Our financial picture
Canada Post’s financial situation is unsustainable. The Corporation has recorded significant annual losses since 2018, fuelled by rapid changes in the postal and parcel delivery sectors and legacy regulatory measures that impede the company’s ability to evolve and compete.
For 2023, the Corporation recorded a loss before tax of $748 million, compared to a loss before tax of $548 million in 2022. From 2018 to 2023, Canada Post lost $3 billion before taxes. Without changes and new operating parameters to address our challenges, we forecast larger and increasingly unsustainable losses in future years.
Canada Post is at a critical juncture in its history. With financial pressures mounting, its long-standing role as a vital, publicly owned national infrastructure for Canadians and Canadian businesses is under significant threat.
Canada Post segment profit (loss) before tax
(in millions of dollars)
Deteriorating liquidity and borrowings
The company’s cash has significantly eroded due to ongoing operating losses, large pension and employee benefit contributions, and critical investments to expand capacity and modernize the network. Cash, cash equivalents and marketable securities have depleted by nearly $1.2 billion since 2021.
Without additional borrowing and refinancing, we expect to fall below our required operating and reserve cash requirements by early 2025.
The Corporation has current loans and borrowings of $1 billion, of which $500 million is due for repayment in July 2025. At least $1 billion in new borrowings or other liquidity measures are required for 2025, including refinancing $500 million in existing debt. In the current financial situation, at least $1 billion will also be needed in 2026 and each year afterward to maintain operations and meet our employee obligations.
The Great Mail Decline and cost pressures
For more than a century, letter mail was the main source of revenue for the postal service. In 2006, letter mail volumes hit an historic high when we delivered almost 5.5 billion letters to Canadians. Since then, domestic letter mail volumes for the Transaction Mail line of business have declined by 60 per cent and associated revenue has fallen by nearly 30 per cent. A system built to deliver 5.5 billion letters a year cannot be sustained on two billion letters.
Letter mail volumes have declined from
5.5 billion pieces in 2006 to 2.2 billion today
As our mail revenue drops, the cost of delivering mail keeps going up. Population growth means we serve a growing number of addresses each year. In 2006, we delivered to 14.3 million addresses. In 2023, we delivered to 17.4 million addresses.
This issue is not unique to Canada Post. Postal services in advanced economies around the world are experiencing these same challenges as part of the rapid growth of ecommerce and digital transformation for consumers and businesses. The Universal Postal Union estimates revenue from letter-post services globally will decline to about 29 per cent of postal service revenue by 2025, from more than 50 per cent in 2005.
The rise of online shopping has boosted revenue in the Parcels line of business, but it costs significantly more to process and deliver parcels than mail. Parcels require more technology, equipment, scans and customer service support, and take up more space in facilities and vehicles. It also often takes more time to deliver a parcel than a letter (the employee may require a customer signature, for example). With higher costs and lower margins, growth in our Parcels business is not offsetting losses from Transaction Mail.
In 2006, Canadian households received an average
of seven letters per week – today it’s two per week
Scaling back our transformational investments
In response to its challenging financial situation, the company has tightened operational spending and significantly scaled back planned transformational investments. For example, we are:
- Cutting costs within our control and operating more prudently. While these cost-saving efforts are critical given our financial situation, they are not enough to offset forecasted deficits.
- Continuing to focus on increasing revenue wherever possible across all lines of business and exploring new revenue opportunities.
- Delaying important investments in our processing network for strategic projects across the country.
- Slowing investments on key social and environmental initiatives. This will impact our service to Canadians and make it more challenging to achieve our environmental targets and timelines.
While we are closely monitoring our spending, we will continue to invest in our highest priority – the health, safety and well-being of our people.