Profits driven by strong growth in parcels while mail volumes, revenue continue steady decline
Canada Post reported strong growth in parcel volumes in the second quarter of 2017, during which time parcel volumes grew by 10 million pieces or 23 per cent compared to the same period in 2016.
According to the Crown corporation’s report, Domestic Parcels volumes grew by sever million pieces or 19.6 per cent. Canada Post delivered one million or more parcels on a single day 25 times in the first two quarters of 2017, which ended July 1. With the peak holiday season ahead, Canada Post is on pace to surpass the previous record of 34 days on which it delivered one million or more parcels, set last year. The growing momentum in the Parcels business reflects the strategic decision Canada Post made in 2011 to become a leader in e-commerce.
“Our employees’ hard work is transforming this company into an e-commerce powerhouse,” said Canada Post President and CEO Deepak Chopra, who recently announced he will step down in March 2018. “I am so proud of them and their focus on the customer.”
The Canada Post segment’s $31-million profit before tax for the second quarter compares to a $1-million profit before tax in the second quarter of 2016. For the first two quarters of 2017, Canada Post reported a profit before tax of $75 million, compared to a profit before tax of $45 million for the same period in 2016.
The growth in parcels is encouraging, but “structural challenges”—such as Lettermail decline and the pension funding obligation—remain significant long-term threats to financial self-sustainability, according to the Crown corporation.
PARCELS RESULTS
Parcels revenue increased by $83 million or 20.5 per cent in the second quarter compared to the same period in 2016. Revenue in Domestic Parcels, the largest product category, also continued to grow strongly, increasing by $62 million or 21.2 per cent. In the first two quarters of 2017, Parcels revenue increased by $128 million or 15.5 per cent, and volumes increased by 16 million pieces or 17.6 per cent when compared to the same period in 2016. For Domestic Parcels, revenue increased by $98 million or 16.6 per cent and volumes increased by 11 million pieces or 15.0 per cent in the first two quarters of 2017, compared to the same period in 2016.
TRANSACTION MAIL RESULTS
Transaction Mail is mostly letters, bills and statements. These volumes decreased by 95 million pieces or 10.9 per cent in the second quarter and revenue decreased by $63 million or eight per cent compared to the second quarter of 2016. This quarter’s volume erosion was higher than in the second quarter of 2016, which had large census mailings. The erosion in Transaction Mail volumes in the second quarter of 2017 and in the first two quarters of 2017 is consistent with the erosion seen in previous periods, once those census mailings are excluded from the comparison. In the first two quarters of 2017, Transaction Mail volumes decreased by 151 million pieces or 8.3 per cent and revenue decreased by $95 million or 5.8 per cent, compared to the same period in 2016. The ongoing decline in mail volumes, due to the use of digital alternatives, remains a significant challenge for Canada Post.
DIRECT MARKETING RESULTS
In the second quarter of 2017, Direct Marketing volumes increased by 23 million pieces or 1.8 per cent, compared to the same period in 2016, while revenue decreased by $11 million or 3.8 per cent, largely reflecting declines in Personalized Mail and Publications Mail volumes and revenue; however, revenue generated by Neighbourhood Mail increased by $5 million or 5.2 per cent and volumes grew by 54 million pieces or 5.7 per cent compared to the same period in 2016.
In the first two quarters of 2017, Direct Marketing revenue decreased by $21 million or 3.6 per cent, while volumes increased by 20 million pieces or 0.8 per cent, compared to the same period in 2016. Again, Personalized Mail and Publications Mail volumes and revenue declined, but Neighbourhood Mail revenue increased by $6 million or 3.0 per cent while volumes increased by 66 million pieces or 3.7 per cent.
GROUP OF COMPANIES RESULTS
The Canada Post Group of Companies reported a profit before tax of $71 million in the second quarter, compared to a profit before tax of $9 million in the same period in 2016. For the first two quarters of 2017, the Group of Companies recorded a profit before tax of $136 million, compared to a profit before tax of $44 million in the first two quarters of 2016. The Purolator segment contributed a profit before tax of $36 million in the second quarter, compared to a profit before tax of $15 million in the second quarter of 2016. Purolator reported a profit before tax of $53 million for the first two quarters of 2017, compared to a profit before tax of $3 million for the first two quarters of 2016.
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