Canada Post turns a profit in Q1

Canada Post has announced its financial results for the first quarter of 2015. The company reported profit before tax of C$24m, this contrasts to a loss before tax of C$27m for the first quarter of 2014. The improved results were mainly due to continued growth in the parcels business and tiered pricing for transaction mail.

In the first quarter, volumes of domestic letter mail fell by 8.4% or 41m pieces compared to the same period a of 2014. Since their peak, Canadian domestic letter mail volumes have fallen every year and in 2014, Canadians sent 1.4bn fewer pieces of mail than in 2006.

The company stated that significant volatility in employee benefit expenses presented it with a sizeable financial risk. Employee benefit expenses for the Canada Post segment rose by 18.1% or C$70m in the first quarter year-on-year. This was due to a decrease in the discount rates used to calculate benefit plan costs in 2015, partially offset by strong pension asset returns in 2014. Employee benefit expenses are expected to remain higher throughout 2015 when compared to 2014.

The decline in letter mail volumes was offset by higher revenue from the tiered pricing structure that took effect at the start of the second quarter of 2014. Transaction mail revenue grew by 9.1% to C$889m in the first quarter while volumes fell by 8% from the same period of 2014. The company’s pricing structure helped to offset declining transaction mail revenues.

Canada Post’s focus on solutions for e-tailers saw first quarter parcels revenue for the Canada Post segment rise to C$380m, up by 6.2% year-on-year, while volumes increased by more than 4m pieces or by 6.5%.

Revenue from direct marketing rose to C$298m, while volumes grew by 47m pieces. Both revenue and volumes declined by less than 1% in Q1 compared to the same period in 2014.