Canada Post profit evaporates in 2011

Canada Post showed an annual loss of $253 million in 2011, the first time the agency has failed to make a profit in 16 years.

The Crown corporation said in a release Tuesday that a labour disruption, the continued erosion of its core mail delivery business, growing pension obligations and a Supreme Court decision on pay equity were a drag on its financial results.

On an unconsolidated basis, the core mail service lost $327 million last year.But Canada Post's three subsidiaries, Purolator Inc., SCI Group Inc. and Innovapost Inc. were able to mitigate that somewhat.

In June, a 25-day lockout effectively shut down mail service and corresponding revenuesacross Canada. Canada Post said that causedmail volumesto fallanother 4.6 per cent last year from 2010's level. Canada Post now ships 20 per cent less mail than they did five years ago in 2007.

The company put $510 million into its pension fund last year, but still faces a $4.7 billion deficit.

Canada Post is mandated by parliament to be self-sufficient, and is not supported by taxpayer dollars. "Deep and enduring shifts in technology and demand for postal services point to the urgent need to transform the business," the company said in a release.

The company has targeted the growth in e-commerce and e-delivery as central pillars in its turnaround plan,as the mail agency faces a systemic reduction in the amount of conventional mail people send and receive.

Prof. Ian Lee of the Sprott School of Business said the advent of electronic financial transactions, coupled with the rise of email and texting as popular communication devices, has eaten into Canada Post's core business for years.

During the recent lockout, utilities and banksaggressively went after people who hadn't switched to electronic statements, Lee says, further eroding Canada Post's business.

"This decline in volume is not a one-off because of the disruption,"Lee said."This decline will continue and accelerate, as one business after another takes its business elsewhere and finds electronic substitutes."

In its statement, Canada Post stressed that addressing its cost structure will be vital to achieving its turnaround plan.

"It is essential that this transformation also address labour costs through the collective bargaining process," the company said."Achieving a competitive labour cost structure will be crucial given that home delivery of parcels a highly competitive business is becoming a critical part of our future activity."