Sources inform ''Globes'' that Israel Postal Company Ltd. is set to announce a loss of NIS 80 million for 2011, after losing NIS 110 million in 2010. The sources estimate that the Postal Company will lose at least NIS 60 million this year, and that it will not be able to repay its bonds in 2013. Six months after government-owned fresh produce exporter Agrexco went into liquidation, the Postal Company could follow suit.
In addition, the Postal Company's workers committee intends to declare a labor dispute, in view of these figures.
Postal Company chairman Sasi Shilo has written to Minister of Finance Yuval Steinitz warning that the company is in jeopardy, after losing NIS 200 million in two years and nearly a year of foot-dragging in negotiations by the Ministry of Finance. He says, "The future of the company is shrouded in fog. The financial basis on which the company relies is undermined and disappearing, and each day bring the Postal Company closer to collapse and raises the price needed to stabilize it."
Shilo adds, "Not helping the Postal Company is tantamount to desiccating the company to the point of destroying its ability to function."
The letter is also addressed to Budget Director Gal Hershkowitz and Accountant General Michal Abadi-Boiangiu, as well as Minister of Communications Moshe Kahlon.
In April 2012, the Postal Company is due to begin paying the principle on its NIS 400 million bond, which it issued in 2010. The payments total NIS 60 million a year, and in view of the company's losses, there is a real concern about its ability to meet the bond payments, beginning in 2013.
Midroog Ltd. gives the Postal Company's bonds an Aa3 rating, after cutting the rating by one grade from A1, with a "Negative" outlook, in August 2011. Under the bond's term, another downgrade will increase the interest rate by 25 basis points.
The Ministry of Finance opposes helping the Postal Company, and has conditioned any aid on floating 30% of the company, which it believes would put the company back on its feet.
The Ministry of Finance told "Globes" in response, "The letter speaks for itself. The company desperately needs a solution to the crisis. The key to the company's operations is held by the Ministry of Finance as the owner and regulator."
The Postal Company does not object in principle to privatization, provided that the rights of its employees will not be harmed, and that it should be part of a general settlement.
Postal Company CEO Haim Almoznino was formerly the CEO of Delek Israel Fuel Corporation Ltd. (TASE: DLKIS). The company suffers from a rigid job structure and problematic income. It has 6,500 employees, and its salary cost accounts for 60% of expenditures. The Postal Company's strong workers committee prevents any maneuvering on the rigid job structure.
Over a year ago, the Postal Company prepared a plan for the early retirement of 500 employees at an estimated cost of NIS 300 million. Since the company did not have this amount, it asked the Ministry of Finance for a special grant to finance the retirements. The ministry has so far not acceded to the request.
The Postal Company also has to deal with tough competition in the bulk mail category, where it has lost substantial market share to private companies in recent years. The company's rates are regulated, and the company says that they do not cover its costs.
The Postal Company says that the price of local stamps is too low, and it has asked for a 17% hike in the price of local mail. Last December 20, it asked it asked the Ministry of Finance for permission to close branches and reduce the level of service it is required to provide. Shilo called the measures "desperately needed oxygen", and said, "There Ministry of Finance's position and willingness to make timely decisions is unclear."
Published by Globes [online], Israel business news - www.globes-online.com - on February 12, 2012
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