Question Period Note: Canada Post Corporation Financial Stability

Canada Post faces financial challenges in the face of lower revenues due to the ongoing decline in letter mail volumes and the need to operate in the increasingly competitive parcels market.

• Canada Post 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
  • Despite the ongoing decline in volumes and increase in addresses to be served, Canada Post continues to strive to deliver postal services at a reasonable price, while meeting the expectations of Canadians
  • Like so many other businesses, Canada Post needs to adapt to the dramatic changes in how Canadians live and work to remain relevant and viable
  • The Government is working closely with Canada Post to assess the challenges facing the corporation and examine opportunities to improve its financial sustainability

If pressed on financial situation:

• Canada Post’s financial results reflect the impacts of the ongoing erosion of letter volumes, the increasingly competitive parcel market, and continued growth in addresses and delivery costs
• Since 2019, Canada Post has been increasing parcel capacity, however, it has not been enough to make up for declining mail volumes and revenues
• Intensifying competition in the parcel delivery landscape has created significant new challenges that the Corporation is working to address to ensure the viability of the national postal service

If pressed on increase to postage rates:

• Canada Post understands the importance of the delivery service it provides and works to minimize the impact of price changes on all customers, ensuring any increases are fair and reasonable
• Canada Post is proposing to increase stamps by 25 cents, to $1.24 per stamp
• The proposed rate change represents a one-time increase of roughly 25 per cent, which is required to better align stamp prices with the rising cost of providing letter mail service to all Canadians

A crowded and highly competitive ecommerce delivery market continued to impact Parcels revenue in the first and second quarters of 2024. Transaction Mail volume continued to erode, while Direct Marketing revenue and volumes picked up.

Canada Post reported a $315-million loss before tax in Q3 2024, up $25 million from Q3 2023. For the first nine months of 2024, losses totaled $345 million, an improvement from $651 million in 2023, aided by income from divesting SCI Group Inc. and Innovapost Inc. Despite this, 2024 will mark its seventh consecutive annual loss.

Parcels

In Q3 2024, Parcels revenue dropped by $46 million (5.8%), with volumes declining by 6 million pieces (9.6%) compared to Q3 2023. Increased competition, including commercial consolidators and reduced fuel surcharges, impacted results. Year-to-date, revenue fell by $133 million (5.5%), with volumes down 12 million pieces (6.0%) from the prior year.

Transaction Mail

In Q3, Transaction Mail revenue rose by $7 million (1.3%) despite a 6.6% (33 million piece) volume decline, aided by a May 6, 2024, postage rate increase. Year-to-date, revenue remained steady, while volumes dropped 3.7% (63 million pieces) compared to 2023.

Direct Marketing

In Q3, Direct Marketing revenue grew by $21M (9.0%) with a 22.1% increase in volume. Year-to-date, revenue rose $63M (9.1%) with a 19.7% volume gain, driven by new business and higher Canada Post Neighbourhood Mail™ sales, though economic uncertainty and digital marketing alternatives dampened other product sales.

Group of Companies

The Canada Post Group of Companies reported a pre-tax loss of $252 million in Q3 2024, up from $217 million a year earlier. Purolator Holdings Ltd. posted a pre-tax profit of $62 million, down from $68 million in Q3 2023.

For the first nine months of 2024, the Group recorded a pre-tax loss of $281 million, an improvement from $442 million in the same period of 2023, aided by proceeds from the sale of SCI Group Inc. and Innovapost Inc. Purolator's nine-month pre-tax profit declined to $182 million from $201 million in 2023.

In January 2024, Canada Post and Purolator sold 100% of their shares in SCI Group Inc. and Innovapost Inc. as part of a strategic transformation to modernize its postal service and refocus on its core mandate.

• Canada Post has recorded more than $3 billion in losses since 2018
  • Canada Post reported a before tax loss of $315 million in the third quarter of 2024
  • Canada Post’s year to date losses for 2024 were partially offset by revenue generated from the divestiture of two of the corporation’s subsidiaries (Innovapost and SCI)
  • 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