Evidence of meeting #55 for Government Operations and Estimates in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was corporation.
A video is available from Parliament.
3:55 p.m.
President and Chief Executive Officer, Canada Post Corporation
The idea for—
3:55 p.m.
President and Chief Executive Officer, Canada Post Corporation
The ideas for both FlexDelivery and Delivered Tonight came from our employees who were interacting with the customers, asking large retailers what we could do differently for them that would help them grow their business. The customers asked for a pilot to do a same-day product such as Delivered Tonight.
In fact, that one required extensive collaboration with the Canadian Union of Postal Workers. I applaud its co-operation on bringing that idea to life, because we needed a different cost structure. When you're launching an idea in a very competitive environment, you need collaboration, and if that idea takes off, yes, you can grow with it. Those are examples of the employee ideas.
Shopify came to us in 2011 for the first time—in fact, we talk to them virtually every day now—on the idea of making it easy for small businesses to deal with Canada Post. They said they have made it easier for businesses to get their PayPal account, to do a checkout engine, to do credit card acceptance. They asked why they couldn't make it easier for them to conduct commerce through Canada Post without having to open an account with Canada Post, without having to get a price structure with Canada Post. It is now a seamless process. When you open an online store at $25 a month with Shopify, you get Canada Post built in.
Those types of ideas have come from innovative leading-edge companies that are redefining retail for Canadians.
I think innovation...and we have half a billion dollars of revenue to show for it. This has been a remarkable journey of collaborating with small businesses, large businesses, employees, and our unions and is showing a really great result in an area that is highly competitive.
4 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Great.
I have a couple of quick questions, because I'm short on time.
As for the money you make from regular mail delivery, DM as you call it, versus parcels, am I understanding correctly that the profit level on a DM is much higher per dollar than on parcels, which is why we see that, even though parcel revenue is rising rapidly, it's not offsetting the profit loss?
4 p.m.
President and Chief Executive Officer, Canada Post Corporation
The cost of our network, the costs of all of our lines of business, are allocated and audited; and we have had an independent, audited cost study that has been verifying the lines of business in our cost allocations. They're absolutely following the rules and they comply with all of the requirements for our cost allocations. In fact, each of the lines of business stand on their own feet.
4 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
On the increase in parcel revenue, do you have an equal amount of drop in DM revenue?
4 p.m.
President and Chief Executive Officer, Canada Post Corporation
No. I think you're referring to transaction mail....
4 p.m.
Conservative
4 p.m.
President and Chief Executive Officer, Canada Post Corporation
I think two very different dynamics are playing out in the market. Transaction mail is declining because more and more Canadians are using—
4 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
That's right, but I'm wondering about the profit per dollar for each.
4 p.m.
Chief Financial Officer, Canada Post Corporation
The profit for dollar, what we call the contribution margin, would be much higher for transaction mail than parcels.
4 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
That's what I was asking, yes. I should have just gone to Mr. Cheeseman to start.
4 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Canada Post has reported a profit of $45 million in the first two quarters of this year. Typically, the fourth quarter is the most profitable for Canada Post, with Christmas cards and parcels. How do you square these facts with the task force prediction that Canada Post will lose money this year?
4 p.m.
President and Chief Executive Officer, Canada Post Corporation
In fact, learning from my previous question, I'm going to pass it on to my colleague here, the chief financial officer.
4 p.m.
Chief Financial Officer, Canada Post Corporation
First of all, I would say it's very challenging to do forecasting at Canada Post when you have $6 billion of revenue, $6 billion of costs, so you have $12 billion; and you're trying to put a needle in, do I make $50 million a year, $100 million a year, or have a $50-million loss? That is very challenging in our business. Our forecasting is very solid. In fact, our average forecasting accuracy is about 3% of our revenue cost base.
I look at anything less than $50 million, $75 million, as really rounding. I would say this year we're probably going to be in a situation for the year where we could probably make $50 million of profit, or lose $50 million.
As an example about the size of the organization...we just were successful in a CPAA arbitration case on post-retirement benefits that we'll be reporting in our third-quarter results. That was worth $44 million to us. It's non-cash, one time, but that will be reported in our results. When you're down talking about plus or minus $100 million, when you're dealing with $6 billion of revenue, $6 billion of costs, $22 billion of assets—
4 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
I take the point that it's hard to predict, but knowing what we know now, that Canada Post did make $45 million in the first half of the year, and it's probably going to make a lot of money in the fourth quarter of the year, do you think it's reasonable to expect the corporation will be profitable in 2016?
4 p.m.
Chief Financial Officer, Canada Post Corporation
What I've said is that I think now, using my crystal ball, we could be in the range of $50 million profitable, $50 million loss.
4 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Could you lay out the scenario for the $50-million loss? Is it like Canada Post is going to lose a couple of hundred million dollars in the third quarter?
4 p.m.
Chief Financial Officer, Canada Post Corporation
A $50-million loss would mean that we would move from $45 million to.... For the back half of the year, we would be $100 million. I don't know what's going to happen to discount rates—
4 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Okay. But if you're making money in the fourth quarter, that would involve a huge loss in the third quarter, wouldn't it?
4 p.m.
Chief Financial Officer, Canada Post Corporation
Not to get into too much detail, but there are obligations that we have on our balance sheet, obligations where the valuations depend on discount rates. If the discount rate is low at the end of the year, it's decided on one day, December 31, and whatever the rate is, it impacts what our costs and our savings are.
4 p.m.
NDP
4 p.m.
NDP
Karine Trudel NDP Jonquière, QC
Good afternoon.
I would like to apologize to the committee members for our absence. Some Olympians came to the House of Commons to see us, including Antoine Bouchard, who is from my riding of Jonquière. He is a young judoka who almost landed a bronze medal, and I wanted to congratulate him. Again, my apologies to the committee members.
Welcome, Mr. Chopra, Mr. Cheeseman and Ms. Margles.
Mr. Chopra, in your remarks today and at your last appearance, you said that employee payroll was high. It came up regularly in the remarks of various Canada Post stakeholders.
For our analysis, could you tell us how much the total salaries are for senior management so that we can do a comparable analysis? We are talking about the payroll of employees, but we would like to be able to compare that payroll with the payroll of senior management to do an overall analysis.
