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Canada Post segment reports $31-million loss before tax in the second quarter

Transaction mail volumes fell faster in first half of 2015 than in any first half since volumes peaked in 2006

Canada Post reported a loss before tax of $31 million for the second quarter as transaction mail volumes fell sharply.

The loss was also driven by higher employee benefit expenses, partially offset by continued strong growth in the parcels business, Canada Post reported.

The loss for the second quarter, which ended July 4, compares to a profit before tax of $53 million for the second quarter of 2014. For the first two quarters of 2015, the Canada Post segment reported a loss before tax of $7 million compared to a profit before tax of $26 million for the same period in 2014.

In the first half of 2015, transaction mail volumes (letters, bills and statements) fell by 102 million pieces (or 7.2 per cent) compared to the first half of 2014. That rate of decline is higher than in the first six months of any year since mail volumes peaked in 2006. In the second quarter, volumes fell by 63 million pieces or 6.5 per cent compared to the same period a year ago. The ongoing volume erosion reflects Canadians’ changing needs for postal service, and is the rationale for initiatives contained in the five-point action plan that will achieve substantial operational savings.

Significant volatility in employee benefit expenses continues to pose challenges. The cost of employee benefits for the Canada Post segment rose by $59 million in the second quarter and by $129 million 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.

Strong parcels results

For the Canada Post segment, parcel volumes increased by more than two million pieces or 6.5 per cent in the second quarter, and by almost seven million pieces or 6.5 per cent in the first two quarters, compared to the same period in 2014. Canada Post’s innovative solutions for e-tailers and consumers and reliable on-time delivery also continue to drive growth in Parcels revenue. Parcels revenue for the Canada Post segment increased by $17 million or 4.8 per cent to $370 million in the second quarter and by $56 million or 5.5 per cent in the first two quarters, compared to the same period a year ago.

Transaction mail results

Transaction mail generates slightly more than half of the Canada Post segment’s revenue. Revenue from transaction mail fell by $44 million or 5.4 per cent to $779 million in the second quarter compared to the same period in 2014. In the first two quarters of 2015, transaction mail revenue increased by $68 million or 1.8 per cent compared to the same period a year ago. Revenue from domestic lettermail, the largest product category of transaction mail, fell by $35 million or 4.7 per cent in the second quarter and rose by $72 million or 2.5 per cent1 in the first two quarters of 2015, compared to the same period a year ago.

Direct marketing results

Revenue from direct marketing fell by $12 million to $297 million and volumes fell by 17 million pieces in the second quarter compared to the same period a year ago. In the first two quarters of 2015, revenue fell by 2.5 per cent1 and volumes fell by 1.2 per cent1 compared to the same period a year ago.

Group of companies

The Canada Post Group of Companies reported a loss before tax of $4 million in the second quarter of 2015 compared to a profit before tax of $86 million in the same period in 2014. For the first two quarters of 2015, the Group of Companies recorded a profit before tax of $18 million compared to a profit before tax of $49 million in the first two quarters of 2014.

Background

The operations of the Canada Post Group of Companies are fund-ed 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.

The Canada Post Group of Companies consists of the core Canada Post segment and its three non-wholly owned principal subsidiaries, Purolator Holdings Ltd., SCI Group Inc. and Innovapost Inc.