Canada Post core segment reports $31m loss for Q2

The core segment of Canada Post has reported a loss before tax of $31m for the second quarter (Q2). The Canada Post Group of Companies consists of the core Canada Post segment (whose results were announced today) and its three non-wholly owned principal subsidiaries, Purolator Holdings Ltd., SCI Group Inc. and Innovapost Inc.

According to a statement issued by Canada Post today (20 August), the loss was due to a sharp fall in transaction mail as well as higher employee benefit expenses, although this was partially offset by continued strong growth in the parcels business.

The loss for Q2 2015 (which ended on 4 July) compares to a profit before tax of $53m for Q2 2014. For the first two quarters of 2015, the Canada Post core segment reported a loss before tax of $7m compared to a profit before tax of $26m for the same period in 2014.

In the first half of 2015, transaction mail volumes fell by 102m pieces  or 7.2% compared to the first half of 2014. According to Canada Post: “That rate of decline is higher than in the first six months of any year since mail volumes peaked in 2006.”

“The ongoing volume erosion reflects Canadians’ changing needs for postal service,” added Canada Post,  “and is the rationale for initiatives contained in the Five-point Action Plan that will achieve substantial operational savings.”

As previously reported, Canada Post is following a policy of switching from door-to-door deliveries to the use of community mail boxes in order to cut the costs of mail deliveries.

The Canada Post statement continued: “Significant volatility in employee benefit expenses continues to pose challenges. The cost of employee benefits for the Canada Post segment rose by $59m in the second quarter and by $129m in the first two quarters, compared to the same period a year ago. This is the result of a decrease in the discount rates used to calculate benefit plan costs in 2015, partially offset by strong pension returns in 2014. Employee benefit expenses are expected to remain higher throughout 2015 when compared to 2014.”

On the plus side, parcel volumes increased by more than 2m pieces or 6.5% in Q2 2015, and by almost 7m pieces or 6.5% in the first two quarters, compared to the same period in 2014. Parcels revenue for the Canada Post segment increased by $17m or 4.8% to $370m in Q2 and by $56m or 5.5% in the first two quarters, compared to the same period a year ago.

Revenue from transaction mail fell by $44m or 5.4% to $779m in Q2 compared to the same period in 2014. In the first two quarters of 2015, Transaction Mail revenue increased by $68m or 1.8% compared to the same period a year ago. Revenue from domestic lettermail, the largest product category of transaction mail, fell by $35m  or 4.7% in Q2 and rose by $72m or 2.5% in the first two quarters of 2015, compared to the same period a year ago.

Revenue from direct marketing fell by $12m to $297m and volumes fell by 17m pieces in Q2 compared to the same period a year ago. In the first two quarters of 2015, revenue fell by 2.5% and volumes fell by 1.2% compared to the same period a year ago.

The Canada Post Group of Companies as a whole (which includes Purolator, SCI and Innovapost in addition to the core segment) reported a loss before tax of $4m in the Q2 2015 compared to a profit before tax of $86m  in the same period in 2014. For the first two quarters of 2015, the Group of Companies recorded a profit before tax of $18m compared to a profit before tax of $49m in the first two quarters of 2014.