Canada Post revenues drop more than expected in Q1
Canada Post has said its revenue was lower then expected in the first three months of 2012, as it reported a $3m loss before tax. Overall, consolidated group revenue was about a third of a percent up on the same quarter last year, to $1.94bn, with the slight improvement “primarily” stemming from Canada Post’s courier subsidiary Purolator.
Along with e-substitution, the company has been facing competitive pressures, and continuing impacts from last year’s industrial action, it said today.
Canada’s economy is also somewhat “uncertain” at present, with an unexpected contraction in February, which had analysts revising forecasts downward.
Mail and parcels
The company, which recorded its first annual loss for 17 years last year, said a “profound shift” away from traditional letters towards digital technology prompted a $33m drop in revenues in its core mail business in the first quarter.
Transactional volumes fell by 4.5% compared to the same period last year, meaning Canadians sent 58m fewer mail pieces compared to the same period last year. Transactional revenues dropped 2% or by $17m.
Direct mail volumes fell by 6.4% (87m pieces) during the quarter, Canada Post said, suggesting that corporate advertisers in the financial, telecom and retail sectors were shifting their marketing spend to electronic media.
Canada Post’s parcel volumes grew “modestly” by 1.1% (400,000 pieces) during the quarter, but parcel revenues actually dropped by 1% or $3m. Canada Post said the revenue decline was mainly from the end of its Food Mail Program last year.
Parcels is one area in particular in which the Corporation is investing to benefit from growth in particularly ecommerce home delivery.
Modernisation
Canada Post said it made significant improvements in its on-time performance in the first quarter of 2012, as it continues its “unprecedented” modernisation programme to cut costs and boost efficiency in its mail network.
The company upped its spending on its multi-year Postal Transformation programme compared to the same period last year, increasing capital expenditure in Canada Post by 55% to $115m during the quarter, while quadrupling investment in Purolator to $10m in the same period.
The Corporation will be making use of the expertise of its Innovapost unit to help it continue efficiency improvements in the Group, particularly on the IT side. During the latest quarter, Canada Post paid $26m to Quebec city-based IT company CGI to take its share of Innovapost from 51% up to 98.6%.
Away from frontline mail operations, Canada Post continued to suffer from the $4.7bn solvency deficit in its pension plan, which inflicted a $141m hit on company results in the quarter.
Not include aspects like the pension problems, Canada Post’s actual operations were narrowly profitable during the quarter, for the first time since Q1 of 2011, with consolidated profit from operations coming in at $6m for the three months.
Operational costs in the main Canada Post business were reduced very slightly during the quarter, by $2m (0.2%), to $1.5bn, thanks to a reduction in overtime and performance-related pay.
Canada Post is currently waiting for a court to decide whether its dispute over a long-term labour contract with the Canadian Union of Postal Workers can move forward into arbitration.
A hearing into the union’s objection to the appointed arbitrator is scheduled for 25th July. The CUPW contract would cover about 48,000 workers.
Purolator
Canada Post’s courier subsidiary Purolator did contribute to higher Group revenues with a 6.9% uplift in its own revenues, to $398m for the first quarter, thanks to higher volumes.
However, the unit saw its loss for the quarter more than doubled compared to last year, from $4m to $9m as operational costs grew 8%, which Canada Post blamed on inflationary pressures and a $12m increase in labour costs.
Purolator is also currently investing to expand the presence of its cross-border business, Purolator International, within the United States.
