Revenue declined as sale of SCI helped improve loss before
tax
OTTAWA,
ON, May 24, 2024 /CNW/ - Canada Post recorded
a loss before tax of $76 million in
the first quarter of 2024 as revenue for Parcels and Transaction
Mail declined and Direct Marketing picked up.
The segment's loss before tax improved compared to the same
period of the prior year due to the receipt of non-recurring
dividends partly related to the divestiture of SCI Group Inc.
(SCI). Without these dividends, Canada Post's loss before tax
would have been approximately $224 million, compared to a loss
before tax of $107 million in the first quarter of 2023.
In the first quarter, Canada Post's revenue declined by
$56 million, or 1.5 per cent,1 compared to the same
quarter of the prior year. Parcels results continued to be
negatively impacted by the competitive environment, while
Transaction Mail volumes continued to erode. In Direct Marketing,
Canada Post Neighbourhood Mail™ service benefited from new business
and higher sales.
Canada Post's loss from operations in the first quarter was
$221 million, expanding by $109 million compared to the
$112-million loss from operations it
had recorded in the first quarter of 2023. The cost of operations
increased by 2.8 per cent in the first quarter compared to the same
period a year earlier. Labour costs rose slightly and employee
benefit costs increased due to a decline in discount rates. The
increase in costs was partly offset by lower non-capital
investments as the company has refocused its 2024 investment
priorities.
Parcels
For the first quarter of 2024, Parcels revenue declined by
$59 million, or 5.4 per cent, while volumes fell by
2 million pieces, or 1.1 per cent, compared to the same period
in 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 linked to market rates also
negatively affected Parcels revenue.
Transaction Mail
In the first quarter, Transaction Mail revenue fell by
$20 million, or 1.3 per cent, as volumes declined by
16 million pieces, or 1.1 per cent, compared to the same
period a year earlier. Transaction Mail revenue and volumes
declined as consumers and mailers continued to shift to digital
channels. The company maintained its regulated stamp prices at 2020
levels through the first quarter of 2024. In May, Canada Post
raised its regulated postage rates after receiving
Governor-in-Council approval of its proposed increase. For stamps
purchased in a booklet, coil or pane, which represent most stamp
sales, the rate has increased by seven
cents, to 99 cents per stamp.
The stamp price increase took effect on May 6, 2024, and did
not impact first quarter results.
Direct Marketing
In the first quarter, Direct Marketing revenue grew by
$23 million, or 12.2 per cent, as volumes increased by
180 million pieces, or 22.4 per cent, compared to the same
period in 2023. New business and higher sales for the company's
Neighbourhood Mail™ service positively impacted results. Economic
uncertainty and digital marketing alternatives continued to weigh
on sales of other Direct Marketing products, which continued to be
below pre-pandemic levels.
Canada Post Group of
Companies2
The divestiture of SCI contributed a gain on sale of
$287 million to the Group of Companies' results in the first
quarter of 2024. As a result, the Canada Post Group of Companies
recorded a profit before tax of $106 million in the first
quarter, compared to a loss before tax of $58 million in the
same period a year earlier. Purolator recorded a profit before tax
of $39 million in the quarter, compared to $46 million in
the same period of 2023.
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). The divestitures of SCI and Innovapost
closed March 1 and April 15, 2024, respectively.
Financial information about the Innovapost sale will be reported in
the second-quarter financial report.
These strategic divestitures are a key component of Canada
Post's transformation. The company is transforming its IT model to
focus its business and resources 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.
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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 first quarter of 2024, there was no difference in paid days,
and one less business day compared to the same period in 2023.
Fewer business days result in a decrease in revenue and
volume.
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2.
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At the close of the
first quarter of 2024, the Canada Post Group of Companies consisted
of the core Canada Post segment and its wholly owned
subsidiaries Purolator Holdings Ltd. and Innovapost Inc.
Following the close of the Innovapost divestiture on April 15,
2024, the Group of Companies consists of the Canada Post segment
and Purolator.
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™ Trademark of Canada Post Corporation.
SOURCE Canada Post