Canada Post maintains profitability as volumes decline 2%

Canada Post released its delayed annual report for the 2010 year yesterday, revealing a 27% drop in earnings in its core business compared to 2009, though profitability was maintained in difficult circumstances. The Corporation said a 4.5% decline in its lettermail business helped pull its earnings for the full year down to $233m.

The results represented a 16th consecutive year of profitability at Canada Post, but mail volumes were down almost across the board.

It was the fourth year-on-year decrease in domestic lettermail volumes, and the fifth consecutive year in which overall volumes per address dropped.

In other segments, transactional mail volumes decreased by 4%, while parcel volumes also fell, by 2.8%.

Overall volumes fell by 1.8%, as the Corporation’s 69,000 employees handled 10.6bn pieces of mail, parcels and messages to more than 15m residential and business addresses in 2010.

Direct marketing volumes remained flat, with a 0.1% increase in volumes not helping much to return the situation to pre-recession levels.

Commenting on the volume declines, Canada Post CEO Deepak Chopra said the figures “confirmed the case for change”.

Chopra said modernisation efforts in his company were now gaining momentum.

“To remain relevant, we must reinvent ourselves – and be nimble, competitive and courageous about it,” he said.

Canada Post said its operating costs for the year rose by $159m as the result of higher benefit costs – an increase that “more than offset” the Corporation’s cost-cutting efforts and productivity improvements.

Chopra said his workforce was now adapting to new methods, while major processing plants were being overhauled.

“Although some disruption is inevitable when a company modernizes on this scale, we are making renewed
efforts to minimize it,” he insisted.

A particular drain on the Corporation’s cash was its pension fund, which is running at a $3.2bn deficit. Canada Post paid $746m into the plan, including $425m in special payments designed to address the deficit.

Consolidated revenue for the Group as a whole increased 1.9% to $7.5bn, mainly as the result of price increases. Consolidated net income for the Group was $439m.

The Corporation’s majority-owned express company Purolator saw its revenues increase 4.1% from 2009 levels, bringing in $72m to the Canada Post income, up $19m from 2009.

Canada Post’s logistics division reported revenue of $149m, down $2m on 2009.