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Canada Post set to turn profit amid dramatic cuts

By: Vanessa Lu Business reporter

After making dramatic changes that include starting a phase-out of door-to-door home delivery and hiking the price of stamps, Canada Post says it expects to end the year in the black.

The crown corporation reported third-quarter earnings on Wednesday that showed the post office segment recorded a before-tax profit of $13 million, compared to a $129 million loss in the same period a year earlier.

For the first three quarters of 2014, profit before tax totalled $39 million, compared with a loss of $165 million over the same period in 2013.

“With the busy holiday season rounding out the year, we are expecting to finish 2014 with a profit,” said spokesman Jon Hamilton, noting there was a loss in the first quarter, but it has been profitable since then.

Canada Post credits the turnaround to higher revenues from its parcel and mail business as well as lower employee benefits costs, which dropped $48 million in the third quarter.

Mail volumes continued to slide, falling 6.1 per cent, or 58 million fewer pieces, in the quarter. But revenues actually increased by $90 million, or 13.7 per cent, thanks to a 35 per cent jump in postage rates.

In late March, the price of domestic stamps rose to 85 cents from 63 cents if they were bought in a packet or bulk. A stamp purchased individually costs $1.

The third quarter, which ended Sept. 27, is traditionally a slower period because it covers the summer. The fourth quarter is always the busiest, with increased holiday business, especially thanks to the growth of online shopping.

“We are anticipating a 20 per cent increase in parcel volumes this season,” Hamilton said. “Canadian retailers have really caught on to the Black Fridays and Cyber Mondays.”

During peak periods, Canada Post anticipates delivering 800,000 parcels a day, which translates into processing about 1,200 parcels a minute in plants, said Hamilton.

Parcel volumes increased by almost 3 million pieces in the third quarter, with revenues up $25 million, or more than 8 per cent, compared to the same period a year earlier.

When asked whether the post office expected to see a drop in the number of Christmas cards sent this season due to the jump in stamp prices, Hamilton said it is too soon to say.

While Christmas card volumes have been falling over the years, sales of Christmas stamps have been strong, he said. “But you still see a lot of red and green envelopes in the mail stream.”

When Canada Post’s earnings are added to its affiliated companies that include Purolator, its profits before taxes in the first three quarters of the year totalled $84 million. That’s a far cry from the 2014 forecast, approved by the federal government, of a $274 million loss for the year before taxes.

In February, the federal government granted Canada Post a delay in making special payments owed on its pension plan until 2017. Without the relief, Canada Post would have been required to pay about $1.3 billion this year.

 

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