Actuarial losses on post-employment benefits of $2.2 billion recorded in third quarter
Nov. 29, 2011
The Canada Post Group of Companies today reported a loss before tax of $163 million in the third quarter ended October 1, 2011, down from a $19-million pre-tax loss recorded in the same period a year earlier.
The decline of the Group’s profitability in the quarter was largely driven by an unfavorable ruling against Canada Post by the Supreme Court of Canada. As a result of this ruling, an estimate of the cost to the Corporation has been recorded in the Group’s third quarter financial statements, resulting in a decrease in profitability for both the Canada Post segment and the Group. The final impact of this ruling is still being evaluated.
In the third quarter, the Group also reported actuarial losses in the amount of $2.2 billion (recognized in Other Comprehensive Loss) on the re-measurement of its post-employment benefits. This was mainly the result of two factors: lower-than-expected returns from the assets of the Group’s pension plans during the quarter due to global market volatility; and an increase in the employee benefit liabilities due to a decrease in the discount rate, which is sensitive to declining bond yields.
The total equity of the Corporation continues to be significantly affected by the measurement of its post-employment benefit liabilities. As at October 1, 2011, the Group of Companies’ equity position was negative $2.1 billion. The financial health of the Corporation is critical, as the key to a strong pension plan is a strong sponsor.
For the first three quarters ended October 1, 2011, the Group reported a loss before tax of $159 million, down from a $62-million pre-tax profit recorded in the same period a year earlier.
Segmented Results – Canada Post
The Canada Post segment, consisting of the Group’s core mail and parcel delivery businesses, lost $190 million before tax in the third quarter, down from a $49-million pre-tax loss reported by the segment in the same period in 2010. The decline was largely driven by the unfavorable ruling rendered by the Supreme Court of Canada. The performance by the Canada Post segment in the quarter was affected by a clearing of the backlog of mail resulting from the labour disruption in June 2011. Without this temporary boost to volumes and revenues, the performance in the quarter would have been worse.
For the first three quarters ended October 1, 2011, the Canada Post segment lost $211 million before tax, down from a pre-tax profit of $7 million in the same period a year earlier. The segment experienced weaker revenues and volumes in the first three quarters compared to the same period in 2010, driven by a cumulative estimated revenue loss of $173 million related to the labour disruption, as well as increased costs largely attributable to the Supreme Court of Canada ruling. This decline was partially offset by revenues from the federal election, the census and pricing action.
For the 39-week period ended October 1, 2011, volumes in the segment’s core Transaction Mail business were down by 2.6%, or 111 million pieces, compared to the same period in 2010. Transaction Mail revenue decreased by $10 million compared to the same period in 2010. Parcels revenue declined by 5.6% in the first three quarters while volumes declined by 1.9%. Direct Marketing revenue increased by 0.8% while volumes decreased by 4% in the first three quarters.
Segmented Results – Purolator
In the third quarter, the Purolator segment earned a $20-million profit before tax, down 20.7% from the $24-million pre-tax profit earned in the same period a year earlier. Revenue increased by $33 million, or 8.7%, compared to the same period in 2010, mainly driven by pricing action and increased volumes. However, this was more than offset by a $37-million increase in the cost of operations, due to increases in volumes and inflationary pressures. The Purolator segment earned $38 million before tax in the first three quarters ended October 1, 2011, down 17.6% from the same period a year earlier.
The Canada Post Group of Companies’ operations are funded by the revenues generated by 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.
To access the full report in PDF, visit canadapost.ca/AboutUs and select “Quarterly Financial Reports” from the Corporate menu.
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