A serious labour dispute, continuing mail decline and higher operating costs combined to push theCanada Post Group into the red last year with a pre-tax loss of C$253 million.
The core Canada Post mail business reported a financial loss before tax of $327 million, itsfirst loss after 16 consecutive years of profitability, the company announced yesterday. Itsrevenues dropped fractionally to C$5.86 billion.
In contrast, express subsidiary Purolator made a profit of C$73 million, down 3.8 per cent on2010, while its revenues grew by 8.7 per cent to C$1.6 billion. The small Logistics and Innovapostdivisions were also profitable.
Group revenue was flat at C$7.5 billion with consolidated volumes down 4.1 per cent. Thegroup ended with a C$188 million net loss compared to a C$314 million profit in 2010.
Canada Post said that four significant factors contributed to the negative financialperformance: the June 2011 labour disruption; a continued decline of mail volumes; the sizable,volatile pension obligation; and the Supreme Court of Canada’s decision regarding pay equity.
The June 2011 labour disruption effectively shut down the postal system for 25 days. This hadan immediate financial and competitive impact. The volumes of Transaction Mail (the bills, noticesand statements that make up the Corporation’s core product) continued to decline in 2011. They fellby 4.6 per cent per point of delivery, bringing the total decline per point of delivery overthe last five years (2007 to 2011) to 20 per cent.
Canada Post contributed $510 million to the pension plan in 2011, including $219 million inspecial payments. The Corporation continues to face a sizable, volatile solvency deficit of $4.7billion in its pension obligation.
The Group of Companies’ profitability was also impacted by a decision from the Supreme Courtof Canada on November 17, 2011. The court ruled that some Public Service Alliance of Canada(PSAC)-represented employees of Canada Post had earned less than others in comparable jobs. Thecase dates back to 1983. As a result of this ruling, Canada Post has recognized an estimate ofthese additional costs in 2011. Detailed information around this estimate is not provided as theCorporation is still consulting with PSAC on a process to pay employees the amount that is owed inthe pay equity case.
Apart from the Corporation’s 2011 financial performance, deep and enduring shifts intechnology and demand for postal services point to the urgent need to transform the business.Building around the two pillars of structural transformation and pursuit of growth in e-commerceand e-delivery, Canada Post has embarked on a journey to create a relevant and successful future.Together, these pillars will redefine Canada Post’s role in the digital economy.
The company said that structural transformation will involve efforts to achieve operationalexcellence through modernization, as well as increased customer focus, technological transformationand a plan to maximize the full potential and synergies of the Group of Companies. It is essentialthat this transformation also address labour costs through the collective bargaining process. Thisis necessary in order for Canada Post to remain competitive, to be able to continue to offerCanadian businesses and consumers affordable services, and to restore and sustain the profitabilityin the Corporation’s mandate. Achieving a competitive labour cost structure will be crucial giventhat home delivery of parcels—a highly competitive business—is becoming a critical part of futureactivity.
The second pillar is the Corporation’s growth agenda. The focus here is on enhancing CanadaPost’s leadership in home delivery to capitalize on the rapid growth of e-commerce, expandingdigital delivery via epost, building data and location intelligence as a growth business andmaximizing the value of traditional and marketing mail.
