2018 Royal Canadian Mint report released

[quaziright]

With extracts and commentary by Paul R. Petch

The Royal Canadian Mint has tabled its annual report, and it should come
as no surprise to anyone that it does not stand up well when compared to
reports of earlier years. How could 2018 hope to compete with the opportunities
that were presented by the Canada 150 Program in 2017? This is a business
document, so you will find that it is formatted and filled with the cumbersome
wording typical of such documents. In some spots it is not light reading.
For those of you who may wish to view the actual report, it is available online
at: https://www.mint.ca/store/dyn/PDFs/2018_RCM_English_AR_Web.pdf.
If you are interested in only the high points, then please read on.
The Mint breaks its activities into four business groups. These are Canadian
Circulation, Foreign Circulation, Bullion Products/Services and Numismatics.
The following chart shows that revenues were down in all sectors except for
Foreign Circulation, which had an impressive growth of 49%.

Revenue by Business
                                              2018          2017            $ change             % change
Canadian Circulation               $ 95.0        $ 104.1       $ (9.1)                (9)
Foreign Circulation                  94.9          63.9             31.0                  49
Bullion Products and Services   1,113.6     1,350.8         (237.2)               (18)
Numismatics                           117.1          172.5            (55.4)              (32)

Numismatic sellouts:
number of coin products
2014 79
2015 72
2016 87
2017 66
2018 39

Going beyond the 2018 revenues, the next table not only shows by just how
much the revenue decreased compared to 2017 but also shows a 15% drop in
profit with an 89% drop in the dividends paid by the Mint to its stakeholders.

Financial and Operating Highlights ($ in millions)
                                                2018              2017          % change
Revenue                                    1,420.6          1,691.3       (16)
Gross profit                               134.5               158.0           (15)
Profit before income tax               46.0                43.9                 5
Profit for the period                      35.1              36.1               3
Dividends paid                              10.0             93.2              (89)
Total assets                                397.8             377.               8 5
Shareholder's equity                    156.5             128.2                22
Capital expenditures                      15.3             13.9                  10
Cash flow from operating activities 39.7             57.6                (31)

The Mint's current collector product marketing strategies obviously cannot
continue. In the middle of the year they undertook a close examination of the way
they market to the numismatic community. Coming out of this exercise was "the
identification and approval of a more focused approach to serving the Mint's
customers well and profitably."
On this subject, the report continues, "Following the exceptional breadth and
elevated cost of activities in 2017, particularly those associated with Canada 150
programs, management conducted a structured, thorough, and inclusive
examination of customers' needs in each market, the related value propositions
required to meet those needs well, and the capability choices and configuration
requirements to deliver them profitably. It became clear that these choices, as a
whole, would require more trade-offs than in previous years. The revised strategy
creates the pathway to sustainable profits by articulating and executing a new set

of customer-facing choices that will stabilize the performance of the
business and bring it closer to its best and most loyal premium and
mainstream customers.
Renewed focus on creating distinct value for our premium and
mainstream customers will require a different set of supporting
structures and implementation activities across all areas of the business
that are designed to deliver distinct premium and mainstream value
propositions to market in a cost effective way. Moving forward, sales
and marketing will be fully integrated under the leadership of a new
Chief Commercial Officer and our product plan will be initially smaller
than it is today, focusing on those products that best meet the needs and
preferences of our customers."
The wording of the preceding statement confirms the Mint is
going to have to change its ways and probably only produce proven
products with the highest profit margins. The number and variety of
products are most certainly going to have to be cut back and already
in 2019 there seems to be more of a focus on our Canadian numismatic
and philatelic heritage. There has to be a cut to the number of
experimental products and a switch to products that will appeal to
existing customers, not those who may or may not respond to media
advertising. There has been a significant absence of Mint ads on
television so far this year.
Specifically on the numismatics business the report states,
"Revenue decreased 32% to $117.1 million from $172.5 million in
2017. The decrease in revenue was largely attributable to a 36%
decrease in the volume of silver and base metal numismatic products
sold in 2018, compared to 2017 Numismatics revenue which was
supported by the strong Canada 150 campaign. In addition, some key
marketing initiatives, including product mix optimization and Canada
150 customer conversion, did not materialize during the year, which
contributed to the decrease in revenue year over year."
"The Mint believes the Numismatics business has good
fundamentals and a solid foundation from which to generate sustainable
future profits. The nature of this business has changed substantially over

the last few years with the wind-down of the Face Value Program and
fewer commemorative coins and programs (such as Canada 150),
which have negatively impacted our ability to attract and grow new
customers. Investments in improved marketing and customer service
capabilities and tools are being made in order for the Numismatics
business to profitably grow and service the Mint's loyal and passionate
customer base. In 2019, the Mint will focus on the implementation of
its updated numismatics strategy and will shift its approach from an
inward product focused perspective to an outward customer focused
approach. Its growth activities in Canada and the US will continue,
while maintaining ancillary markets such as Europe and Asia. The Mint
will also capitalize on its strong network of bullion dealers and
distributors to cross-promote incremental numismatic opportunities and
generate healthy, quality earnings." (I don't think I have ever seen the
phrase, "quality earnings" before.)
With so much difficulty with generating revenue and profit, it is
little wonder there was management turnover at the Mint. The Mint's
President and CEO, Sandra Hanington, announced her resignation from
the Mint effective July 1, 2018. From July 1, 2018 until February 17,
2019, Jennifer Camelon, the Mint's CFO and Vice President of Finance
and Administration served as interim President and CEO, while during
this period Robert Zintel, the Mint's Senior Director, Finance, served
as acting CFO and Vice President Finance and Administration. On
January 21, 2019, the Honourable Bill Morneau, Minister of Finance,
announced the appointment of Marie Lemay as the Mint's President
and CEO effective February 18, 2019 for a period of five years. While
the pictures of Marie Lemay present her as having a good time in her
new job, she has the reputation of a "fixer" and maybe the new broom
that will sweep clean. The old dust had better watch out.
A good place to conclude this brief look at the 2018 Mint Report
is at the circulation coin production. In years gone by, this was
always the first alert on what would become the scarce dates of the
future, but production numbers seem to be high enough that this
won't be happening in 2018. Of course, we can always hope for the
discovery of short runs of production varieties or mint errors!

Source: NYCCC Bulletin 23 May 2019

[redlock]

I wish the RCM would re-instate the table in their annual report where one could see in which year(s) circulation coins with certain dates were  actually minted.
I really wonder which date(s) the regular/normal circulation designs minted in 2017 have because the mint said it would not release the regular designs for circulation (only in sets). So, for example, which date carry the 15.750.000 regular Loonies minted in 2017?

[eurocoin]

The report is rather boring and offers not many insights. I would have liked to know more about their foreign clients. The only interesting bits were that like many other mints RCM is also struggling significantly and that they won their largest foreign order for a single-denomination ever. Does anyone know which country and denomination?

[redlock]

they won their largest foreign order for a single-denomination ever. Does anyone know which country and denomination?

Unfortunately, a quick search (haven't have more time at the moment) came up short. However, I found in the RCM 2nd Quarter report that the contract is for 800 million coins. Now, do we know who ordered 800 million coins for a single denomination in 2018?

[quaziright]

I wish the RCM would re-instate the table in their annual report where one could see in which year(s) circulation coins with certain dates were  actually minted.
I really wonder which date(s) the regular/normal circulation designs minted in 2017 have because the mint said it would not release the regular designs for circulation (only in sets). So, for example, which date carry the 15.750.000 regular Loonies minted in 2017?

Not quite, you are not counting the rolls they were selling as well; basically 2 rolls of each denomination in a presentation box. I can't recall the price though. Yet, that would not of course fully explain the 15.7M pieces they apparently minted that year.

Since I don't collect year wise anyways, I see this article more interesting from the perspective of them cutting back the number of commemorative themes and especially the silly ones they've been doing for a few years now. I didn't buy those anyways, but it'll make browsing through the RCM website easier, hopefully

[eurocoin]

Since I don't collect year wise anyways, I see this article more interesting from the perspective of them cutting back the number of commemorative themes and especially the silly ones they've been doing for a few years now. I didn't buy those anyways, but it'll make browsing through the RCM website easier, hopefully

That is indeed interesting too.