The story of 2018
- the estimated cost of resolving pay equity, which was $420 million, of which $280 million related to previous years
- the labour disruption in the fall, which created an estimated revenue shortfall of $195 million and resulted in a net impact of $135 million to the loss before taxes
- which were offset by a $48 million gain, which was recorded to reflect an actuarial update in the calculation of workers compensation benefit costs.
In the larger context of the business, two important trends continued in 2018: the solid growth in parcels and the significant decline in mail volumes.
Growing our Parcels business while mail volumes decline
Our Parcels results confirm the strength of Canada Post’s core strategy: to grow the business by being Canada’s parcel delivery leader. Parcels revenue grew by $308 million or 13.6% and volumes grew by 54 million pieces or 21.7% compared to 2017.1 The full year’s growth did not match the strong rates seen in recent years. However, growth in the segment’s Parcels business in the first nine months of the year, before the labour disruption, was stronger than these figures show. We look forward to regaining our momentum as Canada’s leader in e-commerce parcel delivery.
As for mail’s decline, Canadians mailed 2.4 billion (44 per cent) fewer pieces of mail in 2018 than they did in 2006, the year volumes were highest. Revenue from Transaction Mail – the part of our business that is letters, bills and statements – fell by 5.5 per cent or $151 million compared to 2017.1
Resolving pay equity
Canada Post believes that pay equity is a basic human right and that any disparity in pay on the basis of gender is wholly unacceptable.
The effort to resolve pay equity dates back to negotiations in 2016. At that time, Canada Post and the Canadian Union of Postal Workers jointly agreed to put before an arbitrator the complex system by which Rural and Suburban Mail Carriers are paid. An arbitrator’s final ruling on pay equity in September 2018 resulted in significant pay and benefit improvements retroactive to 2016.
In 2018, resolving pay equity cost the Canada Post segment an estimated $420 million, of which $280 million related to prior years. Going forward, we estimate the changes will cost $140 million a year.
The impact of the labour disruption
Several months of negotiations with CUPW toward new collective agreements created mounting uncertainty for customers in the fall, followed by CUPW exercising its legal right to conduct rotating strikes from October 22 to November 27. We deeply regret that commercial customers and Canadians could not count on us for timely delivery during this time. As a result, many customers found alternatives to using Canada Post. Reduced volumes and revenue in the fourth quarter contributed an estimated $135 million to the loss before tax in 2018.
Canada Post Group of Companies
*Result restated due to the retroactive implementation of IFRS 15 “Revenue from Contracts with Customers.”
References in the Annual Report to Canada Post and the Canada Post segment do not include subsidiaries. The Canada Post Group of Companies and the Group of Companies include the Canada Post segment and its subsidiaries, which are Purolator Holdings Ltd., SCI Group Inc. and Innovapost Inc.
By the numbers
Canada Post Group of Companies
| (in millions of dollars) | 2018 | 2017 | % Change |
|---|---|---|---|
| Operations | |||
| Revenue from operations | 8,675 | 8,3182 | 3.9% |
| Profit (loss) from operations | (109) | 2312 | — |
| Operating margin (%) | (1.3)% | 2.8%2 | |
| Net Investing and financing income (expense)3 | (1) | (27) | 94.1% |
| Profit (loss) before tax | (110) | 2042 | — |
| Net profit (loss) | (87) | 1482 | — |
| Cash provided by operating activities | 973 | 748 | 30.1% |
| Cash used in capital expenditures | (373) | (299) | (24.8)% |
| Financial position | |||
| Cash and cash equivalents | 1,421 | 1,503 | (5.4)% |
| Total assets | 9,197 | 8,4892 | 8.3% |
| Loans and borrowings | 1,025 | 1,038 | (1.3)% |
| Equity of Canada | (102) | (402)2 | 74.8% |
| Volume | |||
| Total volume – Consolidated (in millions) | 8,092 | 8,383 | (3.9)% |
| Domestic Parcels growth (Canada Post segment) | 10.9% | 22.3% | |
| Parcels growth (Canada Post segment) | 21.7% | 24.5% | |
| Direct Marketing (erosion) growth (Canada Post segment) | (3.9)% | 4.0% | |
| Domestic Lettermail erosion (Canada Post segment) | (4.6)% | (5.3)% | |
| Transaction Mail erosion (Canada Post segment) | (6.2)% | (5.5)% | |
| Transaction Mail volume decline per address | (7.2)% | (6.5)% | |
| Canada Post Corporation Registered Pension Plan | |||
| Pension assets – Fair market value | 24,655 | 25,028 | (1.5)% |
| Going-concern surplus (deficit) – To be funded4 | 3,317 | 2,933 | 13.1% |
| Solvency deficit – To be funded4 | (5,735) | (6,417) | 10.6% |
| Employer contributions – Current | 248 | 259 | (4.2)% |
| Employer contributions – Special | 30 | 34 | (11.6)% |
| (in millions of dollars) | 2018 | 2017 | % Change |
|---|---|---|---|
| Operations | |||
| Revenue from operations | 8,675 | 8,3182 | 3.9% |
| Profit (loss) from operations | (109) | 2312 | — |
| Operating margin (%) | (1.3)% | 2.8%2 | |
| Net Investing and financing income (expense)3 | (1) | (27) | 94.1% |
| Profit (loss) before tax | (110) | 2042 | — |
| Net profit (loss) | (87) | 1482 | — |
| Cash provided by operating activities | 973 | 748 | 30.1% |
| Cash used in capital expenditures | (373) | (299) | (24.8)% |
| Financial position | |||
| Cash and cash equivalents | 1,421 | 1,503 | (5.4)% |
| Total assets | 9,197 | 8,4892 | 8.3% |
| Loans and borrowings | 1,025 | 1,038 | (1.3)% |
| Equity of Canada | (102) | (402)2 | 74.8% |
| Volume | |||
| Total volume – Consolidated (in millions) | 8,092 | 8,383 | (3.9)% |
| Domestic Parcels growth (Canada Post segment) | 10.9% | 22.3% | |
| Parcels growth (Canada Post segment) | 21.7% | 24.5% | |
| Direct Marketing (erosion) growth (Canada Post segment) | (3.9)% | 4.0% | |
| Domestic Lettermail erosion (Canada Post segment) | (4.6)% | (5.3)% | |
| Transaction Mail erosion (Canada Post segment) | (6.2)% | (5.5)% | |
| Transaction Mail volume decline per address | (7.2)% | (6.5)% | |
| Canada Post Corporation Registered Pension Plan | |||
| Pension assets – Fair market value | 24,655 | 25,028 | (1.5)% |
| Going-concern surplus (deficit) – To be funded4 | 3,317 | 2,933 | 13.1% |
| Solvency deficit – To be funded4 | (5,735) | (6,417) | 10.6% |
| Employer contributions – Current | 248 | 259 | (4.2)% |
| Employer contributions – Special | 30 | 34 | (11.6)% |
2. The amounts for 2017 were restated as a result of new or revised accounting standards. For more details, see section 9.2 Accounting pronouncements in the MD&A and Note 5 – Application of New and Revised International Financial Reporting Standards in the accompanying financial statements. ↩ 1 2 3 4 5 6 7
3. Includes loss on sale of capital assets and assets held for sale. ↩ 1
4. Number for 2018 is an estimate. Actuarial valuations for the Plan will be filed by June 30, 2019. For more details, refer to Section 6.5 of the Management’s Discussion and Analysis. ↩ 1 2
2. The amounts for 2017 were restated as a result of new or revised accounting standards. For more details, see section 9.2 Accounting pronouncements in the MD&A and Note 5 – Application of New and Revised International Financial Reporting Standards in the accompanying financial statements. ↩ 1 2 3 4 5 6 7
3. Includes loss on sale of capital assets and assets held for sale. ↩ 1
4. Number for 2018 is an estimate. Actuarial valuations for the Plan will be filed by June 30, 2019. For more details, refer to Section 6.5 of the Management’s Discussion and Analysis. ↩ 1 2