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Canada Post forecasts continuing sector losses despite booming parcel deliveries

A Canada Post employee drives a mail truck through downtown Halifax on July 6, 2016. Parcel delivery is booming, but Canada Post will struggle to make a profit in coming years due to a continuing decline in letter mail, higher employee costs and billions in capital spending, says a corporate forecast quietly tabled in Parliament. THE CANADIAN PRESS/Darren Calabrese

OTTAWA — Canada Post says it will struggle to make a profit in coming years despite booming parcel delivery because of a continuing decline in letter mail, higher employee costs and billions in capital spending.

In a corporate forecast quietly tabled in Parliament, the Crown corporation says it is expecting to achieve “modest” profits of between $10 million and $125 million from 2019 through to 2023 but those will be driven primarily by its Purolator subsidiary, while the base Canada Post segment will post losses.

The five-year plan estimates Canada Post will need to invest $3.6 billion to keep up with the growth of e-commerce shipping while modernizing to meet shipper and customer expectations and stay ahead of competitors.

Meanwhile, employee costs are rising, in part due to a rural pay equity ruling last fall identified as the main cause of an estimated $264 million loss in 2018, and which is expected to add $140 million in annual costs going forward.

Canada Post says it expects to have to borrow about $500 million more by 2023 to cover capital needs and to make special employee pension plan solvency payments, expected to start at over $500 million in 2020 and total over $1.8 billion by 2023.

It forecasts a post office sector loss of $22 million for 2019 as total revenue grows 3.5 per cent or $234 million to $7 billion — driven by a 13 per cent increase in domestic parcel volume offset by a drop in letter mail activity of about five per cent.

The document says Canada Post has spent about $4.7 million to dismantle 2,280 community mailbox sites in 12 municipalities where it had begun but didn’t complete the conversion of door-to-door delivery, acting after the Liberal government ordered the cancellation of the program.

“Although Canada Post is in a financially viable position today, the forecasted growth in parcels revenue will not be enough for the Canada Post segment to achieve profitability throughout this plan’s period, nor will it be enough to make Canada Post financially self-sustaining in the long term,” the document says. 

 

The Canadian Press