Changing needs of Canadians drive losses, as Transaction Mail
volumes fall and Parcels revenue does not make up the
shortfall
OTTAWA,
ON, May 3, 2024 /CNW/ - Canada Post recorded a
loss before tax of $748 million in
2023. Results were negatively impacted by the post-pandemic surge
in parcel delivery competition, the ongoing erosion of Transaction
Mail, and continued growth in addresses and delivery costs.
The postal service has confronted significant new challenges in
recent years. In the post-pandemic parcel delivery landscape,
competition has accelerated at a pace not seen in the company's
history. Canada Post's estimated parcel delivery market share has
eroded from 62 per cent prior to the pandemic to 29 per cent in
2023. At the same time, Transaction Mail continues to decline in
both volume and as a revenue source. In 2006, Canadian households
received an average of seven letters per week; in 2023, they
received two. Delivering fewer letters to a growing number of
addresses is compounding the financial pressures on the
Corporation.
In 2023, revenue fell by $240
million, or 3.3 per cent, compared to the prior year,
dropping across all three lines of business – Parcels, Transaction
Mail and Direct Marketing. The 2023 loss before tax widened by
$200 million from a loss before tax
of $548 million in 2022.
The cost of operations in 2023 rose by $11 million, or 0.1 per cent, compared to 2022,
largely due to higher labour costs, non-capital investments and
depreciation expenses. This was partly offset by lower employee
benefit costs driven by an increase in discount rates.
Under the Canada Post Corporation Act, the postal service
has an obligation to serve all Canadians in a financially
self-sustaining manner based on revenue generated by the sale of
postal products and services, not taxpayer dollars.
But like so many other businesses, Canada Post needs to adapt to
the dramatic changes in how Canadians live and work today to remain
relevant and viable. Over the last 20 years, the amount of mail
Canadians receive has declined by more than 50 per cent, while the
number of addresses has increased by more than three million. This
has resulted in lower revenues and higher costs.
Since 2019, Canada Post has been increasing parcel capacity and
improving service across the country, as consumers have shifted to
more retail spending online. However, growth in the parcel delivery
business has not been enough to make up for the declining mail
volumes and revenues. Intensifying competition in the parcel
delivery landscape has created significant new challenges that the
Corporation must address to ensure the viability of the national
postal service.
Without changes to align the postal service to the needs of
Canadians today, Canada Post projects larger, unsustainable losses
in future years.
Statement from Doug Ettinger, President and CEO, Canada
Post
"Canadians understand our business model must change. They
can see it in their mailbox. An operating model designed to deliver
nearly 5.5 billion letters in 2006 cannot be sustained on the 2.2
billion letters we delivered last year. This trend is not unique to
Canada.
Like other businesses, we need to adapt to what Canadians
need, where they live, how they shop and use our services. Canada
Post is committed to leading that change, building on the
improvements we've made across the organization over the last few
years. Canadians still value the importance of their national
postal service, which is why we're working in partnership with the
Government of Canada to put it
back on the path to long-term financial
sustainability."
Statement from the Hon.
Jean-Yves Duclos, Minister of Public
Services and Procurement
"Canada Post is an essential service that connects Canadians
from coast to coast to coast. The Government of Canada recognizes that Canadians have changed
the way they use the postal service, while continuing to view its
role as vital to the country, particularly in rural and remote
communities.
We will continue to work closely with Canada Post to secure
its long-term future. As announced in Budget 2024, the government
is also considering how to leverage Canada Post's portfolio of
federal properties to build more housing for Canadians. We will
ensure postal service is maintained as part of Canada Post's
mandate as a 'service first' organization focused on delivering the
mail."
Parcels
In 2023, Parcels revenue declined by $91
million, or 2.5 per cent, as volumes rose by 10 million
pieces, or 3.7 per cent, compared to 2022. Volumes rose due to
increased competitive offerings, higher online shopping returns,
and additional business from new and existing ecommerce customers.
Improved service performance, the introduction of late induction in
key markets like the Greater Toronto
Area, and the 2023 launch of carbon-neutral shipping, also
contributed to domestic volume growth. Domestic Parcels revenue
declined despite an increase in commercial rates. The decline in
revenue was partly due to decreased consumer spending, more
lightweight items moving through the Canada Post network, and a
decline in fuel surcharges linked to market rates. Competitive
commercial consolidators also took more business from the
conventional inbound postal network.
Transaction Mail
Transaction Mail revenue fell by $126
million, or 5.2 per cent, in 2023 as volumes declined by 117
million pieces, or 5.0 per cent, compared to 2022. This was largely
the result of consumers and mailers continuing to shift to digital
channels. Throughout 2023, regulated stamp prices remained at 2020
levels. In April 2024, Canada Post
received Governor in Council approval to increase its regulated
postage rates, which take effect May 6,
2024.
Direct Marketing
Direct Marketing revenue declined by $3 million, or
0.4 per cent, in 2023 as volumes increased by 17 million
pieces, or 0.4 per cent, compared to the prior year. Total
volumes in 2023 were below pre-pandemic levels, with the decline in
revenue driven by economic uncertainty and businesses choosing
digital marketing options. Canada Post Neighbourhood Mail™
revenue increased mainly due to new customer relationships and
product development. Direct Marketing remains an important revenue
generator as the company continues to look at solutions to help
businesses and consumers connect.
Group of
Companies
In 2023, the Canada Post Group of Companies1 recorded
a loss before tax of $529 million, compared to a loss before
tax of $292 million the previous year. The Group of Companies
results were due to the Canada Post segment loss. Purolator
recorded a profit before tax of $293 million compared to
$317 million in 2022, while SCI's profit before tax was
$14 million compared to $16 million the previous year.
In early 2024, Canada Post and Purolator announced the
divestiture of 100 per cent of the shares of SCI Group Inc.
(SCI) and Innovapost Inc. (Innovapost). The SCI transaction closed
March 1 and the Innovapost divestiture closed April 15.
Background
The Canada Post Group of Companies' operations are funded by
revenue generated by the sale of its products and services, not
taxpayer dollars.
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1For the
2023 reporting period, the Canada Post Group of Companies consisted
of the core Canada Post segment and its wholly owned subsidiaries
Purolator Holdings Ltd., SCI Group Inc., and Innovapost
Inc.
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™ Trademark of Canada Post Corporation.
SOURCE Canada Post