Quarterly losses before tax at Canada Post fell by 42% compared to Q1, 2022. This amounted to a CAD $42m drop compared to the same period in 2022 to CAD $58m (€39.8m). The strong gain in profitability was on largely equal revenues of CAD $2,501m (€1.7bn) vs CAD $2,502m in Q1, 2022.
The fall in losses was attributed by the postal operator to a fall in employee benefit costs that helped manage the cost of operations in the quarter. Fuel costs also played a role in increased profitability.
Canada Post Group’s profitable commercial parcel delivery and logistics segment, Purolator, played a major role in the fall in losses. Its profit before tax grew by 64.3% q-o-q to CAD 46m. Where parcel volumes fell by 7.9% in its Express segment, higher rates per parcel drove profit growth. As with the postal operator arm of Canada Post, it saw a softening in B2C volumes, led by falls in e-commerce sales.
Parcels now form around half of the Canada Post segment’s revenue. Volumes were down from 75m pieces in Q1, 2022 to 70m pieces in Q1 this year – down 7.6% q-o-q. Rate rises meant however that revenues were up 0.2% from CAD $860m in Q1 2022 to CAD $861m in Q1 2023.
Canada Post segment parcel volumes were hit by new low-cost entrants to the domestic parcel delivery market and rate shopping by customers. The global trend of a post-pandemic softening in the e-commerce market also played a role, and this also hit inbound international parcel shipments. Canada Post stated that inbound international parcel volumes and revenues were hit by global B2C customers moving away from postal operators for international shipping in favour of commercial parcel operators.
The post and parcel operator forecasts a doubling in the Canadian e-commerce market in the next decade. It is investing in infrastructure, new products and services to meet this uptick in volumes, which has hit short term profitability. The Canadian federal government expects it to be financially independent even as it remains a state owned body, that partly explains its drive towards competitiveness and profitability.
Source: Ti Insights
Author: Richard Shrubb
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