Posti Group Corporation

Interim report Q1May 3, 2018

3.5.2018

Posti Group Corporation1

Agenda

3.5.2018

Posti Group Corporation2

• Highlights of Q1/2018

• January-March

• Segments

• Mail, Parcel and Logistics Services

• Itella Russia

• OpusCapita

• Outlook

3.5.2018

Posti Group Corporation3

Highlights of Q1/2018

Posti in figures Q1/2018

Net sales

(EUR million)

Adjusted EBITDA

(EUR million)

Adjusted operating

result (EUR million)

Personnel

on average, FTE

Share of USO

deliveries

January-March in a nutshell

• Postal transformation continued in Q1 as the market further shifted towards parcel and logistics. Parcel

volumes increased by 10% compared to previous year and domestic freight volumes grew by 5%.

• On the other side, the number of addressed letters delivered by Posti decreased by 10% compared to

the previous year.

• Universal service obligation was 4.0% (4.5%) of all Posti’s delivery volumes.

• As a result of management evaluation OpusCapita’s business plan, including the execution schedule

and required investments to implement the plan and the risk-premium of the discount rate, an

impairment loss on goodwill of EUR 30.0 million was recognized in the first quarter of the year.

• Posti Group Corporation's Annual General Meeting held in Helsinki on March 27, 2018 decided to

distribute a dividend of EUR 27 million based on the result in 2017 and an extra dividend of EUR 13

million. Dividend distribution is altogether EUR 40 million.

• In March 2018, the Supreme Court did not grant leave to appeal in litigation concerning the value added

tax on postal services requested by the claimants. This means that the decision given at September

2017 by the Court of Appeal of Helsinki to overrule the complaint as requested by Posti and to

compensate the legal expenses of Posti remains final.

3.5.2018

Posti Group Corporation4

407.5

28.3

11.5

16,911

4.0%

Operational highlights

The Group’s adjusted operating result is expected to remain on par with 2017 or decrease slightly.

Business Environment

• E-commerce continues its growth. According to the Finnish

Commerce Federation, e-commerce in retail increased by 8% and e-

commerce of daily goods by 88% in 2017.

• For Posti, the growth of e-commerce offers growth potential in

parcels and logistics services.

• According to the Finnish Ministry of Finance, the Finnish GDP is

expected to grow by 2.6% in 2018.

• According to the Bank of Finland, economic growth in the euro area

has been exceeding forecasts and both consumption and

investments have increased.

• The positive economic outlook is also reflected in Finnish

consumers’ expectations.

• The Bank of Finland forecasts the Russian GDP to grow by 2% this

year.

3.5.2018

Posti Group Corporation5

Posti’s goal is to evolve

into a customer-oriented

and profitable logistics

and postal service

company by 2020.

3.5.2018

Parcel services keep growingJanuary-March 2018

Posti Group Corporation6

+10%

Parcel volume growth in

Finland and in the Baltics

1–3 2018

+39%

The number of parcels going

through Posti Parcel Lockers

1–3 2018

+21%

B2C parcel volume growth in

Finland and in the Baltics

1–3 2018

3.5.2018

Letter volumes declined by 10%, freight volumes grew by 5%

Posti Group Corporation7

Source: Posti

Letter volumes, million units

1-3 2017 1-3 2018

188170

0,0

50,0

100,0

150,0

200,0

-10%

Freight volumes, million units

0,53 0,56

0,0

0,5

1,0

+5%

1-3 2017 1-3 2018

* The reported figure for domestic freight excludes food

logistics

3.5.2018

Posti Group Corporation8

January-March 2018

Net sales and operating resultJanuary-March

3.5.2018

Posti Group Corporation9

386 389 376

457414 402 379

452408

0

100

200

300

400

500

Q1 Q2 Q3 Q4

Net sales by quarters, EUR million

2016 2017 2018

413.87.2%

407.5-1.5%

0

100

200

300

400

500

1-3 2017 1-3 2018

Net SalesEUR million and change, %

35.58.6% 28.3

6.9%

0

10

20

30

40

1-3 2017 1-3 2018

Adjusted EBITDAEUR million and %

15.53.8%

11.52.8%

0

5

10

15

20

1-3 2017 1-3 2018

Adjusted operating resultEUR million and %

10.02.4%

-18.5-4.5%-30

-20

-10

0

10

20

1-3 2017 1-3 2018

Operating resultEUR million and %

Key figures

3.5.2018

Posti Group Corporation10

• Easter took place earlier in 2018 than last year,

thus reducing the number of working days during

the first quarter.

• The Group’s net sales decreased by 1.5%. Net

sales grew by 0.2% in Finland and declined by

11.9% in other countries.

• The decline in international operations’ net sales

was mainly due to the divestment of

OpusCapita’s Finance and Accounting

Outsourcing business and related subsidiaries

during Q3/2017.

• The decline in the adjusted EBITDA was

attributable to the weaker result of Mail, Parcel

and Logistics Services and Group overheads.

• As a result of management evaluation

OpusCapita’s business plan, including the

execution schedule and required investments to

implement the plan and the risk-premium of the

discount rate, an impairment loss on goodwill of

EUR 30.0 million was recognized in the first

quarter of the year.

1-3 2018 % 1-3 2017 %

Net sales, EUR million 407.5 413.8

Adjusted EBITDA, EUR million 28.3 6.9 % 35.5 8.6 %

EBITDA, EUR million 28.5 7.0 % 30.0 7.3 %

Adjusted operating result, EUR million 11.5 2.8 % 15.5 3.8 %

Operating result, EUR million -18.5 -4.5 % 10.0 2.4 %

Result for the period, EUR million -21.3 -5.2 % 5.9 1.4 %

Return on equity (12 months), % -14.5 5.1

Return on capital employed (12 months) -11.8 8.0

Net debt, EUR million 9.4 -65.5

Net debt / Adjusted EBITDA 0.1x -0.5x

Gross capital expenditure, EUR million 15.4 24.4

Personnel on average, FTE 16,911 18,058

3.5.2018

Posti Group Corporation11

Mail, Parcel and Logistics Services

90 %

Itella Russia6 %

OpusCapita4 %

External net sales by segments

16.0

11.5

-0.6

-1.7

-2.2

Mail, Parceland Logistics

Services

Itella Russia OpusCapita Otheroperations

Posti Group

Adjusted operating result by segment1-3 2018, EUR million

Segments

4.4%*-11.2%*

2.8%*

* percent of net sales

-2.1%*

• The Mail and Marketing Services net sales decrease was driven by a decline in volume, which was largely mitigated by pricing and mix

changes. The Press net sales increase was driven by the acquisition last May.

• Strong volume growth continued to drive parcel net sales growth. However, net sales growth was below volume growth due to product mix

changes, a decrease in the net sales of small items (not included in volumes) and in the average price. Logistics volumes were also affected

by a shorter Q1 period, net sales still grew by 1.8%. Warehouse fill rates also improved.

• The result decrease was driven by a core postal volume decline, with operational costs affected by the collective labor agreement increasing

salary levels, and a long winter and a challenging flu season that required the utilization of an additional workforce. The Q1 results included

approx. EUR 3 million for cost items that are not expected to continue.

• The renewal of the service point network has proceeded as planned. Posti had a total of 1,515 service points in Finland, of which 597 were

Posti Parcel Lockers (March 31).

Mail, Parcel and Logistics ServicesQ1 net sales grew slightly despite of mail volume decline.

3.5.2018

Posti Group Corporation12

EUR million 1-3 2018% of

Net sales1-3 2017

% of

Net sales

Net sales 366.2 363.9

Net sales change, % 0.7% 5.4%

Adjusted EBITDA 26.6 7.3% 31.5 8.6%

EBITDA 27.1 7.4% 30.0 8.2%

Adjusted operating result 16.0 4.4% 19.7 5.4%

Operating result 16.4 4.5% 18.2 5.0%

* The reported figure for domestic freight excludes food

logistics

188170

0

50

100

150

200

Addressed letters

1-3 2017 1-3 2018

-10%

9.410.4

0

2

4

6

8

10

12

Parcels

+10%

0.530.56

0.0

0.1

0.2

0.3

0.4

0.5

0.6Domestic freight*

+5%

Volumes, million pcs

Net sales of Mail and Marketing Services, Press Services,

Parcel Services and Logistics Services

3.5.2018

Posti Group Corporation13

EUR million

164,4

41,7

69,1

91,0

161,5

42,0

71,8

92,7

MAIL AND MARKETING SERVICES

PRESS SERVICES PARCEL SERVICES LOGISTICS SERVICES

1-3 2017 1-3 2018

+0.9%-1.7%+4.0% +1.8%

Itella RussiaNet sales grew in local currency.

3.5.2018

Posti Group Corporation14

• Itella Russia’s net sales measured in local currency grew by 8.8%. However, reported euro-denominated net sales decreased due to

currency translation effects.

• The growth in net sales (measured in local currency) was attributable to higher volumes among the existing customers in the warehousing

business and transport, as well as to the stabilization in the economy.

• The average fill rate for warehouses in Moscow was 85% (76%), while in other regions it was 78% (79%).

• The slight improvement in operating result was driven by a release of provisions.

EUR million 1-3 2018% of

Net sales1-3 2017

% of

Net sales

Net sales 26.8 27.5

Net sales change, % -2.7% 31.0%

Adjusted EBITDA 1.0 3.8% 0.9 3.3%

EBITDA 1.9 7.0% 0.9 3.3%

Adjusted operating result -0.6 -2.1% -1.0 -3.7%

Operating result 0.1 0.3% -1.0 -3.6%

Warehouse fill rates

92%86%

83%

77%

89%

86%

77%80%

75% 75%

87%

85%

90%

89%

86%

69%

76%

81% 84%

85%

90%

86%89%

85%82%

77%74%

67%

82%

75%

50%

60%

70%

80%

90%

100%

Moscow Other areas

OpusCapitaPaper invoice volumes and the Easter holidays affected the net sales.

3.5.2018

Posti Group Corporation15

• OpusCapita net sales declined mainly due to paper invoice sending volumes.

• Business Network product line volumes and net sales were impacted by the timing of the Easter holidays and the decline in transactions.

• Adjusted EBITDA declined as a result of weakening net sales and increased investments in products, sales and marketing.

• As a result of management evaluation OpusCapita’s business plan, including the execution schedule and required investments to

implement the plan and the risk-premium of the discount rate, an impairment loss on goodwill of EUR 30.0 million was recognized in the

first quarter of the year.

EUR million 1-3 2018% of

Net sales1-3 2017

% of

Net sales

Net sales 15.5 16.0

Net sales change, % -3.3% 20.3%

Adjusted EBITDA -0.9 -6.1% -0.7 -4.1%

EBITDA -1.2 -7.5% -0.7 -4.1%

Adjusted operating result -1.7 -11.2% -2.0 -12.8%

Operating result -32.0 -206.8% -2.0 -12.8%

3.5.2018

Posti Group Corporation16

Outlook

3.5.2018

Posti Group Corporation17

The updated Outlook 2018

Net sales

• The net sales in 2018 are

expected to remain on a

par with 2017 or

decrease slightly.

• The development of

exchange rates,

especially the ruble

exchange rate, may affect

the Group’s net sales,

result and balance sheet.

Operating result

• The Group’s adjusted

operating result is

expected to remain on a

par with 2017 or

decrease slightly.

Capital expenditure

• Capital expenditure,

excluding acquisitions

and disposals, is

expected to decrease

slightly.

The Group’s business is

characterized by seasonality.

Net sales and operating profit

in the segments are not

accrued evenly over the year.

In postal services and

consumer parcels, the first

and fourth quarters are

typically strong, while the

second and third quarters are

weaker.

Thank you!

3.5.2018

Posti Group Corporation18