Good afternoon.
Thank you to the chair and to the committee members for inviting us to join you today to talk about Canada Post finances.
I know that my colleagues, Manon Fortin and Serge Pitre, appeared before the committee in February of this year to answer many of your questions about service.
My name is Rindala El-Hage. I am the general manager and financial controller at Canada Post. I am joined by my colleague Nathalie Séguin, general manager, finance business partner. Together, we hope to answer your questions regarding Canada Post financing and the important investments our company is making.
First, I would like to share some important context that will be helpful for our discussion today.
Our company understands the important role we play in the lives of Canadians. Over our long history, we’ve constantly evolved to meet the changing needs of Canadians and businesses.
We proudly serve all corners of the country—the urban centres, the rural towns, remote communities and the far north. We’re the only delivery organization with the network, and the commitment, to serve all Canadians.
We have a retail network of nearly 6,000 post offices and an incredible team of more than 68,000 employees, who are dedicated to serving the communities they live and work in. But to truly serve all Canadians, we know the postal service must also respond to the changes in society and reflect the country we serve.
This requires us stretching beyond our traditional role and viewing our responsibility to the country through a wider lens.
In 2021, Canada Post built an ambitious transformation plan. It strategically positions us for the future by putting the needs of Canadians first. This new plan has one purpose: a stronger Canada—delivered.
Our new plan is designed to respond to the fundamental changes that we’ve seen across the country over the last two years.
Canadians are buying more online than ever before. It went from a necessity during lockdown to a lifestyle game-changer. The needs of Canadians are quickly changing, and businesses are working hard to adjust to this new reality. We're responding to this urgent need by boosting our capacity, improving service and much more. Our plan means that we will play a meaningful role in their lives for years to come. At the same time, we're committed to showing leadership on key issues, helping make Canada greener, stronger and more inclusive.
Above all, we're investing in our employees. Canadians see them as an essential part of their communities. They do an incredible job, and we are focused on their safety and other needs.
Our transformation plan demonstrates leadership that Canadians expect, and it includes important investments that our country needs. Some of these critical investments are reflected in our 2021 financial results, which I will now discuss.
In 2021, the Canada Post segment recorded a loss before tax of $490 million, as higher costs partially offset revenue growth across all lines of business. The loss for 2021 was an improvement from a loss before tax of $779 million in 2020.
It’s important to note that year-over-year comparisons for our 2021 results are affected by COVID‑19, which had different impacts on the lines of business the previous year.
In 2021, revenue for the Canada Post segment increased by $407 million, or 6.3%, compared to 2020.
Our cost of operations increased by $127 million, or 2%, in 2021, compared to the previous year. Cost increases were largely driven by higher labour costs and an increase in non-labour collection, processing and delivery costs.
We also invested in operational capacity to support the growth in online shopping and modernize our retail network of post offices.
I'll now share a bit more detail on the results for each of our lines of business. In 2021, parcel revenue increased by $238 million, or 7.4%, while volumes fell by 28 million pieces, or 7%, compared to the prior period, when volumes surged. The reopening of stores for in-person shopping also had an impact on domestic parcel volumes in the second half of 2021.
Transaction mail revenue grew by $10 million, or 0.8%, as volume fell by 62 million pieces, or 2%, compared to the previous year. The 2021 revenue growth was atypical, partly due to the mailings for the federal election and census. Overall, transaction mail continues to erode as consumers and mailers migrate to digital alternatives.
Due to COVID-19, Canada Post maintained regulated stamp prices at 2020 levels through 2021.
Direct marketing partially recovered in 2021 following significant declines in our personalized mail and neighbourhood mail services in the prior year, when customers postponed or cancelled marketing campaigns due to COVID-19. In 2021, direct marketing revenue grew by $113 million, or 14.4%, while volumes increased by 595 million pieces, or 18.4%, compared to the previous year. While some retailers experienced global supply chain issues in the second half of 2021, personalized mail and neighbourhood mail revenue and volumes began to recover in 2021 with the gradual return to in-person shopping.
Canada Post has a long-standing mandate to maintain financial self-sustainability while serving all Canadians. We believe that our new transformation plan will help build Canada Post for the future and put us on a path to financial self-sustainability.
The needs of Canadians have changed dramatically during the pandemic. Online sales in Canada nearly doubled in the last two years. Canadians expect more, and businesses of all sizes need us to be there for them.
We’re responding by investing to expand capacity, improve service and innovate our operations. Our plan will see us increase parcel capacity by more than 50% over the next seven years to manage the forecasted growth in online shopping beyond 2030.
Our immediate focus must continue to be on the investments and improvements needed to meet the changing needs of Canadians and support businesses of all sizes. Financial self-sustainability remains our goal, and we fundamentally believe that our transformation plan—along with our amazing people—will help get us there.
In closing, I want to say how proud Canada Post is to serve the people, businesses and communities that make this country strong. Their needs are at the heart of everything we do. We are the only organization serving all 17 million residential and business addresses across Canada.
It's a tremendous responsibility, and one we have never felt more than in the past two years. Canadians from coast to coast to coast have changed, and we are changing with them. As Canada continues to evolve, so will Canada Post.
Thank you, and we look forward to our discussion.