Canada Post expects to make a loss in 2013 as the fall in mail volumes accelerates and despiterecording a profit last year and its ongoing expansion of digital and parcel services.
The Canada Post Group made a pre-tax profit of C$127 million in 2012 and the core CanadaPost segment had a before-tax profit of $98 million in 2012, largely thanks to one-off financialeffects from a key labour agreement last December. In 2011, the group had made a pre-tax loss ofC$253 million. The group’s revenues stagnated at C$7.5 billion last year but the operating resultimproved to a C$131 million profit from the C$226 million loss in 2011.
But these positive results were created by non-recurring, non-cash adjustments worthapproximately C$152 million. These were largely due to reductions in the future costs of sick leaveand post-retirement health benefits resulting from new collective agreements with the CanadianUnion of Postal Workers in December 2012. Without the non-cash adjustments, the Canada Post segmentwould have incurred a before-tax loss of C$54 million and the overall group would have had a C$25million pre-tax loss.
President and CEO Deepak Chopra said in the company’s annual report that the group is “at apivotal moment”, urging that “we must fundamentally rethink our business”. He also welcomed the “historic” agreements with the Canadian Union of Postal Workers (CUPW) in December 2012. Under theseagreements, new staff will start at lower wages, there will no wage rise in 2015-16, pensioneligibility changed and healthcare payments were reduced.
The core Canada Post segment had stagnating revenues of C$5.9 billion in 2012. DomesticLettermail volumes fell 6.4% last year, mostly due to digital replacement. The Digital DeliveryNetwork delivered 15% more e-documents through its epost service while the 24/7 online post officeis becoming an increasingly important point of contact for Canadians, the company said.
Parcel volumes grew by 6.7 per cent, driven largely by home deliveries of goods purchased on theinternet, generating a 6.1% rise in revenues to C$1.3 billion. Online consumer spending onlyrepresents 4% of total retail sales in Canada and the postal operator sees e-commerce as one of itsmain growth areas in the future.
In its latest move, Canada Post has linked up with e-commerce services company OSF GlobalServices to integrate its retail and delivery services into the firm’s Demandware Commerceplatform. OSF customers will be able to access the postal operator’s retail and delivery services,and benefit from precise expected delivery dates, tracking and returns.
The B2B courier business Purolator, a separate group division, increased revenues slightly toC$1.63 billion last year but its pre-tax profit dropped to C$38 million from C$73 million in 2011.According to Canada Post’s annual report, this decline was due to “a challenging year as increasedcosts exceeded revenue growth” and Purolator’s volumes dropped 1.9% because of the slow economy andintense competition.
Looking ahead, Canada Post said it must “continue to explore and pursue opportunities toreshape its business and adjust its labour costs in order to meet Canadians’ changing needs forpostal services”. To remain financially self-sufficient, Canada Post must make more fundamentalchanges to transform its business. In doing so, it intends to continue to meet its public policyobligations, such as the need to serve every Canadian address, including those in rural andnorthern Canada.
