Canada Post’s core business dropped into the red in the third quarter of this year as falling mail volumes and higher costs outweighed strong parcels growth, although the overall group made a small profit.
The state-owned postal operator reported a pre-tax loss of C$13 million compared to a C$13 million profit one year earlier with a 1.5% rise in revenue to C$1,486 million. In the first nine months of 2015, the Canada Post segment reported a loss before tax of C$20 million compared to a profit before tax of C$39 million in the same period a year ago.
The overall Canada Post Group of Companies, which includes the profitable express parcels business Purolator and several small logistics businesses, reported a pre-tax profit of C$10 million, down from C$35 million in the same period a year ago. Revenue was flat at C$1.9 billion. For the first three quarters, the group’s pre-tax profit declined to C$28 million from C$84 million last year.
While Parcels volumes are usually slow in the third quarter, there was no summer lull in 2015 with a 16% rise in domestic parcel volumes. “The results reflect the growing success of Canada Post’s e-commerce strategy and the positive impact of its innovative solutions for online retailers and shoppers,” the company said.
Overall Q3 Parcels revenue rose by 11% to C$380 million, while volumes rose by over four million pieces or 10.4% compared to the same period a year ago. Revenue for Domestic Parcels, the largest product category, grew in the third quarter by 13% as volumes grew by 16%. In the first three quarters of 2015, Parcels revenue for the Canada Post segment increased by 7.4% and volumes increased by 7.8% compared to the same period a year ago.
In contrast, Transaction Mail volumes continued to fall with a 2.6% drop, but this was less than in previous quarters because of the volume attributed to the federal election. Without these additional mailings, Transaction Mail volumes would have fallen by 5.5% in the third quarter of 2015 compared to the same period in 2014. Revenue was slightly lower at C$742 million, supported by higher prices. Direct Marketing revenue increased by 3.5% to C$294 million in the third quarter while volumes increased by 5.6%.
In addition, the volatility of employee benefit expenses continued to present a sizeable financial risk, according to the company. Employee benefit expenses for the Canada Post segment rose by C$44 million in the quarter and by C$173 million in the first three quarters of 2015 compared to the same periods a year ago.
The overall group results benefitted from the stable profits achieved by Purolator, with a Q3 pre-tax profit of C$18 million, despite a 10% drop in revenues to C$373 million due to lower volumes.
