Ottawa (Ont.) – The Canada Post segment reported a profit before tax of $13 million in the third quarter compared to a loss before tax of $129 million in the same quarter of 2013. As they were in the second quarter, the results are mostly due to the impact of lower employee benefit costs, continued growth in the Parcels business and new pricing measures for Transaction Mail contained in the Corporation's Five-point Action Plan. For the first three quarters of 2014, the Canada Post segment reported a profit before tax of $39 million compared to a loss before tax of $165 million for the same period in 2013 and is expected to report a profit for 2014.
Volumes in Transaction Mail, Canada Post's core business, nevertheless continued to fall as mailers and consumers turn to digital alternatives. Volume erosion picked up speed in the third quarter after being lower than expected in the second quarter. Compared to the same periods in 2013, volumes decreased by 58 million pieces or 6.1 per cent in the third quarter and by 175 million pieces or 5.1 per cent in the first three quarters of 2014.
Employee benefit costs for the Canada Post segment decreased by $48 million for the third quarter of 2014 and by $161 million for the first three quarters of 2014, compared to the same periods in 2013. This is the result of strong pension asset returns in 2013 and an increase in the discount rates used to calculate benefit plan costs in 2014. Employee future benefits, including pension, continue to be highly volatile and unpredictable and remain a significant factor in the Corporation's operating results.
The Five-point Action Plan, announced in December 2013, is realigning the postal service with Canadians' changing needs and will return it to financial self-sufficiency. To date, approximately 800,000 households have either been converted from delivery at the door to community mailbox delivery or are in various stages of the conversion process for 2015. In addition, a strong focus on consolidating processing operations in light of the declines in mail volumes is delivering savings.
The Canada Post Group of Companies1 reported a profit before tax of $35 million in the third quarter, compared to a loss before tax of $109 million for the third quarter of 2013. For the first three quarters of 2014, the Group of Companies' profit before tax was $84 million, compared to a loss before tax of $134 million for the same period in 2013.
Parcels revenue for the Canada Post segment grew by 8.2 per cent to $337 million in the third quarter, while volumes increased by close to three million pieces or 8.1 per cent, compared to the same period last year. Over the first three quarters of 2014, Parcels revenue for the Canada Post segment grew by 8.9 per cent to more than $1 billion, while volumes increased by four million pieces or 4.2 per cent, compared to the same period in 2013.
Largely as a result of the Lettermail price adjustment put in place in the second quarter, revenue from Transaction Mail, which includes mostly letters, bills and statements, rose by 13.7 per cent to $750 million in the third quarter compared to the same period in 2013. Revenue for the first three quarters rose by 6.5 per cent to approximately $2.4 billion compared to the same period last year.
In the third quarter, Direct Marketing volumes for the Canada Post segment decreased by 65 million pieces or 5.6 per cent and revenue fell by $15 million to $279 million, compared to the same period in the prior year. In the first three quarters of 2014, Direct Marketing revenue fell by $32 million or 3.1 per cent to $874 million, and volumes declined by 99 million pieces or 2.2 per cent, compared to the same period last year.
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Canada Post is making considerable progress in implementing the Five-point Action Plan, which is expected to contribute financial benefits of an estimated $700 million to $900 million a year to the Corporation's bottom line, once fully implemented.
The operations of the Canada Post Group of Companies are funded by the revenue generated by the sale of its products and services, not taxpayer dollars. Canada Post has a mandate from the Government of Canada to remain financially self-sufficient and to provide a standard of postal service that is affordable and meets the needs of the people of Canada.
1 The Canada Post Group of Companies consists of the core Canada Post segment and its three non-wholly owned principal subsidiaries, Purolator Holdings Ltd., SCI Group Inc. and Innovapost Inc.
