Canada Post segment records $1 million profit before tax in second quarter

Pension solvency deficit rises to an estimated $8.1 billion

OTTAWA, Aug. 26, 2016 /CNW/ - Benefitting from savings from its business transformation efforts in the previous year, and on the strength of its Parcels line of business, the Canada Post segment recorded a small profit before tax of $1 million in the second quarter. This essentially break-even result compares to a loss before tax of $31 million in the same period a year ago.

During this period, Canada Post's pension solvency deficit rose significantly as the discount rate dropped. The pension solvency deficit is estimated at $8.1 billion as of July 1, 2016, up from $6.1 billion at December 31, 2015 (using 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.

The Canada Post segment's results were driven by continued strong Parcels growth and the almost 27 million additional pieces of mail generated by the 2016 census. Uncertainty over negotiations with the Canadian Union of Postal Workers for two new collective agreements had minimal impact on revenue in the second quarter, which ended July 2, 2016. This was before any work stoppage could occur. However, late in the quarter, many customers made other arrangements to deliver their mail and parcels, which will have a noticeable impact on third-quarter results.

Parcels and Direct Marketing continue to 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 pension obligations, offset the ongoing decline in Lettermail and invest in the network and customer service. These are all key aspects of Canada Post's long-term financial self-sustainability.

In the first two quarters of 2016, the Canada Post segment recorded a profit before tax of $45 million, compared to a loss before tax of $7 million in the same period a year ago, largely due to strong Parcels results.

Parcels results

In the second quarter, Parcels revenue rose by $34 million or 9.2 per cent to $404 million while volumes increased by 4 million pieces or 8.5 per cent compared to the same period a year ago. In the first two quarters of 2016, Parcels revenue rose by $75 million or 10.9 per cent, while volumes increased by 9 million pieces or 11.4 per cent, compared to the same period a year ago. ¹

Transaction Mail results

Even including the census mailings, Transaction Mail volumes fell by 28 million pieces or three per cent in the second quarter compared to the same period a year ago. Revenue increased by $5 million to $784 million compared to a year ago. Excluding the census mailings, volumes would have fallen by approximately 6 per cent compared to the same period last year. In the first two quarters of 2016, Transaction Mail revenue decreased by $35 million or 1.3 per cent, while volumes fell by 111 million pieces or 5 per cent compared to the same period in 2015. ¹

Direct Marketing results

In the second quarter, Direct Marketing contributed $296 million to the Canada Post segment, a decline of $4 million or 1.3 per cent from the same period a year ago. Volumes fell by 35 million pieces or 2.8 per cent. In the first two quarters of 2016, Direct Marketing revenue decreased by $19 million or 2.4 per cent, while volumes fell by 85 million pieces or 2.7 per cent compared to the same period a year ago. ¹

Group of Companies

The Group of Companies reported a profit before tax of $9 million in the second quarter of 2016, compared to a loss before tax of $4 million a year ago. For the first two quarters of 2016, the Group of Companies reported a profit before tax of $44 million compared to a profit before tax of $18 million in the first two quarters of 2015. Purolator reported a profit before tax of $15 million in the second quarter, reflecting reduced courier volumes, compared to a profit before tax of $23 million a year ago. For the first two quarters of 2016, Purolator reported a profit before tax of $3 million compared to a profit before tax of $17 million in the first six months of 2016. ²

For more information, view the video and infographic. To read the full report in PDF, visit canadapost.ca/aboutus and select "Financial Reports" from the Corporate menu.

Background

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.

1.	Variance percentages of revenue and volumes were adjusted to reflect the impact of one less business day in the first quarter of 2016, compared to the first quarter of 2015.
2.	The Canada Post Group of Companies consists of the core Canada Post segment and its three non-wholly owned subsidiaries, Purolator Holdings Ltd., SCI Group Inc. and Innovapost Inc.

SOURCE Canada Post

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