Canada Post segment reports a $129-million loss before tax in third quarter as Lettermail volumes fall
Growth in parcel volumes by 2 million pieces year to date reflects continuing shift in consumers’ needs
Nov. 21, 2013
Ottawa (Ont.) – The Canada Post segment today reported a loss before tax of $129 million for the third quarter as a 7.3-per-cent decline in Transaction Mail volumes outweighed solid growth in both revenue and volumes in its market-leading Parcels business. With these results, the Canada Post segment is on track to record a substantial loss in 2013.
The Canada Post Group of Companies1 reported a loss before tax of $109 million for the third quarter, compared to a loss before tax of $145 million in the third quarter of 2012.2 For the first three quarters of 2013, the Group of Companies’ loss before tax was $134 million, compared to a loss before tax of $298 million in the first three quarters of 2012. The loss for the first three quarters of 2013 was mitigated by the $109-million gain from the sale of the downtown Vancouver mail processing plant in January 2013. Without the sale, the Group of Companies’ loss before tax for the first three quarters would have been $243 million.
Canada Post segment results
The Canada Post segment’s loss before tax of $129 million in the third quarter compares to a loss before tax of $161 million in the third quarter of 2012, an improvement mostly due to labour savings. The segment recorded a loss before tax of $165 million for the first three quarters, compared to a loss before tax of $322 million in the first three quarters of 2012. Again, the sale of the Vancouver plant reduced the loss over the first three quarters by $109 million.
With its market-leading position in the business-to-consumer e-commerce delivery market, Canada Post is a key enabler of e-commerce and is benefitting from the increasing popularity of online shopping. Parcel revenue increased by $32 million or 11.2 per cent in the third quarter and volumes increased by more than one million pieces or 4.2 per cent compared to the same period last year. Over the first three quarters, total parcel volumes increased by about two million pieces or 2.8 per cent compared to the same period in 2012. As encouraging as the Parcels growth is, it alone is not enough to offset larger declines in Transaction Mail volumes.
Transaction Mail, which is mostly letters, bills and statements, generates approximately 50 per cent of the Canada Post segment’s revenue. For the third quarter, Transaction Mail volumes fell by 73 million pieces or 7.3 per cent compared to the same period last year. In the first three quarters, volumes declined by 184 million pieces or 5.1 per cent compared to the same period last year. Direct Marketing volumes in the third quarter were down by 0.7 per cent and down by 1.3 per cent for the first three quarters, compared to the same periods last year.
Productivity improvements and a reduction in headcount contributed to reducing the Canada Post segment’s labour costs by $22 million or 2.9 per cent in the third quarter and by $65 million or 2.7 per cent in the first three quarters compared to the same periods in 2012.
The need for additional liquidity in 2014
With the historic shift away from paper-based communications, the Corporation’s current business model does not allow it to achieve sufficient profitability and cash flow to support its operations. Also, in early 2014, Canada Post expects to reach the maximum legislated pension relief from special payments to reduce the $5.9 billion solvency deficit in its pension plan (as of December 31, 2012), which is fully funded on a going-concern basis. In resuming its special payments, the Canada Post segment will have to contribute an estimated $1 billion, on top of current service contributions, in 2014 alone. Based on current financial projections, Canada Post believes it will require additional liquidity by mid-2014, and is exploring with its Shareholder options to address the liquidity challenge.
To access the full report in PDF, visit canadapost.ca/aboutus and select “Quarterly Financial Reports” from the Corporate menu.
The operations of the Canada Post Group of Companies are funded by the revenue generated by the sale of its products and services, not taxpayer dollars. Canada Post has a mandate from the Government of Canada to remain financially self-sufficient and to provide a standard of postal service that is affordable and meets the needs of the people of Canada.
1. The Canada Post Group of Companies consists of the core Canada Post segment and its three non-wholly owned principal subsidiaries, Purolator Inc., SCI Group Inc. and Innovapost Inc.
2. Results for 2012 were restated due to the adoption of new and revised accounting standards, effective January 1, 2013.