Profit of $98M small comfort for Canada Post

Canada Post managed to turn a profit in 2012, but the profits are the result of non-cash adjustments to labour costs, and from operations. According to the Crown corporation’s annual report, $98 million in future sick leave and post-retirement health benefits were saved as a result of the new collective agreement reached in late 2012. That allowed for a one-time adjustment without which Canada Post would have posted a loss of $54 million in that year. The loss would have been tempered by profits from Canada Post’s other operations, such as Purolator, but the Canada Post group as a whole would still have posted a loss of $25 million. All numbers reported are before taxes.

Labour remains a major cost for Canada Post, accounting for 69 per cent of the cost structure. The report highlighted the continued decline of letter-mail, once the corporation’s bread and butter. The total volume of what Canada Post calls transaction mail has dropped by 23.6 per cent per household since 2008. “Rapidly declining mail volumes combined with the need to serve a growing number of new addresses are a major cause of Canada Post’s serious financial challenges,” the report stated. The actual volume of transaction mail dropped 6.4 per cent over the year, to a total volume of 9.76 billion pieces. The volume of letter-mail delivered in 2012 was roughly four billion pieces. Meanwhile, in 2012 alone, 157,000 new addresses were created.

In his statement, Deepak Chopra, president of Canada Post, said the corporation was at a pivotal moment. “After successfully adjusting to fax machines, email, and dial-up then broadband Internet, the combination of fast Internet and smart tablets has shaken the mail business at its core,” he said. The combination has accelerated the decline in mail volumes, and even the corporation’s cash cow of direct marketing is facing digital rivals that use mobile and smart technologies. “We must fundamentally rethink our business.” One bright light is the parcel delivery business. Because the universal service obligations requires Canada Post to provide postal service to all Canadians, the Crown corporation is in a strong position to take advantage of the number of parcels being delivered through online transactions. In 2012, revenue from the parcels line of business increased by 6.1 per cent to $79 million, and the number of pieces handled increased by 10 million.

The drawback, is that because it does not have monopoly in parcel delivery, the corporation has to compete with private-sector services. “The group expects to incur a substantial loss again in 2013,” the report concluded. “In fact, an accounting profit alone is not a sign that Canada Post can afford to conduct business as usual.” The line is similar to Canada Post’s annual reports since 2007, which have pointed out the decline in mail volumes and the need for massive modernization of Canada Post’s old infrastructure. In 2008, Canada Post launched a $2-billion renewal project to replace facilities, automate manual sorting, create a motorized delivery force, and increase productivity.

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