September 4, 2017 / 7:09 PM / a year ago

Brazil post office needs further streamlining before sale, IPO

SAO PAULO (Reuters) - Brazil’s government has more cost-cutting to do before selling control or listing Empresa Brasileira de Correios e Telégrafos SA, as efforts to turn the postal service around have failed to stem years of losses, Chief Executive Officer Guilherme Campos said.

Campos said that Correios, as the company is commonly known, will soon launch the third phase of a voluntary worker retirement plan targeting about 5,000 employees. Workers with fewer than 15 years in the postal office will be eligible for the plan, Campos said in a Friday interview.

Currently, Correios has 108,000 employees and is struggling with the legacy of mismanagement and losses that ran up to a combined 4 billion reais ($1.3 billion) over the past two years.

Reuters reported on Aug. 30 that the government could list Correios without giving up control, underscoring growing momentum to privatize state assets in the wake of President Michel Temer’s decision to exit control of the largest power utility.

Still, the company needs further and tougher streamlining before an option to sell control or list it, Campos said. One challenge stems from a secular decline in revenue related to competition and a new accord to lease the postal service’s bank.

“We’ll do whatever it takes to zero out losses as early as this year,” Campos said.

While previous worker retirement plans have trimmed payroll by about 6,000 people, the magnitude of such effort and other cost-cutting initiatives has been deemed as insufficient by officials. According to Campos, Brazil’s postal service model is at least ten years outdated relative to those in countries like Germany.

To offset falling revenues, Correios has also discussed with other agencies the feasibility of other services - such as handing over passports or paying pension benefits, Campos said. At this moment, the equivalent of 88 percent of Correios’s about 6,500 branches lose money.

($1 = 3.1353 reais)

Writing by Guillermo Parra-Bernal; Editing by Nick Zieminski

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