With the benefit of savings from its business transformation efforts in 2015 and continued strong Parcels growth, the Canada Post segment reported a small profit before tax of $1 million in the second quarter.
Census mailings contributed to the essentially break-even result, but Transaction Mail volumes dropped by 3 per cent compared to the same period a year ago and would have fallen by approximately 6 per cent without the census mailings.
During this period, Canada Post’s pension solvency deficit rose significantly. It is estimated at $8.1 billion as of July 1, 2016, up from $6.1 billion at December 31, 2015, based on the market value of plan assets. The large size and volatility of this obligation compared to the Corporation’s revenue and profit presents a major challenge to the Corporation’s financial self-sustainability.
Parcels and Direct Marketing represent opportunity for Canada Post, the country’s No. 1 parcel delivery company. However, growth in these areas will not be enough to pay for the Corporation’s pension obligations, offset the ongoing decline in Lettermail and invest in the network and customer service.
Key results for the Canada Post segment compared to Q2 2015
- Revenue rose by $34 million or 9.2 per cent to $404 million
- Volumes increased by 4 million pieces or 8.5 per cent.
- Volumes fell by 28 million pieces or 3 per cent.
- Revenue increased by $5 million to $784 million.
- Since the peak year of 2006 through 2015, Lettermail volumes have fallen by 32 per cent or 1.6 billion pieces.
- Direct Marketing contributed $296 million in revenue, a decline of $4 million or 1.3 per cent.
- Volumes fell by 35 million pieces or 2.8 per cent.
Canada Post released its financial results for the first quarter of 2016 today. Continued strength in Parcels contributed to a $44-million profit before tax for the Canada Post segment, the country’s No. 1 parcel company.
Transaction Mail volumes fell by 83 million pieces compared to the same period in 2015 and remain a significant challenge. Direct Marketing generated revenue of $286 million for the first quarter of 2016 for the Canada Post segment.
Parcels’ growth and Direct Marketing represent opportunity, but will not be enough to offset the decline in the core Lettermail business and pay for the pension, or allow the Corporation to invest in its network and customer service. Therefore, this growth will not be enough to ensure Canada Post’s long-term financial self-sustainability.
Key results for the Canada Post segment compared to Q1 2015
- Revenue grew 12.5 per cent or $41 million to $421 million.
- Volumes rose by 14.4 per cent or more than 5 million pieces.
- Volumes in Domestic Parcels, the largest product line, increased by 20.5 per cent.
- Volumes fell by 6.6 per cent
- Revenue declined by three per cent or $40 million to $849 million.
- Since the beginning of 2015, mail volumes have fallen by nearly one third of a billion pieces.
- Volumes fell by 2.6 per cent or 50 million pieces.
- Revenue decreased by 3.5 per cent or $15 million to $286 million, although Neighbourhood Mail revenue remained relatively flat.
Employee benefit expenses: Employee benefit costs, including pension, continue to be volatile and remain a significant challenge. Expenses fell by $19 million due to a slight increase in the discount rates used to calculate benefit plan costs in 2016, as well as positive pension asset returns in 2015.
Canada Post released its 2015 financial results today. Our record parcels growth in 2015 made Canada Post the largest parcel company in the country and contributed to a profit before tax of $63 million for the Canada Post segment. Declining Transaction Mail volumes continue to present a significant challenge, falling by nearly a quarter billion pieces in 2015.
Key results for the Canada Post segment compared to 2014
- Revenue increased by $137 million or 9.1 per cent to $1.65 billion.
- Volumes rose by 16 million pieces or 9.7 per cent.
- Parcels now generate more than 25 per cent of our revenue.
- Volumes fell by 6.1 per cent.
- Revenue declined by $13 million or 0.4 per cent to $3.2 billion.
- Since peaking in 2006, volumes of Domestic Lettermail, the largest product category, have fallen by 32 per cent or 1.6 billion pieces.
- Direct Marketing contributed almost $1.2 billion in revenue in 2015.
- Volumes rose by 0.2 per cent or 10 million pieces. Revenue fell by $11 million or 0.9 per cent.
Employee benefit expenses: Significant volatility in pension and other employee benefit expenses continues to pose a challenge to Canada Post. Expenses rose by $189 million mainly because of a decline in the discount rates used to calculate benefit plan costs in 2015. This was partially offset by the positive impact of strong pension asset returns in 2014.
Read the 2015 Annual Report for more details. A copy of the Focus on our Business Newsletter highlighting the 2015 Annual Report will arrive at your home in the coming days.
The Canada Post segment reported a loss before tax of $31 million for the second quarter of 2015, as Transaction Mail volumes fell faster in the first half of the year than in any comparable period since volumes peaked in 2006.
The results were also due to higher employee benefit expenses and partially offset by continued strong growth in the Parcels business.
Transaction Mail volumes fall sharply
Transaction Mail volumes fell by 102 million pieces or 7.2 per cent in the first two quarters of 2015.
This ongoing volume erosion reflects Canadians’ changing needs for postal service.
Transforming our business
We need to outpace the decline in Transaction Mail by completing all the initiatives set out in the Five-Point Action Plan, which will achieve substantial operational savings, and we need to grow our business.
Our e-commerce business continues to grow. Reliable on-time parcel delivery and the innovative solutions we provide for online retailers and customers continue to produce solid growth in our Parcels business.
And we are working hard to grow our Direct Marketing business, which accounts for about one fifth of all the revenue generated by the Canada Post segment. It is a pillar of our growth strategy.
Key results for the Canada Post segment compared to Q2 2014
Revenue fell by $44 million or 5.4 per cent to $779 million
Volumes fell by 63 million pieces or 6.5 per cent
Revenue rose by $17 million or 4.8 per cent to $370 million
Volumes increased by more than two million pieces or 6.5 per cent
Revenue fell by $12 million or four per cent to $297 million
Volumes fell by 17 million pieces or 1.3 per cent
Employee benefit expenses: Significant volatility in employee benefit expenses continues to pose a sizeable financial risk to Canada Post. Costs rose by $59 million in the second quarter mainly because the discount rates used to calculate benefit plan costs declined. Employee benefit expenses are expected to remain higher throughout 2015 than they were in 2014.
Canada Post released its quarterly financial results today.
The Canada Post segment reported a profit before tax of $24 million in the first quarter of 2015, compared to a loss before tax of $27 million for the first quarter of 2014.
The improved results were mainly due to:
continued growth in the Parcels business; and
tiered pricing for Transaction Mail;
They were offset by:
higher employee benefit expenses.
Five-point Action Plan continues to deliver results
The first quarter profit shows the Five-point Action Plan is continuing to deliver results.
We are expanding our market share in the highly competitive parcels business by creating shipping solutions for online retailers and shoppers.
The Five-point Plan’s tiered pricing for Transaction Mail helped lift revenue as Domestic Lettermail volumes continued their historic decline.
Ongoing decline in our core business accelerates
Volumes of Domestic Lettermail, still our core business, fell by 8.4 per cent during this period. It is one of the steepest quarterly rates of decline since 2006, when Domestic Lettermail volumes peaked. It reflects the accelerating use of digital alternatives to paper.
The ongoing decline shows we still have a long way to go to create a financially sustainable postal service. We need to outpace the decline in Domestic Lettermail by completing all the initiatives in the Five-point Action Plan.
Our goal remains to secure the future of the postal service for all Canadians. We are heading in the right direction. We are growing our Parcels business and working hard to grow the highly valuable marketing mail business.
Parcels: Parcels revenue rose to $380 million, up $39 million. Volumes increased by more than 4 million pieces, or 6.5 per cent.
Transaction Mail: The decline in Domestic Lettermail volumes was offset by higher revenue from the tiered pricing structure. Transaction Mail revenue grew by $112 million to $889 million.
Direct Marketing Results: Revenue from Direct Marketing rose by $11 million to $298 million. Without three more business days in the first quarter compared to the same period last year, Direct Marketing volumes and revenue declined, but by less than one per cent.
Employee benefit expenses: Significant volatility in employee benefit expenses continues to present a sizeable financial risk to Canada Post. Employee benefit expenses rose by $70 million because the discount rate used to calculate benefit plan costs declined. Employee benefit expenses are expected to remain higher throughout 2015 than they were in 2014.
Read the news release for full details.