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Board of Directors’ Report 2013

Operating environment 2013

The overall economic situation in Finland remained weak throughout the year. Itella’s net sales increased in the first, second and third quarters as a result of an acquisition, but decreased in the fourth quarter by 2.5%. Full-year net sales increased slightly, but comparable net sales decreased from 2012.

The rate of digitization in postal services accelerated during the year. The volume of addressed letters decreased by 6% from the previous year, while the decrease from 2011 to 2012 had been 4%. The decline was particularly strong in second-class letters and gained momentum in the fourth quarter.

Newspaper and magazine volumes continued to decline as well. The increase in parcel services slowed down to 4% as a result of the weak economic situation (5% in 2012). The market has been weakened by the performance of GDP. In addition, consumers are increasingly using foreign online retailers instead of Finnish ones, which has changed the structure of the market.

The market situation in logistics and retail is weak, which has been reflected in the decrease in groupage logistics volumes at Itella Logistics. The volume of heavy traffic has continued to decrease for 20 consecutive months in Finland, where the situation is clearly weaker than before. In Scandinavia as a whole, the situation has remained challenging, although the volume of heavy traffic has resumed growth. In Russia, Itella Logistics has seen positive development, although Russian economic growth and consumption have slowed down, and the ruble weakened against the euro by 11% from the previous year.

The digitization of invoicing and financial administration has an impact on Itella’s business, offering opportunities in outsourcing services and multichannel solutions, particularly for OpusCapita. On the other hand, the accelerating rate of digitization has affected the printing services business, and the weakened market situation has been reflected in electronic data communications between organizations.

The postal licenses that have been granted allow for competition in addressed deliveries, but competition did not yet have an impact on Itella in 2013. The Finnish Government issued a postal delivery license to one of Itella’s competitors on January 30, 2014. Itella considers increased competition in the postal market to be a positive development. However, in the view of Itella, the decision to issue the postal license reduces its opportunities to profitably provide services that fall under the universal service obligation in accordance with the Finnish Postal Act. For this reason, the decision increases the need for efficiency measures.

In August, the Finnish Supreme Administrative Court repealed the majority of the decisions of the Finnish Communications Regulatory Authority (FICORA) on the cost basis of fees charged for universal postal services and the pricing of universal postal services. According to the decision of the Supreme Administrative Court, the obligations stipulated by FICORA for Itella in 2008 and 2009 on adjusted prices for corporate clients and reduced prices of universal postal services were illegal.