The Canada Post segment today reported a $55-million profit before tax for 2016. This was the segment’s third profitable year in a row. We remain Canada’s No. 1 parcel company – a proud achievement made possible by the dedication, customer focus and hard work of thousands of employees.
Our 2016 results are a positive sign, but we still face significant challenges: declining mail volumes; sizeable pension obligations; comparatively high labour costs; and the need to invest in our network to keep up with growing parcel volumes. We believe these challenges can be solved.
We have grown our annual Parcels revenue by $521 million since 2011, when we decided to focus on helping Canadian businesses grow through e-commerce. Our growth strategy is working – for them, and for us. It’s why 2016 was a game-changing year. For example, we delivered one million or more parcels in a day 34 times. As well, during the holiday season, we shattered every parcel delivery record.
Key results for the Canada Post segment compared to 2015
- Revenue increased by $92 million or 5.6 per cent to $1.7 billion.
- Volumes rose by 14 million pieces or 7.7 per cent to 195 million.
- Parcels now generate 28 per cent of our revenue.
- Volumes continued their decade-long decline, falling by 286 million pieces or 7.8 per cent. That decline represents a revenue shortfall of $256 million based on the average revenue per piece in 2016.
- Transaction Mail volumes fell 44.1 per cent per address in the period 2007-2016, as volumes fall and the number of addresses increase.
- In 2016, Transaction Mail generated less than half of the segment’s revenue.
- Revenue fell by $67 million or 5.6 per cent to $1.14 billion.
- Volumes decreased by 261 million pieces or 5.3 per cent.
Group of Companies
- The Canada Post Group of Companies reported a profit before tax of $114 million, which was $22 million less than the profit before tax in 2015.
- Purolator’s profit before tax of $67 million was $11 million higher than its 2015 profit before tax.
With the risk of a work disruption in the third quarter, Canada Post’s commercial customers made other arrangements to deliver their parcels and mail, which reduced volumes sharply. While we reached tentative agreements with the Canadian Union of Postal Workers on August 30, volumes took longer to recover.
We estimate the net financial impact of the labour uncertainty at $100 million for the third quarter. That figure reflects the significant reduction in revenue but also slightly lower costs, such as less use of overtime and temporary employees. Employee benefit expenses were also lower in the third quarter due to a $44-million non-cash one-time gain. It resulted from the new collective agreement with the Canadian Postmasters and Assistants Association (CPAA) in August.
The Canada Post segment’s $60 million loss before tax in the third quarter compares to a loss before tax of $13 million in the third quarter of 2015.
Key results for the Canada Post segment in Q3 compared to Q3 2015
- Parcels revenue decreased by $30 million or 7.9 per cent.
- Volumes declined by 2 million pieces or 5.2 per cent.
- Over the first three quarters of 2016, Parcels revenue is up 4.5 per cent and volumes are up 5.9 per cent compared to the first three quarters of 2015.
- Transaction Mail volumes continued to erode significantly, for the 20th straight quarter.
- Volumes fell 120 million pieces or 13.8 per cent. Revenue fell by $79 million or 10.8 per cent.
- The revenue and volume declines are a result of the labour uncertainty. As well, Q3 2016 is compared to Q3 last year, when the federal election increased our volumes.
- Direct Marketing revenue decreased by $45 million or 15.2 per cent.
- Volumes fell by 210 million pieces or 17.5 per cent.
- Again, results were affected by the labour uncertainty and by comparison to Q3 2015, which had benefited from election mailings.
With the benefit of savings from its business transformation efforts in 2015 and continued strong Parcels growth, the Canada Post segment reported a small profit before tax of $1 million in the second quarter.
Census mailings contributed to the essentially break-even result, but Transaction Mail volumes dropped by 3 per cent compared to the same period a year ago and would have fallen by approximately 6 per cent without the census mailings.
During this period, Canada Post’s pension solvency deficit rose significantly. It is estimated at $8.1 billion as of July 1, 2016, up from $6.1 billion at December 31, 2015, based on the market value of plan assets. The large size and volatility of this obligation compared to the Corporation’s revenue and profit presents a major challenge to the Corporation’s financial self-sustainability.
Parcels and Direct Marketing represent opportunity for Canada Post, the country’s No. 1 parcel delivery company. However, growth in these areas will not be enough to pay for the Corporation’s pension obligations, offset the ongoing decline in Lettermail and invest in the network and customer service.
Key results for the Canada Post segment compared to Q2 2015
- Revenue rose by $34 million or 9.2 per cent to $404 million
- Volumes increased by 4 million pieces or 8.5 per cent.
- Volumes fell by 28 million pieces or 3 per cent.
- Revenue increased by $5 million to $784 million.
- Since the peak year of 2006 through 2015, Lettermail volumes have fallen by 32 per cent or 1.6 billion pieces.
- Direct Marketing contributed $296 million in revenue, a decline of $4 million or 1.3 per cent.
- Volumes fell by 35 million pieces or 2.8 per cent.
Canada Post released its financial results for the first quarter of 2016 today. Continued strength in Parcels contributed to a $44-million profit before tax for the Canada Post segment, the country’s No. 1 parcel company.
Transaction Mail volumes fell by 83 million pieces compared to the same period in 2015 and remain a significant challenge. Direct Marketing generated revenue of $286 million for the first quarter of 2016 for the Canada Post segment.
Parcels’ growth and Direct Marketing represent opportunity, but will not be enough to offset the decline in the core Lettermail business and pay for the pension, or allow the Corporation to invest in its network and customer service. Therefore, this growth will not be enough to ensure Canada Post’s long-term financial self-sustainability.
Key results for the Canada Post segment compared to Q1 2015
- Revenue grew 12.5 per cent or $41 million to $421 million.
- Volumes rose by 14.4 per cent or more than 5 million pieces.
- Volumes in Domestic Parcels, the largest product line, increased by 20.5 per cent.
- Volumes fell by 6.6 per cent
- Revenue declined by three per cent or $40 million to $849 million.
- Since the beginning of 2015, mail volumes have fallen by nearly one third of a billion pieces.
- Volumes fell by 2.6 per cent or 50 million pieces.
- Revenue decreased by 3.5 per cent or $15 million to $286 million, although Neighbourhood Mail revenue remained relatively flat.
Employee benefit expenses: Employee benefit costs, including pension, continue to be volatile and remain a significant challenge. Expenses fell by $19 million due to a slight increase in the discount rates used to calculate benefit plan costs in 2016, as well as positive pension asset returns in 2015.
Canada Post released its 2015 financial results today. Our record parcels growth in 2015 made Canada Post the largest parcel company in the country and contributed to a profit before tax of $63 million for the Canada Post segment. Declining Transaction Mail volumes continue to present a significant challenge, falling by nearly a quarter billion pieces in 2015.
Key results for the Canada Post segment compared to 2014
- Revenue increased by $137 million or 9.1 per cent to $1.65 billion.
- Volumes rose by 16 million pieces or 9.7 per cent.
- Parcels now generate more than 25 per cent of our revenue.
- Volumes fell by 6.1 per cent.
- Revenue declined by $13 million or 0.4 per cent to $3.2 billion.
- Since peaking in 2006, volumes of Domestic Lettermail, the largest product category, have fallen by 32 per cent or 1.6 billion pieces.
- Direct Marketing contributed almost $1.2 billion in revenue in 2015.
- Volumes rose by 0.2 per cent or 10 million pieces. Revenue fell by $11 million or 0.9 per cent.
Employee benefit expenses: Significant volatility in pension and other employee benefit expenses continues to pose a challenge to Canada Post. Expenses rose by $189 million mainly because of a decline in the discount rates used to calculate benefit plan costs in 2015. This was partially offset by the positive impact of strong pension asset returns in 2014.
Read the 2015 Annual Report for more details. A copy of the Focus on our Business Newsletter highlighting the 2015 Annual Report will arrive at your home in the coming days.