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Canada Post profits from “solid growth” in parcels

Wednesday, May 3rd, 2017

The Canada Post segment has reported a profit before tax in 2016 of $55m, bolstered by “solid growth” in parcels.

In 2015, the Canada Post segment made a profit of $63m, so profits are down some $8m. However, in a statement issued yesterday (2 May) Canada Post said that 2016 year-end results were still “a positive sign considering the significant challenges facing the company”.

Canada Post explained: “With declining mail volumes, less than half of the segment’s revenue in 2016 was generated by Transaction Mail, or letters, bills and statements. In addition to that issue, the Corporation is faced with the challenges of significant pension obligations, labour costs and the need to invest in network capacity to keep up with growing parcel volumes.”

The bright spot for Canada Post was the parcels business, where revenue has grown $521m since 2011 on the back of e-commerce.

Canada Post commented: “In 2016, Parcels revenue from the Canada Post segment increased by $92m or 5.6% compared to 2015. At 195m, volumes increased by 14m pieces or 7.7% compared to 2015. Domestic Parcels volumes grew by 11m pieces or 9.0% compared to 2015. Inbound Parcels volumes – from the U.S. and the rest of the world – increased by 8.4% compared to 2015, driven particularly by strong growth from Asia Pacific countries.

“Parcels continue to generate an increasing proportion of Canada Post’s revenue. Parcels generated 28% of the segment’s revenue in 2016; by comparison, Parcels generated 26% of revenue in 2015 and only 21% in 2011.

On a less positive note, volumes in Transaction Mail, the Canada Post segment’s largest line of business, continued their decade-long decline in 2016.

“Volumes fell by 286m pieces or 7.8% compared to 2015,” said Canada Post. “Revenue fell by $153m or 4.8% compared to 2015. At $3.0bn in 2016, Transaction Mail generated 49% of the Canada Post segment’s operating revenue of $6.2bn. In 2011, Transaction Mail had generated 53% of the segment’s revenue.

Encapsulating the dilemma that faces posts worldwide, Canada Post said: “Canadians mailed 1.8 bn fewer pieces of Domestic Lettermail or 37% less in 2016 than they did in 2006, the year that mail volumes reached their historic peak.”

Direct marketing revenue also took a fall in 2016, down 5.6% to $1.14bn, and volumes dropped by 261m pieces or 5.3%.

“In another sign of the ongoing disruption of a paper-based industry by digital technology,” added Canada Post, “Publications Mail volumes fell 9.6% in 2016, as mailed subscriptions of magazines and similar material continued to decline.”

The Canada Post Group of Companies as a whole – which includes the three non-wholly owned subsidiaries, Purolator Holdings Ltd., SCI Group Inc. and Innovapost  as well as the core Canada Post segment – reported a profit before tax of $114m, down $136m in 2015.

Responding to Canada Post’s announcement on the 2016 results, the Canadian Union of Postal Workers (CUPW) described the company as a “public sector success story” which “has consistently made money and will continue to, if it plots the right course”.

Expounding on what that”right course” could be, CUPW National President Mike Palecek said: “We want to see a plan that ensures the future viability of the postal service.

“Around the world, post offices are expanding services to bring in new revenue. This country urgently needs services such as broadband, postal banking, services at the door for seniors and electric charging stations. Canada Post could offer solutions. Instead, they offered a raft of service cuts that wasted hundreds of millions of dollars.”

Source: Canada Post

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Canada Post profits from "solid growth" in parcels

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