Canada Post returned to profit in the second quarter of this year thanks to parcels growth andcost reductions but is maintaining its wide-ranging cutbacks programme despite union calls for a
U-turn.The overall Canada Post Group, covering the ‘Canada Post’ mail and parcels business, expresssubsidiary Purolator and several smaller subsidiaries, reported a profit before tax of C$86 millionin the second quarter, compared to a loss before tax of C$76 million for the second quarter of2013. For the first two quarters of 2014, the Group of Companies’ profit before tax was C$49million, compared to a loss before tax of C$25 million for the same period in 2013. Group revenuesincreased by 9.5% to C$2,007 million in the second quarter and grew by 3.7% to C$3,875 million inthe half-year.
The core Canada Post segment, covering the mail & parcels businesses, reported a profitbefore tax of C$53 million for the second quarter of 2014 compared to a loss before tax of C$104million in the same quarter of 2013. For the first two quarters of 2014, the segment reported aprofit before tax of C$26 million, compared to a loss before tax of C$36 million for the sameperiod in 2013. The segment’s Q2 revenues grew by 10.4% to C$1,559 million while half-year revenueswere up 3.5% at C$3,027 million.
The improved Q2 results were primarily due to the impact of lower employee benefit costs,continued growth in the Parcels business and new pricing measures for Transaction Mail contained inthe Corporation’s Five-point Action Plan.
Canada Post’s parcels business grew well in the second quarter thanks to growth of onlineshopping. Parcels revenue grew in the second quarter by 11.3% to C$353 million. Domestic Parcels,the largest product category, increased Q2 revenues by 10.9%, and volumes grew by 9.7%. Over thefirst two quarters of 2014, Canada Post Parcels revenue grew by 9.2% to C$694 million, DomesticParcels revenue increased by 8.4%, while volumes increased by 7.3%.
Largely as a result of the Lettermail price adjustment, revenue from Transaction Mail, whichincludes mostly letters, bills and statements, rose by 14.3% to C$823 million in the second quarterof 2014. Volume erosion of 2.3% was lower than expected due to the positive impact of the Quebecand Ontario provincial elections and the change in purchasing patterns from the re-issuance of thePermanent stamp. In addition, Direct Marketing volumes grew by 2%.
Meanwhile, Purolator improved its Q2 pre-tax profit by 12% to C$27 million and revenuesincreased by 5.3% to C$427 million. Over the half-year, its profit improved 26% to C$16 million andrevenues rose 3.5% to C$813 million.
Canada Post said that while it is “encouraged” by this result, Transaction Mail volumescontinued their historic decline. “This further demonstrates the continued need to transform thebusiness on a long-term basis,” the state-owned postal group said.
The Corporation’s Five-point Action Plan to return the postal service to financialself-sufficiency, announced in December 2013, is designed to help the Crown Corporation respond toits immediate and long-term challenges, including the cost of its employee pension plan. CanadaPost said it has made considerable progress so far this year on various measures.
In February, Canada Post began the process of converting 100,000 addresses in 11 communitieswith door-to-door service to community mailboxes by the end of 2014. Planning for 2015 is alsoprogressing. So far this year, the Corporation has made community announcements for a quartermillion conversions that will be made in early 2015. A total of 1.17 million conversions will bemade in 2015. The remaining one third of Canadian addresses with door-to-door delivery service willbe converted to community mailboxes over a five-year period.
On March 31, 2014, the one-time strategic letter mail pricing adjustment took effect. Priceincreases for future years are expected to revert to what the industry has seen in the past,reflecting inflation and operating costs, the group said.
In response to the results, the Canadian Union of Postal Workers claimed that Canada Post’slatest profits “prove what postal workers have been saying all along: alternatives to cuttingpostal service should not be dismissed”.
Union president Denis Lemelin declared: “When our post office has been profitable for most ofthe last two decades, the types of cuts that Canada Post and the Conservatives are trying to imposeon us are completely unnecessary. We need to do what the rest of the world is doing and make thepost office a better service, not a lack of service.”
The CUPW claimed that Canada Post’s recent financial results had been better than originallyforecast, with a lower than expected decline in mail volumes and lower losses than predicted.
“According to Canada Post’s own annual reports, the Conference Board was wrong about 2012, theywere wrong about 2013 and now they’re wrong about 2014. The report is discredited, theConservatives are wrong and Canada Post management is wrong,” Lemelin said.
