Itella 2012


President and CEO's Review

Itella's Business Developed Positively

Like so many other businesses in various sectors, Itella too faced financial challenges during the past fiscal year. Our business environment is in the middle of an accelerating transition and we need to build our future with this change in mind.

After a promising first quarter, the Finnish economy slipped onto a downward trend during late spring and early summer. Itella's net sales also developed positively during the first half of the year. But the growth slowed down considerably towards the end of the year, in line with the overall trend in economic activity.

The trend of development in Itella's business as a whole was largely positive. Viewed against the backdrop of general economic uncertainty, Itella's results can be considered reasonable. We began to see the positive impact on profits of the EUR 100 million cost-cutting program that we initiated in 2011. These measures have allowed us to mitigate the impact of declining volumes in traditional postal traffic in the short term. Although the company's profitability is yet to achieve targeted levels, the improvement in comparison to the previous year's level was significant. What is noteworthy is that Itella's cash flow and solvency have remained at a good level.

The transaction between Itella Logistics and VR Group, through which Itella Logistics acquired VR Transpoint's groupage logistics business in Finland, was one of the most important events of 2012. The acquisition increased Itella's net sales by about EUR 130 million, in addition to which a little over 800 VR employees transferred to Itella. This transaction between two strong industry operators means that Itella's customers now have at their disposal the widest network of terminals and the most comprehensive transportation capacity in Finland. We now have the capacity to offer increasingly wide-ranging and cost-effective logistics services in Finland.

Online commerce and Russia provide us with business opportunities

Online commerce volumes continue to grow robustly. Consumers' increasing desire to buy products online provides Itella with significant opportunities for growth in the future. Itella is responding to the growing demand by, among other things, expanding its network of automatic parcel terminals in Finland.

Growing demand in Russia is also generating profitable business for Itella. Itella is an important service provider in the field of warehouse logistics, particularly in the Moscow area. In 2012, our volumes and warehouse fill rates developed positively – a fact evident in the solid increase in net sales.

Employee satisfaction improved

Corporate responsibility has been a cornerstone in our operations throughout our lengthy history and, once again, we were able to make significant headway on this front during the past year. In September, we became a member of the Climate Partners network, and in October we joined Diversity Charter Finland.

Once again we also conducted our annual employee satisfaction survey, the results of which indicated that employee satisfaction has developed positively. Overall job satisfaction rates were higher than the year before. Some 66 percent of our employees participated in the survey in 2012, whereas the equivalent percentage in 2011 was 58.

In October, Itella Logistics became one of the first Finnish companies to start using next-generation electric vans. Electric vans move silently and are zero-emission vehicles. An essential goal of Itella's environmental scheme is to decrease carbon dioxide emissions by 30 percent by 2020 (compared to 2007, in relation to turnover).

Our goal for 2012 was to reduce the energy consumption of Itella's properties in Finland by two percent in terms of electricity and three percent in terms of heat, in comparison to the year before. These goals were exceeded by far; our cuts in the consumption of electricity amounted to more than three percent and in the consumption of heat, nearly seven percent.

We will continue to improve quality and flexibility

I began my work at Itella at the beginning of November 2012. During my first few months, I have toured the company's offices and outlets extensively, getting to know its employees, customers, and stakeholders. Based on this short experience, I can say that Itella's employees possess a strong desire and ambition to serve their customers well. Letters and parcels get delivered, often under tight schedules and tough circumstances. We are doing our best to fulfil our customer promise while paying attention to occupational safety.

During 2013, we will focus, in particular, on the efficient completion of our ongoing projects. A good example of such are what we refer to as the LEAN projects, where different employee groups get together to find ways to increase operational efficiency and improve quality.

I wish to thank Itella's entire personnel, who have worked very hard to keep Itella's development on a positive track. I also wish to express my gratitude for the past year to all of Itella's customers and partners. In conclusion, I would like to extend my gratitude to my predecessor Jukka Alho, who ran Itella successfully for over 12 years.

Heikki Malinen
President and CEO