Canada Post makes a profit after hiking mail prices

Canada Post was profitable in the second quarter of 2014 after raising the cost of mailing the letter and seeing a big boost in its parcel business.

Crown corporation in midst of restructuring and continues to face pension plan deficit

Canada Post is undergoing restructuring that will result in 1.17 million Canadian households losing door-to-door delivery by 2015. Some of the changes, including increasing the price of sending mail, helped make it profitable in the second quarter of this year. (Sean Kilpatrick/Canadian Press)

Canada Post was profitable in the second quarter of 2014 after raising the cost of mailing letters and seeing a big boost in its parcel business.

The Crown corporation reported a second-quarter profit of $53 million before tax, compared with a loss of $104 million in the same period in 2013.

However, unfunded pension liabilities hang over Canada Post, despite a $58-million reduction in employee benefit costs because of improved pension performance this quarter.

It is the first time since the 2010 fiscal year that Canada Post recorded a profit. In the first quarter of this year, it showed a $27-million loss, and for 2013, it had operating losses of $269 million.

Canada Post is undergoing a radical restructuring to cope with changes in the way Canadians use its services.

The five-year plan, announced in December 2013, includes:

  • Building its parcel-delivery and direct-mail business.
  • Hiking the price of traditional mail.
  • Moving away from door-to-door delivery.

By this fall, 100,000 customers who formerly had home mail delivery will have been moved to community mailboxes, and 1.17 million more lose home delivery in 2015.

The increase in the cost of mailing letters, bills and statements pushed through in March helped Canada Post’s bottom line, with a 14.3 per cent increase in revenues from transaction mail to $823 million in the second quarter.

But Canada Post warns the decrease in mail volume it expected when it hiked prices was kept in check by two provincial elections, resulting in a lot of political mail. Mail volumes continued their decline, falling by 38 million pieces or 2.3 per cent in the quarter compared with a year earlier.

The more promising business area is parcel business from online shopping, which grew by 11.3 per cent to $353 million in the quarter.

Domestic parcel volume is up by two million pieces, or 9.7 per cent from a year earlier.

The Canada Post group's net profit in the second quarter of 2014 was $67 million, up from a loss of $50 million a year ago. Its total profit before tax was $86 million versus a $37 million loss a year earlier.

Revenue for operations for the whole group was $2.007 billion, including $427 million from Purolator, the second-largest segment after Canada Post.