August 27, 2014 11:15 am

As mail declines, parcel business drives Canada Post turnaround

Canada Post is generating a profit by focusing on parcel deliveries as mail volumes fall. Lower employee costs are also helping.

Matt Myers / Global News

OTTAWA – The Canada Post division in charge of mail delivery reversed its loss into a profit in the latest quarter, boosted by growth in its parcel delivery business and lower employee benefit costs.

The Crown corporation said it earned a net profit of $42 million in the second quarter, compared to a loss of $71 million in the same period a year earlier. Its profit before tax for the three-months ended June 28 was $53 million, compared to a loss of $104 million a year earlier.

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The Canada Post mail delivery segment saw its revenue from operations climb 10 per cent to $1.56 billion, up from $1.35 billion in the comparable period of 2013.

It said it had a $58 million reduction in employee benefit costs versus a year earlier, due to strong pension asset results last year and an increase in the rates used to calculate benefit plans for 2014. It warned that future employee benefits, including pensions, continue to be “high volatile and unpredictable” going forward.

The Crown corporation said it continues to be hurt by a historic decline in transaction mail – mainly bills and other statements – as more people choose to receive and pay their bills online. For the second quarter, the volume of transaction mail fell by 2.3 per cent or 38 million pieces compared to the same period a year ago.

Canada Post said one area where it is seeing support is in domestic parcels, as more people shop online and have their packages delivered to their homes.

In the second quarter, revenue from domestic parcels jumped by 10.9 per cent, while volumes grew by 9.7 per cent or 2 million pieces, year-over-year.

MORE: Here’s how much Canada Post spends delivering mail to your house

Overall, its parcels revenue increased by 11.3 per cent to $353 million in the second quarter, compared with a year ago.

The postal service is the core of the Canada Post Group of companies, which also includes the Purolator courier service and other business segments.

The 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.

Canada Post said it continues to stay on course with its plan to cut down operating costs. In February, it installed community mailboxes for 100,000 addresses in 11 communities across Canada. A total of 1.17 million conversions will be completed by 2015. It also raised prices for letter mail to better reflect inflation and operating costs.

WATCH: Canada Post says they will require medical information from people who are unable to collect their mail at a community mailbox and will still need home delivery.

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