Canada Post reports $46-million profit before tax in second quarter as one-time sale of subsidiaries offset $269-million loss from operations

Operating loss offset by income from the sale of SCI and Innovapost

OTTAWA, ON, Aug. 23, 2024 /CNW/ - Canada Post recorded a profit before tax of $46 million in the second quarter of 2024, as the divestiture of SCI Group Inc. and Innovapost Inc. contributed to the segment's bottom line and offset a loss from operations of $269 million.

A crowded and highly competitive ecommerce delivery market continued to impact Parcels revenue in the first and second quarters of 2024. Transaction Mail volume continued to erode, while Direct Marketing revenue and volumes picked up.

The Corporation's profit before tax in the second quarter improved by $300 million compared to a loss before tax of $254 million in the second quarter of 2023, largely due to dividend income from the sale of SCI and Innovapost. As a result of the divestitures of SCI and Innovapost, the segment's loss before tax in the first two quarters was $30 million, compared to a loss before tax of $361 million in the first half of 2023.

Canada Post's revenue in the second quarter was relatively flat compared to the same period a year earlier. For the first half of 2024, Canada Post's revenue fell slightly by $48 million, or 1.4 per cent,¹ compared to the same period of the prior year. 

In the second quarter and the first six months of 2024, total operating costs increased by 0.9 per cent and 1.9 per cent, respectively, compared to the same periods of the prior year. This was mainly due to higher employee benefit costs driven by lower discount rates. The increase in costs was partly offset by lower non-capital investments.

The Corporation recorded a loss from operations of $269 million in the second quarter, compared to a loss from operations of $259 million in the same period of the prior year. In the first six months of 2024, the loss from operations was $490 million, compared to $371 million in the same period of 2023. The loss from operations excludes any dividends from the divestitures.

Parcels

In the second quarter of 2024, Parcels revenue fell by $28 million, or 5.0 per cent, as volumes declined by 4 million pieces, or 7.2 per cent, compared to the same period of 2023. A crowded and competitive parcel delivery market continued to negatively affect results for the line of business. These market dynamics included growing competition from commercial consolidators that are taking more volume from the conventional inbound postal network. A decline in fuel surcharges tied to market rates also negatively affected Parcels revenue. For the first six months of the year, Parcels revenue declined by $87 million, or 5.3 per cent, as volumes fell by 6 million pieces, or 4.2 per cent, compared to the same period of the prior year.

Transaction Mail

In the second quarter, Transaction Mail revenue increased by $13 million, or 0.6 per cent, as volumes declined by 14 million pieces, or 3.9 per cent, compared to the same period a year earlier. While Transaction Mail continued to erode, a regulated postage rate increase that took effect on May 6, 2024, helped soften the revenue impact from the decline in volumes. For the first two quarters of 2024, Transaction Mail revenue declined by $7 million, or 0.6 per cent, while volumes fell by 30 million pieces, or 2.5 per cent, compared to the same period of 2023.

Direct Marketing

In the second quarter, Direct Marketing revenue rose by $19 million, or 6.2 per cent, as volumes increased by 175 million pieces, or 15.2 per cent, compared to the same period of the previous year. For the first half of the year, revenue increased by $42 million, or 9.1 per cent, as volumes rose by 355 million pieces, or 18.6 per cent, compared to the same period of 2023. New business and higher sales for the Canada Post Neighbourhood Mail™ service positively impacted results. Economic uncertainty and digital marketing alternatives continued to weigh on sales of other Direct Marketing products.

Group of Companies²

In the first and second quarters of 2024, the divestitures of SCI and Innovapost provided proceeds to the Group of Companies, which were distributed to Canada Post and Purolator Holdings Ltd. in the form of dividends. The divestiture of SCI closed on March 1, 2024, with a gain on sale of $294 million for the Group of Companies; Innovapost closed on April 15, 2024, with a gain on sale of $54 million.

As a result, the Canada Post Group of Companies recorded a loss before tax of $135 million in the second quarter, compared to a loss before tax of $167 million in the same period a year earlier. Purolator recorded a profit before tax of $81 million in the second quarter, compared to a profit before tax of $87 million in the same period of 2023.

The divestitures of SCI and Innovapost also improved the six-month results of the Group of Companies, resulting in a loss before tax of $29 million compared to a loss before tax of $225 million in the same period of 2023. Purolator recorded a profit before tax of $120 million in the first half of 2024, compared to a profit before tax of $133 million in the prior-year period.

In January 2024, Canada Post and Purolator announced the divestiture of 100 per cent of the shares of two subsidiaries: SCI Group Inc., a leading Canadian third-party logistics provider, and Innovapost Inc., the Group's shared-services provider in information technology (IT). These strategic divestitures are a key component of Canada Post's transformation. The company is transforming its IT model to focus its business on its core mandate of providing a modern postal service to Canadians.

Background  

The Canada Post Group of Companies' operations are funded by revenue generated by the sale of its products and services, not taxpayer dollars. 

1.

All percentages in this news release were adjusted for differences in business and paid days and are calculated on values rounded to the nearest thousand. In the second quarter of 2024, there was one additional business day compared to the same period a year earlier, and no difference in paid days. For the first half of 2024, there was no difference in paid or business days. Additional business or paid days generally result in higher revenue, volume and costs.

2.

At the close of the second quarter of 2024, the Canada Post Group of Companies consisted of the core Canada Post segment and its wholly owned subsidiary Purolator Holdings Ltd.

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SOURCE Canada Post

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