Financial Archives - Page 2 of 2 - Canada's Modern Post

Canada Post and Profits: 2004–2011

A closer look at Canada Post’s Annual reports on profits from 2004–2011.

Canada Post, the media, the Canadian Union of Postal Workers, and parliamentarians of every political affiliation, have emphasized Canada Post had a 16 year run of profits until the stated loss in 2011. Is this correct?

The results from 1995 to 2003 are hard to assess and cannot be easily reconciled, but from 2004 onwards the reports are more conclusive. Therefore the more reasonable question is, what do the records show since 2004?

Canada Post Negative Cash Flow in 2010?

Canada Post has issued on August 17th a clarification of its 2010 financial state. It is sharply different than that of the 2010 Annual Report.

This media release was likely the result of mis-interpretation of by the public on the Annual Report results. The initial results were from the Canada Post Group – this is Canada Post along with its subsidiaries such as Purolator. The Canada Post segment is found later on in the report, but most have not read that portion yet. This makes many think Canada Post is doing financially better than what the numbers really demonstrate.

The media release, Canada Post Pre-Tax Earnings Declined Sharply in 2010
was to separate the Canada Post entity from its subsidiaries and give a clearer picture of the 2010 state of affairs.

Here is a portion of their statement:

“The Canada Post pension plan continued to pose a significant financial burden on the Group in 2010. The plan had a liability of $16 billion and a pension solvency deficit of $3.2 billion at the end of 2010. Canada Post made $746 million in cash contributions to the pension plan in 2010, including $425 million in special payments relating to the solvency deficit. As a result, Canada Post generated negative cash from operating activities in 2010.”

As you will find in the historical financial coverage of Canada Post throughout this blog, the media release issued on Canada Post’s website is consistent with those results. This is closer to the true reality of Canada Post’s current economic reality.

Canada Post was contacted by email to clarify this claim of negative cash flow and substantiate this claim using the 2010 Annual Report as the basis. They did not reply.

However, from what is publicly available, it is good to see Canada Post being proactive and clear in its current state of affairs.

The 2010 Annual Report now made public

It is available at Canada Post’s website the Canada Post 2010 Annual Report

It is going to take some time to look through.

Here are a few quick observations:

The Canada Post Group consists of a number of companies such as Purolator and others in its end results. If the Canada Post segment is separated from these other entities, its actual profit was $233 million dollars (Page 83 of the 2010 Annual Report).

The Canadian Postal Service Charter annual average cost per address is still misleading. It is only calculating the cost of the delivery agent bringing it to its final address, not the total cost of initial mailing to its end-point. These present numbers in the report are useless for any real-world purposes. This problem was pointed-out in The MIA 2010 Canada Post Annual Report.

The report identifies an error in my previous article, The MIA Canada Post Annual Report Part 2. The blog article stated that Canada Post was to begin implementing the IFRS as the standard accounting method in the 2010 Annual Report. This is incorrect. The MIA Canada Post Annual Report Part 2 has been withdrawn from the public until properly updated.

Canada Post’s Rising Debt Load

In early 2007, Canada Post was debt free and had a maximum availability of $300 million in external borrowing. In 2010, Canada Post had a $3.2 billion pension shortfall along with a potential debt load of $3.9 billion dollars in external borrowing – a startling change.

Canada Post has went from debt-free four years ago, to a potential $7.1 billion in debt, or if the funds not fully utilized, around $5 billion. Canada Post may not have borrowed all this money or perhaps used some of this capital to pay-off the pension which may make it less than $7.1 billion.

The MIA 2010 Canada Post Annual Report

This blog went through a number of theories why the 2010 Annual Report issued by Canada Post was delayed by almost four months.

It went from accusing Canada Post, to the Government, to a new accounting system bringing on delays, and referred to some conspiracy theories out in the general public.

All of these are wrong. The Federal election caused the delay.

Therefore this article in its original form has been withdrawn and replaced by this short statement.