Crown corporation’s commercial customers made ‘other delivery arrangements,’ reducing volumes and revenue
In the third quarter of 2016, during a time of labour uncertainty that prompted commercial customers to make other arrangements to deliver their parcels and mail, the Canada Post segment lost $60 million before tax.
According to representatives from the Crown corporation, the net financial impact of the labour uncertainty is estimated at $100 million for the third quarter. This figure reflects the significant reduction in revenue but also includes slightly lower costs—such as less use of overtime and temporary employees—because volumes had declined sharply in all lines of business.
On Aug. 30, Canada Post and the Canadian Union of Postal Workers reached tentative agreements; however, volumes took much longer to recover. Employee benefit expenses were also lower in the third quarter due to a $44-million non-cash one-time gain, resulting from the new collective agreement with the Canadian Postmasters and Assistants Association in August.
The Canada Post segment’s $60-million loss before tax in the third quarter, which ended Oct. 1, 2016, compared to a loss before tax of $13 million in the third quarter of last year. For the first three quarters, the Canada Post segment recorded a loss before tax of $15 million, compared to a loss before tax of $20 million in the same period in 2015. The improved results over three quarters are largely due to growth in the Parcels business over the first two quarters of 2016.
PARCELS
According to representatives from Canada Post, the labour uncertainty in the third quarter meant volumes in the rapidly growing Parcels line declined for the first time since the first quarter of 2014. What’s more, revenues declined “year over year” for the first time since the first quarter of 2012. Parcels revenue decreased by $30 million (7.9 per cent) while volumes declined by two million pieces (5.2 per cent) in the third quarter of 2016 compared to the third quarter of last year. For the first three quarters, Parcels revenue increased by $45 million (4.5 per cent) and volumes increased by 7 million pieces (5.9 per cent) compared to the same period in 2015. That growth was lifted by the results over the first two quarters, reflecting the strength of Canada Post’s e-commerce strategy as well as its solutions for retailers and consumers.
TRANSACTION MAIL
In the third quarter, Transaction Mail volumes continued to erode as mailers adopt digital billing. They decreased by 120 million pieces (13.8 per cent) and revenue fell by $79 million (10.8 per cent) compared to the same period in 2015, which had benefitted from the one-time impact of the October 2015 federal election.
According to the Crown corporation, the labour uncertainty worsened the ongoing volume decline. For the first three quarters of 2016, Transaction Mail revenue decreased by $114 million (4.3 per cent) while volumes fell by 231 million pieces (7.7 per cent) compared to the same period in 2015.
DIRECT MARKETING
In the third quarter, Direct Marketing revenue decreased by $45 million (15.2 per cent) while volumes decreased by 210 million pieces (17.5 per cent) compared to the third quarter of 2015. These results were also affected by the labour uncertainty, claims the Crown corporation, and by stronger results from the same period of 2015, which had benefitted from federal election mailings. For the first three quarters, Direct Marketing revenue decreased by $64 million (6.7 per cent) while volumes fell by 295 million pieces (7.5 per cent) compared to the same period in 2015.
GROUP OF COMPANIES
The Canada Post Group of Companies reported a loss before tax of $25 million in the third quarter of 2016 compared to a profit before tax of $10 million in the same period last year. For the first three quarters, the Group of Companies recorded a profit before tax of $19 million compared to a profit before tax of $28 million for the first three quarters of 2015.
Purolator reported a profit before tax of $32 million in the third quarter of 2016, an increase of 76.9 per cent compared to the third quarter of 2015. For the first three quarters of 2016, Purolator earned a profit before tax of $35 million, a decrease of 1.3 per cent compared to the same period of 2015.
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