Canada Post Group remained stuck in the red in the third quarter of this year with a pre-taxloss of C$75 million and a nine-month loss of C$88 million, its sixth quarter in a row with
negative results.The Canada Post segment, covering the core mail, parcel and digital delivery businesses, had aQ3 pre-tax loss of $91 million and a loss of $114 million in the first three quarters of 2012.
However, the figures were considerably better than last year, although those results had beenseriously impacted by a major strike. The group’s revenues dropped slightly by 1.6% to $1.74billion in Q3, 2012, and stagnated at $5.5 billion over the first nine months.
Accelerated mail volume declines resulted in the financial losses for a sixth consecutivequarter, the state-owned postal group said. “The underlying cause is a historic shift frompaper-based to digital communication by consumers, businesses and governments. Canada Post’s coreTransaction Mail volumes are likely to decline further and rapidly. The Corporation is acceleratingthe transformation of its business in order to meet the evolving needs of Canadians and avoidbecoming a burden on taxpayers,” it stated.
Canada Post’s Transaction Mail volume fell by 9.0% or 119 million pieces in the third quarterand by 5.9% or 207 million pieces in the first three quarters, compared to the same periods lastyear. Transaction Mail generates most of the segment’s revenue. In the largest product category,domestic Lettermail, volumes decreased by 9.5% or 116 million pieces in the third quarter. Volumesfell by 6.3% or 205 million pieces in the first three quarters, compared to the same periodslast year.
Direct Marketing mail volumes fell by 7.3% or 113 million pieces in the third quarter whencompared to the third quarter of 2011. Direct Marketing volumes fell as corporate customers reducedtheir marketing spend and shifted to electronic media.
More positively, Canada Post said its Parcels results continue to reflect strong growth ine-commerce orders. On a year-to-date basis, Parcel revenue was up by 7.0% and volumes were up by6.8% or 7 million pieces, compared to the same period in 2011. However, this growth is notsufficient to offset losses from mail volume declines, the operator pointed out.
The group said it faces two significant challenges at present.
Firstly, it has to secure collective agreements that enable it to compete. On October 5, 2012,Canada Post reached tentative agreements with the Canadian Union of Postal Workers’ bargainingunits for urban employees and for rural and suburban mail carriers. Ratification voting is underwayuntil December 19, 2012. Successful ratification would allow Canada Post and the 53,000 employeesin these bargaining units to focus on transforming the business to face the digital economy. Afailure to ratify could worsen Canada Post’s significant challenges and make aspects of thetentative agreements unaffordable.
In addition, the Corporation continues to face a volatile solvency deficit to be funded ofapproximately $4.7 billion in its pension plan, as at December 31, 2011. The seriouschallenges facing the plan are better represented by the deficit on a market-value basis, which isapproximately $6.6 billion, also as at December 31, 2011. Canada Post is responsible for fundingshortfalls in the plan and must be viable in order to meet this obligation and to fundpost-retirement benefits.
