State postal operator Ukrposhta lost $4.6 million in the first quarter of 2021, according to its CEO Igor Smelyansky.
Smelyansky said that the company keeps losing money even though the amount of parcels it delivers has grown by 36% compared to the same period last year.
The reason for the poor financial results in 2021 is low tariffs for the state services that Ukrposhta is obliged to provide: the delivery of letters and the distribution of pension payments.
Today, the delivery of letters by Ukrposhta costs $0.3, while tariffs for the distribution of pensions range from 1.3% to 2.6% from the provided payment.
Smelyansky said that if nothing changes, Ukrposhta can lose $25 million by the end of this year.
Smelyansky has complained about low tariffs for years and even threatened to stop delivering pensions, which could affect every third retiree. Retirees in Ukraine usually receive their pensions in cash from Ukrposhta’s mail carriers, because many of them don’t have bank accounts or access to the internet.
Following Smelyansky’s request, the government increased tariffs by 11% in April this year. Smelyansky said it was not enough because the company’s expenditures on air flights, salaries, petrol, rent and utilities are growing too.
Last year Ukrposhta generated over $5.7 million in net profit compared to $21 million in 2019. Out of this $5.7 million, Ukrposhta will pay $2.8 million in dividends to the state.
Despite the poor financial results at the beginning of 2021, Smelyansky is proud of his firm because Ukrposhta managed to stay profitable in the challenging 2020.
Ukrposhta is still widely considered slow and bureaucratic, even though many acknowledge that some of its services have changed for the better in recent years. The company, for example, has opened modern post offices and started delivering parcels faster.
It still, however, can’t outcompete in speed and popularity with its main rival Nova Poshta, the largest private delivery service in the country.
Ukrposhta must provide services in remote villages where nobody else wants to work, which drains Ukrposhta’s budget. If it wasn’t for this obligation, the company could invest more in its development, according to Smelyansky.
Ukrposhta has recently received a 100-million loan in 2020 from the European Bank for Reconstruction and Development and the Europen Investment Bank. Smelyansky said that it will help Ukrposhta to become more digital, to start offering banking services and build a new logistics center near Kyiv.
The loan from the EBRD is also a step to one of Ukrposhta’s primary goals — to become less dependent on the state.
