Question Period Note: Canada Post Corporation Financial Stability

Note: When we reference Canada Post, we are referring the Canada Post segment and not the group of companies that includes subsidiaries

• The Canada Post Corporation is a Crown Corporation that operates at arm’s length from the Government
  • As is the case with other postal carriers around the world, Canada Post is evolving to meet the changing customer needs and expectations
  • Our experience during COVID-19 underscored just how important Canada Post is as Canadians relied heavily on this essential service
  • Canada Post connects this country from coast to coast to coast. We continue to work with the corporation to examine opportunities to improve the financial sustainability of its important operations

If pressed on specifics of the financial situation:

• On August 20, 2021, Canada Post recorded a loss before tax of $151 million in the second quarter of 2021, an improvement of $227 million from the $378 million loss before tax in the same quarter a year earlier
• Revenue increased by $188 million, or 11.5 per cent, in the second quarter and by $464 million, or 12.2 per cent, in the first six months of the year, compared to the same periods a year earlier. Continued Parcels revenue growth, increased Transaction Mail volumes linked to the 2021 Census and a partial recovery of Direct Marketing volumes helped drive this revenue growth
• Year-over-year growth rates in each business line reflect the impact of COVID-19 in 2020, which included significant declines in Transaction Mail and Direct Marketing but also soaring parcel volumes. Two additional business days also contributed to the revenue increase for the six-month period in 2021

Currently, the Corporation has a healthy liquidity position allowing Canada Post to operate efficiently in the short term. The significant financial losses that have been experienced lately have been amplified by COVID. The Corporation is forecasting a fourth, consecutive year of significant financial losses in 2021 and anticipates this trend to continue without operational transformation.

Cost of operations

Costs of operations decreased by $44 million, or 2.2 per cent, in the second quarter of 2021 and increased by $243 million, or 4.1 per cent, for the year-to-date of 2021, compared to the previous year. These results were positively impacted by the 2020 arbitrator’s decision for new collective agreements with the Canadian Union of Postal Workers..

Excluding the impact of the arbitrator’s decision, costs of operations increased by $70 million in the second quarter and $357 million for the year-to-date compared to the same periods in 2020. These increases were driven by annual wage increases, processing and delivery costs related to higher parcel volumes, the required operational changes due to COVID-19, health and safety costs and expenses for special employee leave. The accelerated shift in our business from mail to parcels continues to put pressure on our capacity, processing and delivery costs.

Key results for the Canada Post segment in Q2 2021:

Parcels

Despite a parcel volume decline in the second quarter of 5 million pieces, or 5.4 per cent, compared to the same period a year earlier, revenue grew by $52 million, or 6.1 per cent. Revenue results were positively affected by proactively managing use of available capacity through our commercial customer and product mix. Compared to a year earlier when online shopping surged, growth in the second quarter of 2021 began to reflect the return to in-person shopping. For the first six months of 2021, revenue increased by $338 million, or 20.2 per cent, as volumes increased by 18 million pieces, or 8.5 per cent, compared to the same period of the prior year.

Transaction Mail

The 2021 Census mailing contributed to revenue growth for the business line. Transaction Mail revenue increased by $43 million, or 7.5 per cent, in the second quarter as volumes increased by 25 million pieces, or 4.1 per cent, from the same period in the prior year. For the first two quarters of 2021, revenue grew by $33 million, or 0.9 per cent, as volumes fell by 4 million pieces, or 1.9 per cent, compared to the same period a year earlier. Transaction Mail revenue continues to erode as consumers and mailers migrate to digital alternatives. Due to the pandemic, Canada Post is maintaining its regulated stamp prices at 2020 levels through 2021, while minimizing the impact of other price changes.

Direct Marketing

Direct Marketing started to recover in the second quarter, following significant declines in Personalized Mail™ and Neighbourhood Mail™ in 2020 as customers postponed or cancelled marketing campaigns due to COVID-19. Direct Marketing revenue increased $72 million, or 49.1 per cent, for the second quarter as volumes increased by 375 million pieces, or 66.1 per cent, compared to the same period in the prior year. For the first two quarters of 2021, Direct Marketing revenue increased by $58 million, or 13.7 per cent, as volumes increased by 313 million pieces, or 19.0 per cent, compared to the same period a year earlier.

N.B. The operations of Canada Post are funded by the revenue generated by the sale of its products and services, not taxpayer dollars.

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