Canada Post is facing major financial difficulties and will likely be asking its owner for financial relief next year, the federal Crown corporation said. The company, collectively the Canada Post Group, made the comment in releasing its third-quarter results, which included an improved but still big pre-tax loss of $109 million for the period ended Sept. 28. The pre-tax loss in the comparable period a year ago was $145 million. The group, which includes the Canada Post mail and parcel delivery segment, along with majority-owned subsidiaries Purolator, SCI Group and Innovapost, says options under consideration include asking the federal government for additional pension regulatory relief and new financing for 2014.
Canada Post Group said its net loss was $73 million for the quarter, $30 million less than the $103-million net loss it suffered in the prior-year period. Revenue from operations rose seven per cent to $1.752 billion from $1.745 billion. Of that, the Canada Post segment contributed $1.343 billion. For the first three quarters, the group’s net loss was $88 million, compared with $219 million in the 2012 period. The improvement was primarily due to a gain of $109 million on the sale in January of the company’s Vancouver mail processing plant.
The Canada Post segment had a pre-tax loss of $129 million in the latest quarter, improved from a deeper $161 million loss in the comparable period in 2012. It said a 7.3-per-cent decline in transaction mail volumes outweighed solid growth in both revenue and volumes in its parcels business. Transaction mail, which includes letter, bills, statements and the like, generates about 50 per cent of that segment’s revenue.
Elsewhere, Canada Post said its Purolator delivery business posted a pre-tax quarterly profit of $16 million, up $1 million, while its SCI logistics, specialized transport and supply chain business posted a $3-million profit, up from $1 million. Innovapost, its information technology and services provider, contributed a pre-tax profit of $1 million, versus nil a year ago.
The company said its losses stem from a number of factors, including mail volume erosion as a result of electronic substitution, bill consolidation and intense competition. It also cited “largely fixed operating costs required to meet its service mandate to a growing number of addresses despite volume declines.”
Meanwhile, Canada Post said expects to reach the maximum legislated relief from special payments to reduce the $5.9-billion solvency deficit in its pension plan early next year. In resuming special payments, the Canada Post segment will have to contribute an estimated $1 billion on top of current service contributions in 2014, it said.
Based on current financial projections, Canada Post believes it will require additional liquidity by mid-2014 and said it was exploring its options with the government. The company said it was looking for support to restructure its business model and pension plan framework to assure long-term financial sustainability “while continuing to meet the changing needs of Canadians and Canadian business.” “Given its financial position and outlook, Canada Post believes changes must be implemented as quickly as possible,” it added.
The Canada Post Group is one of Canada’s largest employers, with about 68,000 workers who deliver some 10 billion pieces of mail, parcels and messages to more than 15 million addresses across Canada each year.