The latest information on the rating, including rating reports and related methodologies, is available on this LINK.

Rating action

Scope Ratings UK Limited (Scope) has affirmed the issuer rating assigned to Posten Bring AS (Posten, erstwhile Posten Norge AS) at A/Stable. Posten’s senior unsecured debt rating has been affirmed at A.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BBB+ (unchanged). Posten’s business risk profile continues to be supported by its long-standing monopoly-like position over traditional letter posting services in Norway, which is partially supported by government procurements of commercially non-viable postal services. Government support, in terms of procurements, is expected to be above NOK 1.4bn in 2024, and increase further going forward. Posten’s parcel and logistics business, on the other hand, entails a higher degree of competition, but with higher growth trends. Posten’s offerings such as Shelfless (fully automated storage/warehousing) and Norgespakken establish Posten as a provider of innovative, technology-driven fulfilment and logistics solutions. Scope anticipates that over the medium term, EBITDA margins will rise to above 10%, representing a significant improvement over the lows observed in 2022. This has primarily been made possible by a strong focus on cost improvement measures by the group since 2022, and this focus is expected to extend further into 2024 and beyond; any decline in profitability remains a key rating sensitivity for the group.

Financial risk profile: BBB (unchanged). Posten’s financial risk profile continues to reflect its current position in the tail-end of its capex cycle, with leverage elevated from historical levels on account of its ambitious investment programme in Norway and Sweden. However, the group’s improved profitability in 2023 and continued improvement in 2024 has enhanced Posten’s Scope-adjusted leverage* metrics compared to earlier years. Scope expects Posten’s leverage to gradually decline to below 3x over the medium term. Posten’s investment plans are expected to continue over 2025 and 2026, with an estimated NOK 3.4bn of capex over this period, although Scope notes that the company’s capex plans have been curtailed significantly from earlier expectations. Growth investments will largely be dedicated to increasing capacity at its terminals and will continue to constrain free operating cash flow and leverage over this period. Scope expects funds from operations/debt to remain above 30%, while interest cover is expected to remain at around 8x. Scope assumes that the company will not be able to fund investments with internal cash flow at least until 2026, maintaining negative free operating cash flow until that period.

Liquidity: adequate (unchanged). Posten’s liquidity continues to remain strong as it has good access to banks and domestic bond markets. In 2023, the company has refinanced the majority of the short-term debt taken in 2022 with the issuance of further green bonds worth NOK 2.5bn, and in 2024, the group has continued with green bonds, issuing an additional NOK 1.0bn. As of YE 2024, the company is expected to have around NOK 2.0bn in cash and marketable securities as well as NOK 2.2bn in undrawn credit lines. Liquidity is therefore sufficient to cover interest-bearing short-term debt.

Supplementary rating drivers: +2 notches (unchanged). Posten’s overall issuer rating reflects its standalone credit quality of BBB+ and a two-notch uplift based on Scope’s assessment of the strong capacity and willingness of Posten’s sole owner, the Norwegian state (rated AAA/Stable by Scope) to provide support, assessed following Scope’s Government Related Entities Rating Methodology. Separately, Scope continues to assume that the supportive regulatory framework, under which the Norwegian government covers the net costs of holding the universal service obligation provider licence, will remain in place through 2025, though full compensation costs/losses borne by Posten may not be covered without a time lag. Scope also notes that the government procurement has been increasing significantly in recent years to an estimated NOK 1.4bn in 2024 from NOK 731m in 2022 and NOK 536m in 2018, showcasing the ability and willingness of the Norwegian state to fulfil its obligations to Posten under the USO. Scope has noted the report from the expert committee on the future of postal services and its recommendation to modify the delivery of letters to pickup points with an option of mailbox delivery, but will continue to monitor the progress of the aforementioned recommendations through the Norwegian Parliament, and the final outcome of the legislative deliberations, before assessing the impact (if any) on Posten.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that leverage and EBITDA margins will remain at similar levels (less than 3.0x and around 10% respectively) over the medium-term.

The Outlook also assumes that Posten will continue to maintain its position in the Nordic parcel market and remain Norway’s traditional mail service provider, with the Norwegian state remaining the company’s sole owner without any significant adverse change to the regulatory framework and government procurement agreements with the Norwegian Ministry of Transport.

The upside scenarios for the ratings and Outlook are collectively:

1. Debt/EBITDA well below 3.0x on a sustained basis, and
    
2. Free operating cash flow/debt sustained over 15%

The downside scenarios for the ratings and Outlooks are individually:

1. Reduced Norwegian state ownership and/or adverse change in the regulatory framework that governs Posten’s role as the mandatory provider of postal service in Norway
    
2. Debt/EBITDA over 3.5x along with consequent sustained negative cash flow ratios

Debt rating

The senior unsecured debt rating is affirmed at A, in line with the issuer rating. Posten is also the bond-issuing entity. Posten has outstanding bonds totaling NOK 4.5bn, maturing between 2026-2031.

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action.

All rating actions and rated entities

Posten Bring AS

Issuer rating: A/Stable, affirmation

Senior unsecured debt rating: A, affirmation

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and Outlook (General Corporate Rating Methodology, 16 October 2023; Government Related Entities Rating Methodology, 10 December 2024), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions - Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/uk-regulation. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlook and the principal grounds on which the Credit Ratings and Outlook are based. Following that review, the Credit Ratings and Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlook are issued by Scope Ratings UK Limited at 52 Grosvenor Gardens, London, United Kingdom, SW1W 0AU, Tel +44 20 7824 5180. The Credit Ratings and Outlook are EU-endorsed.
Lead analyst: Rohit Nair, Director
Person responsible for approval of the Credit Ratings: Thomas Faeh, Executive Director
The Credit Ratings/Outlook were first released by Scope Ratings on 26 March 2021. The Credit Ratings/Outlook were last updated on 22 February 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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