This article first appeared in The Edge Malaysia Weekly on August 23, 2021 - August 29, 2021

THE appointment of Charles Brewer, a former executive of the DHL Group, as CEO of Pos Malaysia Bhd has raised expectations but also got employees of the postal services and logistics company worried over their job security.

A British citizen, Brewer, 56, is Pos Malaysia’s fourth CEO in five years.

The main concern among staff is that the appointment of a foreigner as CEO could lead to a downsizing of Pos Malaysia’s workforce in the group’s efforts to save costs and bring it back to the black, say executives The Edge spoke to.

“We have seen the appointment of foreigners in other government-linked companies, and usually it is followed by a group-wide downsizing in the workforce. The shareholders had to hire a foreigner to do this, as usually Malaysian CEOs would not be able to do it.

“Foreign CEOs will have no qualms in cutting the workforce, as they do not have any affiliations with the staff and the country.

“They could come in, do whatever it takes to bring the group back to profitability, even if it includes reducing the size of the workforce, and after one or two years, they could go back to wherever they came from and continue with their lives,” says one of the executives.

This was seen at Malaysia Airlines Bhd (MAB) when its sole shareholder Khazanah Nasional Bhd appointed German Christoph Mueller to the board of the national carrier on Jan 1, 2015. He was made CEO on March 1, 2015.

In June 2015, Mueller announced that 6,000 employees would have to be laid off by the national airline. At that time, MAB had a workforce of around 20,000 employees spread across several business divisions.

It is understood that Brewer has started work at the CEO’s office and will require several weeks to assess the situation at Pos Malaysia.

Pos Malaysia has around 22,000 employees in the country. In FY2020, staff costs made up 42.4% of total operating costs compared with 43.6% in FY2019.

In the second quarter ended June 30, 2021, Pos Malaysia recorded a net loss of RM121.84 million, compared with a net loss of RM19 million a year ago.

The deeper net loss was due to the 9% drop in postal revenue to RM787.6 million, higher impairment loss for property, plant and equipment of RM46.7 million, as well as higher transport and delivery cost incurred during the quarter.

The huge net loss in the second quarter resulted in losses in the first half of 2021 (1HFY2021) more than doubling to RM168.63 million, compared with a net loss of RM68.24 million in the corresponding period in 2020.

The continued losses at Pos Malaysia have wiped out the group’s reserves, resulting in a negative reserve of RM96.6 million as at June 30, 2021. As at Dec 31, 2020, Pos Malaysia’s reserve stood at RM72 million.

Nevertheless, there is a glimmer of hope for Pos Malaysia. In 1HFY2021, its logistics segment saw revenue increase 32% to RM187.4 million, compared with RM142.2 million a year ago.

The logistics segment, which includes haulage services, freight and forwarding, shipping agency and chartering services, warehousing and distribution, recorded a profit before tax of RM3.5 million in 1HFY2021, compared with a loss before tax of RM20 million last year.

Pos Malaysia has three other business segments, namely postal, aviation and others. This last segment comprises the Ar-Rahnu (Islamic pawnbroking), printing and digital certificate businesses.

In the results announcement for 2QFY2021, Pos Malaysia said it continued to face challenges during the quarter owing to the Movement Control Order (MCO 3.0), which resulted in a 20% decline in its mail business.

“We foresee that the migration to digital alternatives and continuation of movement restrictions will continue to depress mail volumes further,” it said.

The group’s courier business (under its postal segment) registered a 17% decline in volume during the quarter, owing to the closure of physical outlets by its contract customers during the MCO period, said Pos Malaysia. Its retail business also continued to experience minimal activities as customers switched to online platforms.

Meanwhile, its international business has yet to normalise owing to the suspension of services for international mail and parcel, the group said.

Pos Malaysia is working to improve its finances. It has introduced a courier price revision for key customers and is rationalising four more Mail Processing Centres (MPC) in the third and fourth quarters of this year.

“Furthermore, we are revisiting our outsourcing models for Pos Rider (PR) and land transport in order to manage costs better. Pos Aviation continues to manage its operational costs to minimise losses,” the group said.

The PR programme was introduced by former CEO Syed Md Najib Syed Md Noor to help Pos Malaysia manage the increased volume of parcels during the MCO, without increasing the group’s fixed costs if more postmen were hired.

What will Brewer, who comes with 34 years of experience at DHL, do to turn around Pos Malaysia? In addition to facing declining mail volumes, the courier business is also highly competitive, with players competing on price.

This led to the Malaysian Communications and Multimedia Commission (MCMC) imposing a two-year moratorium on the issuance of new courier service licences, between Sept 14, 2020, and Sept 15, 2022.

As at last October, there were 109 courier service licensees in Malaysia. Naturally, many of the existing courier service providers welcomed the move by MCMC. However, the moratorium does not address the fact that there are already too many courier service licensees.

If Brewer decides to embark on a workforce rationalisation exercise, it would be a highly unpopular move amid the Covid-19 pandemic. Moreover, as Pos Malaysia is a GLC, the issue could turn political.

Meanwhile, Pos Malaysia’s 53% parent, DRB-Hicom Bhd, seems to be instituting changes by appointing new directors to the former’s board.

On March 29, Pos Malaysia announced that Datuk Yasmin Mahmood had resigned as the group’s chairman, and would be replaced by Datuk Seri Syed Faisal Albar, the group managing director of DRB-Hicom.

At the same time, DRB-Hicom appointed Datuk Jezilee Mohamad Ramli as a non-executive director of Pos Malaysia. Jezilee is the chief operating officer of corporate services at DRB-Hicom.

Then, on April 12, Pos Malaysia announced that Datuk Mohamed Sharil Mohamed Tarmizi, former chairman and CEO of MCMC, had been appointed to its board as an independent non-executive director.

Sharil also holds directorships at Opcom Holdings Bhd, Bina Darulaman Bhd and Privasia Technology Bhd as their independent non-executive chairman. He is also a director of Digital Nasional Bhd, a newly set up special purpose vehicle that will undertake the deployment of the 5G infrastructure and network nationwide.

Sharil is also currently a senior adviser to Quantephi Sdn Bhd, a boutique investment advisory firm in Malaysia, and Asean Advisory Pte Ltd, a specialist advisory and consulting firm based in Singapore. He is also a member of the advisory board of the United Nations University Institute based in Macau, China.

According to a filing with Bursa Malaysia, Sharil is a lawyer. He practised law at Azman Davidson & Co and Zaid Ibrahim & Co early in his career before becoming a partner at investment advisory firm BinaFikir Sdn Bhd.

He was then invited to join MCMC as its chief operating officer in 2009 and subsequently appointed to the position of chairman and CEO from Oct 16, 2011, to Dec 31, 2014.

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