Canada Post says it is facing "serious financial challenges" this year due to a growing number of new addresses along with rapidly declining mail volume.

The company said in a press release Wednesday that it is expecting a "substantial financial loss in 2013."

The amount of mail delivered within Canada in 2012 fell by 6.4 per cent compared to the year before, Canada Post said Wednesday.

Canadians mailed almost one billion fewer pieces of domestic mail in 2012 than in 2006, with most of that decline happening within the last year.

Canada Post points to widespread adoption of digital alternatives, such as email, as the major reason behind the drop.

"Canada Post must continue to explore and pursue opportunities to reshape its business and adjust its labour costs in order to meet Canadians’ changing needs for postal services," the company said in a statement.

Despite the decline in letter mail, the amount of parcels delivered grew by 6.7 per cent. The company’s online epost service also handled 15 per cent more e-documents.

The company said it has also reduced future costs with new collective agreements signed with the Canadian Union of Postal Workers on Dec. 21, 2012. The agreements included lower starting wages for new hires, wage freezes in 2015 and 2016, and changes to pension, post-retirement health care benefits and sick leave.

Because of these savings, the Canada Post Group of Companies — which consists of the core Canada Post segment along with Purolator Inc., SCI Group Inc. and Innovapost Inc. — reported a before-tax profit of $127 million last year rather than a $25-million loss it would have incurred.