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 and its operations are funded by the revenue generated by the sale of its products and services, not taxpayer dollars
  • 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’s reported financial losses were amplified by COVID-19; while the Corporation has reported losses so far in 2021, its financial results have improved compared to 2020
  • 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:

• Through the first three quarters of 2021, Canada Post reported a consolidated net loss of $209 million, an improvement of $243 million (53.8%) from the same period in 2020, when the net loss was $452 million
• While the first half of 2021 showed strong revenue growth from all lines of business, it slowed slightly in the third quarter as consumers returned to shop in store
• Revenue gains in Transaction Mail due to the federal election and some recovery in Direct Marketing partially offset a decline in Parcels revenue for the quarter
• Revenue for the Canada Post segment increased by $37 million, or 0.81 per cent, in the third quarter compared to the same period a year earlier
• Through the first three quarters of 2021, consolidated revenue increased by $897 million (12%), compared to the same period in 2020
• Year-over-year comparisons are affected by the impacts of COVID-19 on volumes and revenue, which began at the end of the first quarter of 2020 and affected the lines of business differently

Cost of operations increased by $32 million, or 1.8 per cent, in the third quarter of 2021 and by $275 million, or 3.3 per cent, for the first three quarters, compared to the same periods a year earlier. These increases were driven by annual wage increases and higher costs of processing and delivering parcels compared to mail. The Corporation also invested in operations and capacity.

Canada Post’s long-standing mandate is to serve every Canadian address while maintaining financial self-sustainability. The pandemic has changed the needs of Canadians dramatically, putting further pressure on the Corporation’s existing business model and operations. To grow the business and better meet these evolving needs, Canada Post is investing to expand capacity, improve the customer experience and innovate its operations.

Key results for the Canada Post segment in Q3 2021:

Parcels results

In the third quarter, Parcels revenue declined by $31 million, or 5.3 per cent, as volumes fell by 20 million pieces, or 22.1 per cent, compared to the same period a year earlier. The reopening of stores for in-person shopping negatively impacted demand for parcels. Global supply chain issues also began to affect inbound volumes, particularly from China. For the first nine months of the year, revenue rose by $307 million, or 11.4 per cent, as volumes declined by 2 million pieces, or 2.3 per cent, compared to the same period a year earlier. Year-to-date Parcels revenue was positively affected by more proactively managing available capacity and the mix of commercial customers and products. The Corporation continues to make investments to improve processing capacity and efficiencies to support growth in the Parcels business.

Transaction Mail results

Transaction Mail revenue grew by $21 million, or 2.4 per cent, in the third quarter as volumes rose by 8 million pieces from the same period in the prior year. This was partly due to federal election mailings. For the first three quarters of 2021, revenue grew by $54 million, or 1.3 per cent, as volumes rose by 4 million pieces compared to the same period a year earlier, due in part to the census and federal election mailings. Despite revenue growth from these mailings, continued erosion in Transaction Mail persists as consumers and mailers migrate to digital alternatives.

Direct Marketing results

Direct Marketing continued to partially recover in the third 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 grew $42 million, or 20.3 per cent, in the third quarter as volumes rose by 184 million pieces, or 21.1 per cent, compared to the same period in the prior year. While Direct Marketing results improved, some retailers delayed or cancelled marketing campaigns in the third quarter due to global supply chain issues. For the first three quarters of 2021, Direct Marketing revenue increased by $100 million, or 15.9 per cent, as volumes increased by 497 million pieces, or 19.8 per cent, compared to the same period a year earlier.

Note: All per cent values in this note have been adjusted for differences in business and paid days and are calculated on values rounded to the nearest thousand. In the third quarter of 2021, there was one additional business day and no difference in paid days compared to the third quarter in 2020. For the year-to-date period of 2021, there were three additional business days and three additional paid days compared to the same period in 2020.

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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