PostNL raises its guidance for underlying cash operating income to € 50 -€ 90m in 2013 (earlier range: € 20 - € 60m). The reasons to increase the outlook are the tariff increases (e.g. basic rates for letters within the Netherlands will become € 0.60, +€ 0.06) which will be implemented as of 1 August 2013.
The tariff increases are, together with rigorous cost savings, needed to compensate for the expected volume decline of 8-10% and the losses resulting from the universal service obligation. Following this announcement, the outlook for the operating margin in the segment Mail in the Netherlands, the most important division, improves to -1% to 1% (earlier range: -2% to 0%).
Our expectation was for an underlying cash operating income was of € 45m in 2013. Following this announcement we will likely lift our estimates to reflect the new guidance and we also see room for a target price increase.
However, this news does not materially modify our case. We continue to believe that a postal stock is mainly perceived as a dividend story, which is lacking at PostNL given its disruptive balance sheet and negative distributable equity until 2016 and lack of a solid credit rating. Hold maintained.