Singapore Post's (SGX:S08) Five-Year Earnings Decline: A Market Analysis

Singapore Post (SGX:S08) has witnessed a five-year decline in earnings, contributing to a 31% shareholder loss. This article delves into the factors behind this trend, examining market dynamics and investor behavior.

The shift in consumer behavior towards eCommerce has significantly impacted Singapore Post's parcel volumes and revenue. While eCommerce logistics volumes have grown, the company's domestic parcel business has struggled with declining letter and printed paper volumes. In 2022, domestic parcel revenue fell by 9.3% due to a higher base effect from the pandemic and lower volumes from a major eCommerce customer who insourced part of its logistics. To adapt, SingPost has focused on expanding its international logistics business, which contributed to 86% of its revenue in 2023.

Changes in eCommerce platforms' logistics strategies, such as insourcing, have also impacted Singapore Post's operations and profitability. This shift has led to lower delivery volumes, as seen in its domestic and international post and parcel segments. In FY2022/23, domestic post and parcel revenue declined by 9.3%, while international post and parcel revenue fell by 20.6%. The insourcing of logistics by major eCommerce customers has exacerbated this trend, contributing to Singapore Post's reduced profitability.

In addition to market trends, intense competition in the eCommerce logistics sector has influenced Singapore Post's market position and financial performance. Local and international rivals have challenged SingPost's market position, with companies like DHL, FedEx, and UPS offering robust services and innovative solutions. To counter this, SingPost has invested in growth areas like Australia and cross-border eCommerce logistics, as seen in its acquisition of Quantium Solutions and SP eCommerce. However, these investments have not yet translated into significant revenue growth, contributing to the company's financial struggles.

To maintain profitability in the evolving eCommerce landscape, Singapore Post has adapted its strategies through investments in digital capabilities and inorganic growth. The company has expanded its eCommerce logistics business, with Quantium Solutions and SP eCommerce benefiting from re-engineered processes to improve customer experience and scalability. However, challenges remain in the Post & Parcel segment, with revenue declining and higher operating costs leading to losses.

In conclusion, the five-year earnings decline at Singapore Post can be attributed to various factors, including the shift in consumer behavior towards eCommerce, changes in eCommerce platforms' logistics strategies, and intense competition in the sector. The company has taken steps to adapt to these trends, but it remains crucial for SingPost to continue diversifying its offerings, enhancing its digital capabilities, and maintaining a lean operational structure to regain market share and improve financial performance.