Canada Post cites pay equity ruling for $71M Q3 loss

Canada Post reported a third-quarter loss of $71 million, which it claims is “mainly due to implementing the final pay equity ruling” in a previous dispute with its largest union.

The Canada Post Group of Companies, which is funded by revenue generated from the sale of its products and services—not taxpayer dollars—compared the net loss with the $44-million loss in the third quarter of 2017. The pay equity ruling, which will adjust how delivery employees in suburban and rural Canada (RSMC) are paid, reversed what the Crown corporation claims would have been “a small profit before tax for the first three quarters of 2018.”

“In 2016, the Corporation and the Canadian Union of Postal Workers jointly agreed to put before an arbitrator the system by which RSMC employees are paid,” reads a statement issued by Canada Post last month. “A final ruling issued on Sept. 20, 2018, gave the parties clarity on this important issue. Canada Post expects pay equity will cost approximately $550 million by the end of 2018, of which $130 million was recorded by the end of 2017. Going forward, the Corporation expects pay equity will cost approximately $140 million annually. The pay and benefit changes resulting from the ruling include wage adjustments, increases in pensionable pay and other benefits that have significantly impacted the 2018 financial performance.”

The impact of pay equity and the five-week rotating strikes, which ended Nov. 27, are major factors in the Crown corporation, which expects to end 2018 with a loss.

“Canada Post is at a critical point in its history,” reads a statement in the third-quarter report. “As the trend toward online communication is increasing, Canadian households and businesses do not use our Lettermail services to the same extent, which has led to a significant drop in Transaction Mail, our largest line of business. In 2017, we delivered three billion pieces of Domestic Lettermail, two billion (or 41%) less than we did in the peak year of 2006. Digital technology has disrupted many industries, including Canada Post’s. However, Canada Post has reinvented itself to continue to play a key role in the lives of Canadians in the digital era and has become the country’s number one parcel delivery company. Canada Post has achieved its market-leading position in e-commerce by pivoting its operations, innovating to gain competitive advantage, partnering with retailers and focusing on providing a superior customer experience. Though parcels and direct marketing represent opportunities for Canada Post, their growth alone may not entirely offset the financial impact of the decline in the core Lettermail business.”

In the third quarter, Canada Post remained the country’s leading parcel-delivery company and has grown its parcels revenue year over year in 25 of the last 26 quarters, it reported. For the first three quarters of 2018, Canada Post is reporting a loss before tax of $266 million, compared to a profit before tax of $13 million for the same period in 2017.

PARCELS RESULTS

Parcels revenue increased by $106 million (or 21.2 per cent) in the third quarter, and volumes increased by 14 million pieces (or 23.3 per cent) compared to the same period in 2017.

Domestic parcels, the largest product category, continued to grow as revenue increased by $92 million (or 25.7 per cent) and volumes grew by seven million pieces (or 18.1 per cent) in the third quarter.

In the first three quarters of 2018, parcels revenue increased by $322 million (or 21.8 per cent) and volumes increased by 44 million pieces (or 26.7 per cent) when compared to the same period in 2017.

For Domestic parcels, revenue increased by $249 million (or 23.2 per cent) and volumes grew by 19 million pieces (or 16.6 per cent) in the first three quarters of 2018 compared to the same period a year earlier.

“The increases in revenue and volumes were driven by a strong performance from major commercial customers and a solid delivery performance, as well as the continued growth in e-commerce as consumers continue to order more products online,” reads a statement issued by Canada Post.

TRANSACTION MAIL RESULTS

Transaction mail is mostly letters, bills and statements.

These volumes for the Canada Post segment decreased by 35 million pieces (or 4.6 per cent) in the third quarter and revenue decreased by $24 million (or 3.6 per cent) compared to the third quarter of 2017.

In the first three quarters of 2018, transaction mail volumes decreased by 119 million pieces (or 4.9 per cent) and revenue decreased by $103 million (or 4.6 per cent) compared to the same period a year earlier.

“The ongoing decline in mail volumes, due to the use of digital alternatives, remains a significant challenge for the Corporation,” it explained in last month’s statement.

DIRECT MARKETING RESULTS

Direct marketing revenue decreased slightly by $5 million (or 1.9 per cent) in the third quarter compared to the same period in 2017 while volumes decreased by 44 million pieces (or 3.9 per cent.)

Neighbourhood mail, the largest product category by volume, saw revenue decrease slightly by $4 million (or 3.8 per cent) while volumes decreased by 36 million pieces (or 4.2 per cent) compared to the same period a year earlier.

In the first three quarters of 2018, direct marketing revenue decreased by $9 million (or 1.1 per cent) and volumes decreased by 54 million pieces (or 1.5 per cent) when compared to the same period in 2017.

Neighbourhood mail revenue was “flat” compared to the first three quarters of 2017 while volumes decreased by 16 million pieces (or 0.6 per cent).

Personalized mail and publications mail revenue and volumes declined in the first three quarters of 2018 compared to the same period last year.

GROUP OF COMPANIES RESULTS

The Canada Post Group of Companies reported a loss before tax of $46 million for the third quarter of 2018 compared to a loss before tax of $23 million in the third quarter of 2017.

For the first three quarters of 2018, the Group of Companies recorded a loss before tax of $140 million compared to a profit before tax of $112 million in the first three quarters of 2017.

Purolator recorded a profit before tax of $42 million in the third quarter of 2018—an increase of $6 million (or 20.5 per cent) compared to the same period in 2017.

For the first three quarters of 2018, Purolator’s profit before tax was $108 million compared to a profit before tax of $85 million for the same period in 2017.

For more information, read Canada Post’s third-quarter financial report by clicking here.

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