Standard and Poor will upgrade Australia Post’s official credit rating from negative to stable.

The upgrade is a sign that Australia Post’s strategy to shift from postal to parcels is beginning to pay off. 

S&P revised the outlook to ‘AA-/A-1+’ and said “Australia Post has made sound progress shifting from a postal to a parcels dominated business”.

Post announced a full-year profit after tax of $36 million in August which Managing Director and Group CEO Ahmed Fahour said represented a turnaround of $258 million compared with the previous financial year.

Mr Fahour said the figure was driven by strong performance in the parcels business and the impact of letters reform.

In January the company introduced a new two-speed letter delivery system and increased the basic postage rate  from 70 cents to $1 (now called the regular letter service). Priority mail costs an extra 50 cents.

He said the group had applied “strong financial discipline” and gone through an extended period of change, including expanding its parcel business, automating and consolidating parcel facilities; maximising synergies between the mail and parcel business and expanding the retail services it offers, particularly the provision of government and financial services.

“Changes to the letters business introduced earlier this year were an important factor in the group returning to profitability,” Mr Fahour said.

“While the letters business is in structural decline, we have reduced our forecast cumulative losses in letters from around $5 billion to $1.5 billion over the next five years.”

Addressed letter volumes continue to fall by 9.7 per cent, the largest ever 12-month decline, contributing to a loss in the postal business of $138 million, with parcels profit up 8 per cent to $314 million.

But Mr Fahour said that although he was pleased with this turnaround there was significant work ahead to ensure sustainability, including managing the ongoing decline in the letters business and developing the organisation’s e-commerce capabilities.

Meanwhile, Australia Post announced earlier this week that it will trial extended hours parcel deliveries over the Christmas period in Adelaide, Brisbane, Canberra, Hobart, Melbourne, Sydney and Perth. Parcels will be delivered between 7am to 8pm, Monday to Thursday, from November 14 until December 23.