Nordic Credit Rating has assigned a 'A' long-term issuer rating to pan-Nordic mail and logistics operator PostNord AB. The outlook is stable. An 'N2' short-term issuer rating was also assigned. Further, we expect to assign 'A' issue ratings to newly issued senior unsecured bonds.
Rating rationale
The long-term rating reflects PostNord's strong position as the leading logistics operator in the Nordic region. We expect the company's position as universal mail service provider in Sweden to provide synergies with its growing parcel delivery and logistics business. The company has sound financial leverage and profitability that is comparable with that of its north European peers despite the challenges of transitioning away from declining mail volumes. In addition, we believe the Swedish and Danish governments are highly likely to provide support, if needed, given their dual ownership.
The rating is constrained by near-term challenges associated with winding down PostNord's Danish mail operations and an ongoing decline in Swedish mail volumes, which continue to pressure margins. We expect significant investment requirements as the company is to expand its Nordic parcel delivery and logistics businesses.
Stable outlook
The stable outlook reflects our expectations that PostNord's comprehensive strategy of expanding its parcel delivery business by leveraging its strong Nordic network, together with meaningful cost saving measures, will offset projected average annual 11% volume declines in the mail business through 2027. We expect some regulatory relief from universal service obligations, such as relaxed delivery deadlines, that might enable the company to adjust its cost base to lower mail volumes. In addition, we expect PostNord to continue its transition from mail to parcel delivery without any significant change in financial leverage.
We could raise the rating to reflect a growing EBITDA contribution from a sustainably profitable parcel business, improved profitability (EBITDA margins above 12%), and continued low leverage.
We could lower the rating to reflect increased leverage (debt to EBITDA above 2x and FOCF to debt below 25%), loss of revenues and weaker margins, or a loss of its universal service provider status in Sweden.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | A |
| Outlook: | Stable |
| Short-term issuer credit rating: | N2 |
| Senior unsecured issue rating: | A |
Contacts:
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.