Canada Post recorded a loss before tax of $76 million in the first quarter of 2024 as revenue for Parcels and Transaction Mail declined and Direct Marketing picked up.
The segment’s loss before tax improved compared to the same period of the prior year due to the receipt of non-recurring dividends partly related to the divestiture of SCI Group Inc. (SCI). Without these dividends, Canada Post’s loss before tax would have been approximately $224 million, compared to a loss before tax of $107 million in the first quarter of 2023.
In the first quarter, Canada Post’s revenue declined by $56 million, or 1.5 per cent, compared to the same quarter of the prior year. Parcels results continued to be negatively impacted by the competitive environment, while Transaction Mail volumes continued to erode. In Direct Marketing, Canada Post Neighbourhood Mail™ service benefited from new business and higher sales.
Canada Post’s loss from operations in the first quarter was $221 million, expanding by $109 million compared to the $112-million loss from operations it had recorded in the first quarter of 2023. The cost of operations increased by 2.8 per cent in the first quarter compared to the same period a year earlier. Labour costs rose slightly and employee benefit costs increased due to a decline in discount rates. The increase in costs was partly offset by lower non-capital investments as the company has refocused its 2024 investment priorities.
For the first quarter of 2024, Parcels revenue declined by $59 million, or 5.4 per cent, while volumes fell by 2 million pieces, or 1.1 per cent, compared to the same period in 2023. A crowded and competitive parcel delivery market continued to negatively affect results for the line of business. These market dynamics included growing competition from commercial consolidators that are taking more volume from the conventional inbound postal network. A decline in fuel surcharges linked to market rates also negatively affected Parcels revenue.
In the first quarter, Transaction Mail revenue fell by $20 million, or 1.3 per cent, as volumes declined by 16 million pieces, or 1.1 per cent, compared to the same period a year earlier. Transaction Mail revenue and volumes declined as consumers and mailers continued to shift to digital channels. The company maintained its regulated stamp prices at 2020 levels through the first quarter of 2024. In May, Canada Post raised its regulated postage rates after receiving Governor-in-Council approval of its proposed increase. For stamps purchased in a booklet, coil or pane, which represent most stamp sales, the rate has increased by seven cents, to 99 cents per stamp. The stamp price increase took effect on May 6, 2024, and did not impact first quarter results.
In the first quarter, Direct Marketing revenue grew by $23 million, or 12.2 per cent, as volumes increased by 180 million pieces, or 22.4 per cent, compared to the same period in 2023. New business and higher sales for the company’s Neighbourhood Mail™ service positively impacted results. Economic uncertainty and digital marketing alternatives continued to weigh on sales of other Direct Marketing products, which continued to be below pre-pandemic levels.
The divestiture of SCI contributed a gain on sale of $287 million to the Group of Companies’ results in the first quarter of 2024. As a result, the Canada Post Group of Companies recorded a profit before tax of $106 million in the first quarter, compared to a loss before tax of $58 million in the same period a year earlier. Purolator recorded a profit before tax of $39 million in the quarter, compared to $46 million in the same period of 2023.
In January 2024, Canada Post and Purolator announced the divestiture of 100 per cent of the shares of two subsidiaries: SCI Group Inc., a leading Canadian third-party logistics provider, and Innovapost Inc., the Group’s shared-services provider in information technology (IT). The divestitures of SCI and Innovapost closed March 1 and April 15, 2024, respectively. Financial information about the Innovapost sale will be reported in the second-quarter financial report.
These strategic divestitures are a key component of Canada Post’s transformation. The company is transforming its IT model to focus its business and resources on its core mandate of providing a modern postal service to Canadians.