Canada Post recorded a loss before tax of $378 million in the second quarter of 2020. This increased loss was largely due to the significant impact COVID-19 had on revenue and costs, combined with added costs from the June 2020 arbitrator’s ruling that gave us new collective agreements with the Canadian Union of Postal Workers (CUPW).
In this CEO Update and video message, Doug Ettinger provides his thoughts on the second-quarter results and what it means for employees and the company.
With people at home and businesses closed, we saw a dramatic shift in what we were asked to deliver. Online shopping drove unprecedented growth in Parcels volume and revenue, but Transaction Mail and Direct Marketing volume and revenue declines exceeded the growth in Parcels. The estimated total revenue shortfall due to COVID-19 was $46 million. In addition, Canada Post’s costs related to COVID-19 increased by an estimated $118 million. The total negative financial impact due to COVID-19 was an estimated $164 million.
Although COVID-19 and the new collective agreements with CUPW contributed to the loss, the Canada Post segment would have still incurred a loss without these factors.
Key results for the Canada Post segment in Q2 2020 compared to Q2 2019:
- Early in the second quarter, Parcels volumes were as high as in past peak Christmas seasons. With physical stores closed due to COVID-19, Canadians shopped significantly more online.
- Volumes grew by 26 million pieces or 35.5 per cent
- Revenue grew by $226 million or 35.4 per cent
Transaction Mail results:
- Ongoing revenue and volume declines accelerated as businesses and Canadians used digital alternatives even more during COVID-19.
- Volumes fell by 102 million pieces or 14.7 per cent
- Revenue decreased by $104 million or 15.4 per cent
Direct Marketing results:
- Customers were already delaying or cancelling marketing campaigns due to COVID-19 as the quarter began, adding to the impact of ongoing digital substitution.
- Volumes fell by 652 million pieces or 53.4 per cent
- Revenue declined by $126 million or 46.4 per cent
Canada Post recorded a loss before tax of $66 million in the first quarter of 2020, as continued growth in Parcels revenue and volumes was not enough to offset increased costs. Ongoing declines in Transaction Mail and Direct Marketing also contributed to the loss.
The increase in costs was mainly due to higher labour and employee benefits, and increased collection, processing and delivery costs from Parcels growth.
The first quarter ended on March 28, 2020, before COVID-19 had a significant impact on our Parcels business. With parcel volumes rapidly increasing and Transaction Mail and Direct Marketing volumes quickly decreasing, COVID-19 is expected to have a larger impact on the business in the second quarter.
Key results for the Canada Post segment in Q1 2020 compared to Q1 2019
- In Q1, when the impact of COVID-19 on the Parcels business was minimal, volumes increased by 4 million pieces or 6.1 per cent and revenue increased by $53 million or 10.4 per cent.
Transaction Mail results
- Volumes fell by 30 million pieces or 2.2 per cent and revenue decreased by $16 million or 0.6 per cent. Ongoing erosion accelerated toward the end of Q1 as many businesses began operating on an online-only basis due to COVID-19.
Direct Marketing results
- Volumes decreased by 126 million pieces or 10.5 per cent and revenue decreased by $26 million or 8.6 per cent.
- Declines in Direct Marketing revenue and volumes were larger than in the first quarter of 2019 due to COVID-19, as marketing campaigns were delayed or cancelled near the end of the quarter.
Canada Post recorded a loss before tax of $153 million for 2019. This loss can be attributed to four key factors:
- Canada Post’s Parcels business continued to grow but at a slower pace than 2018, as competition in e-commerce delivery intensified.
- The shift from mail to parcels is having a significant impact on our operating model. Processing and delivering parcels is significantly more expensive than letters.
- Transaction Mail and Direct Marketing continued to decline as Canadians communicate, transact and advertise more by digital means.
- Costs increased as the number of addresses continued to rise. In 2019, we served 168,000 more addresses.
Canada Post has a long-standing mandate to serve all Canadians while remaining financially self-sufficient. Fulfilling this dual mandate is a challenge that the company is addressing, as it invests and evolves to meet the changing needs and expectations of Canadians.
Key results for the Canada Post segment in 2019 compared to 2018:
- Parcels revenue surpassed Transaction Mail revenue for the first time, and Canada Post remained the country’s leader in e-commerce delivery.
- Total Parcels revenue increased by $232 million compared to 2018, exceeding $2.7 billion.
- Revenue for Domestic Parcels increased by $204 million or 11.0 per cent over 2018, while volumes increased by 26 million pieces or 13.2 per cent compared to 2018.
- During the 2019 peak season, we set records by delivering more than 2 million parcels in a single day three times, and 1.1 million parcels on a single weekend.
- Transaction Mail revenue decreased by $69 million or 2.5 per cent, and volumes fell by 192 million pieces or 6.4 per cent.
- Transaction Mail generated more than $2.7 billion in 2019, or 40 per cent of the Canada Post segment’s revenue (it was 55 per cent in 2006, the peak year for Transaction Mail volumes).
- Direct Marketing revenue decreased by $32 million or 3.0 per cent, and volumes fell by 75 million pieces or 1.6 per cent.
- The Direct Marketing line of business generated $1.1 billion or 16 per cent of the segment’s revenue in 2019.
The Canada Post segment recorded a loss before tax of $135 million in the third quarter, which is traditionally our softest quarter. Growth in parcels volumes only partially offset declines in mail volumes.
For the first three quarters of 2019, the Corporation recorded a loss before tax of $162 million.
Revenues decreased by $44 million or 2.8 per cent in the third quarter compared to the same period in 2018, and fell by $71 million or 0.9 per cent in the first three quarters compared to last year.
- Parcels volumes increased by 4 million pieces or 6.1 per cent in Q3 2019.
- Revenue increased by $22 million or 3.9 per cent.
- Domestic Parcels volumes and revenue increased by 3 million pieces (6.9 per cent) and $18 million (4.2 per cent), respectively.
- Canada Post remains the leading e-commerce delivery company in Canada.
Transaction Mail results
- Volumes fell by 80 million pieces or 11.3 per cent.
- Revenue decreased by $49 million or 7.5 per cent.
- The rates of decline in 2019 are partially explained by higher revenue and volumes in the first three quarters of 2018 due to provincial and municipal elections.
Direct Marketing results
- Direct Marketing volumes decreased by 32 million pieces or 2.9 per cent.
- Revenue decreased by $14 million or 5.4 per cent.
The Canada Post segment recorded a loss before tax of $50 million for the second quarter of 2019, as continuing declines in mail volumes were offset by parcels volumes growth that was more modest than the significant growth rates of a year ago.
Revenue decreased by $1 million in the second quarter compared to the same period of 2018, and fell by $27 million for the first two quarters compared to last year.
Key results for the Canada Post segment in Q2 2019 compared to Q2 2018
- Parcels revenue increased by $31 million or 6.7 per cent in Q2 2019.
- Volumes increased by 6 million pieces or 8.8 per cent.
- Domestic Parcels revenue and volumes increased by $32 million (8.8 per cent) and 5 million pieces (10.5 per cent), respectively.
- Parcels growth was modest compared to Q2 last year.
Transaction Mail results
- Volumes fell by 55 million pieces or 5.7 per cent.
- Revenue decreased by $16 million or 0.8 per cent.
- Domestic Lettermail volumes decreased by 48 million pieces (5.3 per cent) and revenue decreased by $15 million (0.7 per cent).
- The ongoing decline in mail volumes remains a significant business challenge.
- Total Direct Marketing revenue decreased by $11 million (2.2 per cent) and volumes decreased by 73 million pieces (4.1 per cent).