Lettermail volume decline accelerates, hitting 6.4% in 2012

Apr 17, 2013, 13:56 ET from Canada Post

Fourth-quarter non-cash impact of new labour agreements allows Canada Post Group of Companies to report a profit

OTTAWA, April 17, 2013 /CNW/ - The Canada Post Group of Companies* today reported a before-tax profit of $127 million in 2012. While the core Canada Post segment had a before-tax profit of $98 million in 2012, this result was created by non-recurring, non-cash adjustments worth approximately $152 million. These adjustments are largely due to reductions in the future costs of sick leave and post-retirement health benefits. These savings are a result of reaching new collective agreements with the Canadian Union of Postal Workers in December 2012. Without the non-cash adjustments, the Canada Post segment would have incurred a before-tax loss of $54 million in 2012. For the Group of Companies, the before-tax loss would have been $25 million.

Mail volume decline escalates in 2012
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. Canadians mailed almost one billion fewer pieces of domestic Lettermail in 2012 than they did in 2006. Almost 30 per cent of that decline occurred in 2012 alone (as domestic Lettermail volumes fell by 6.4 per cent compared to 2011). Widespread adoption of digital alternatives to paper mail is a major driver of this volume erosion. Compared to 2008, Canada Post is now delivering 23.6 per cent less Transaction Mail per address. As a result, Canada Post expects a substantial financial loss in 2013.

Reduced future costs were negotiated in the new collective agreements Canada Post signed with the Canadian Union of Postal Workers (CUPW) on December 21, 2012. The agreements are a welcome first step in reaching a shared understanding with our employees and their representatives about the seriousness of Canada Post's financial challenges. The agreements provide for:

  • lower starting wages for new hires
  • no wage increase for the year 2015-2016
  • changes to pension eligibility for new employees. Eligibility for an unreduced pension was raised to 60 years of age and 30 years of service (instead of 55 years of age and 30 years of service) or after reaching 65 years of age with 2 years of service (instead of 60 years of age and 2 years of service).
  • a higher employee premium for post-retirement health care benefits
  • the elimination of the previous banked sick leave provisions for the last group of employees at Canada Post to fall under a more affordable Short-Term Disability Program.

Canada Post must continue to explore and pursue opportunities to reshape its business and adjust its labour costs in order to meet Canadians' changing needs for postal services.

In several ways, Canada Post is increasingly playing a vital role in the new economy. Its focus on e-commerce and providing Canadians with a secure, consolidated digital mailbox for all their e-bills is yielding solid results. The convenience offered by its retail network and by community mail and parcel boxes for parcel delivery is being embraced by Canadians. Parcel volumes grew by 6.7 per cent and the Digital Delivery Network delivered 15 per cent more e-documents through its epostTM service than in the prior year. The 24/7 online post office is becoming an increasingly important point of contact for Canadians.

Canada Post also achieved improved on-time service performance in 2012, setting combined service records for some products and surpassing targets for most others. Employees also achieved the best year for injury frequency since 1983 by continuing to improve on health and safety.

While the Canada Post Corporation Registered Pension Plan earned a 10.1 per cent return in 2012, better than the benchmark of 8.5 per cent, discount rates declined and the solvency deficit to be funded increased from $4.7 billion to $5.9 billion. This places greater pressure on the financial position of Canada Post Corporation going forward.

To remain financially self-sufficient, Canada Post must make more fundamental changes to transform its business. In doing so, it intends to continue to meet its public policy obligations, such as the need to serve every Canadian address, including those in rural and northern Canada.

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.

* The Canada Post Group of Companies consists of the core Canada Post segment and its three non-wholly owned principal subsidiaries, Purolator Inc., SCI Group Inc. and Innovapost Inc.

To access the full report in PDF, visit canadapost.ca under About Us / Corporate / Annual Report.

SOURCE Canada Post