Canada Post Corporation records first loss for 17 years
Canada Post has recorded its first loss after 16 consecutive years of profitability, with declining mail volumes and last summer’s strike action contributing to a $327m loss before tax in 2011. The Crown Corporation, which is funded by its own income rather than government support, said today that its pension problems and a $150m equality pay-out ordered by the Supreme Court were also significant factors in the loss reported on an unconsolidated basis for the group.
But, beyond one-off hits to the accounts, Canada Post said today that “deep and enduring shifts” in technology and demand for postal services was now underlining an urgent need to transform its business.
Canada Post said it will be looking to continue trimming its operational costs – particularly from its workforce – while pushing for growth in the home delivery market, building on the e-commerce boom, as well as expanding its digital business.
Meanwhile, the company will be seeking to maximise the value of direct mail as it attempts to slow the decline in traditional letter mail volumes.
Canada Post spokesperson Anick Losier told Post&Parcel today the company was “disappointed” by the $325m loss, but said it went further than just the summer strike action or Supreme Court damages.
“The results reflect a business model that isn’t working any more,” she said. “It worked when lettermail was flowing in our systems, but experts predict that the decline will continue, and probably reach 50% in less than 10 years.
“We see the trend almost every day,” added Losier, pointing to major transactional mailers now charging consumers if they want statements mailed physically, and announcements from the Canadian government that it will no longer send payments through the mail.
The Canada Post spokesperson said: “This is why changes are crucial. Labour represents 70% of our cost structure and addressing these costs remain our single largest priority.”
Losses
Canada Post’s mail volumes fell by 4.6% per point of delivery – taking account of the growth in addresses within Canada – during 2011, bringing the decline since 2007 to 20%.
Last June’s labour disruption shut down the postal system for up to 25 days as union talks broke down over a new collective bargaining agreement, taking further volume out of the mailstream and prompting some customers to find alternative communications channels that may have become permanent.
Canada Post’s pension solvency deficit reached $4.7bn, despite a payment of $510m being made to the plan in 2011, including $219m in special payments aiming to help rectify the situation.
And, last November saw a 28-year legal case over claims that some female employees were paid less than equivalent male colleagues resolved with the Supreme Court ordering Canada Post to pay $150m in damages. Canada Post said today it is still consulting on a payment process for the staff concerned, but wrote the full cost against its 2011 results.
Transformation
“Our future is more about e-commerce fulfillment”
Canada Post said today that it will continue its modernisation efforts under the new structure – dual networks of physical and digital operations – with a customer focus and technological transformation.
The company is also aiming to expand its digital delivery through its epost service while gaining new revenues through applications involving data and locational intelligence.
Last year Canada Post restructured its entire operations into a physical and a digital network to support its new approach to the market.
The company warned that as transformation continues, changes in its work force were needed, with about 70% of its operational costs down to labour. Much of the downsizing will come through attrition, with the Post seeing an opportunity to change its workforce as tens of thousands of employees are scheduled to retire in the next decade.
Achieving a competitive labour cost structure would be “crucial” given the importance Canada Post attaches to building market share in the highly-competitive home delivery market, the Post said.
Losier said: “Our business model needs to change. It was built to sustain the last 40 to 50 years where the business was growing with bills, statements and cheques. While we try to slow that erosion, it won’t stop. Our future is more about e-commerce fulfillment where online shopping is growing fast and we have the network to deliver.”
Changes in the labour force are subject to discussions with the Canadian Union of Postal Workers, which remains waiting for the arbitration process stemming from the same contract negotiation process that gave rise to last June’s strike action. After pressuring the previous arbitrator appointed to decide on the details of the new labour deal to resign, last week the union formally asked the courts to prevent the latest arbitrator appointed by the government from taking up the role because of his political links.
The Canada Post spokesperson said there was no update yet on when the arbitration process will be carried out, but that the company was “anxious to see this resolved as quickly as possible to focus on the future of our business”.
