These are stories Report on Business is following Tuesday, Jan. 10, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
Of railroads and pipelines In his rant yesterday against environmentalists and radicals, Canada's natural resources minister contrasted the building of the Canadian Pacific Railway with the approval process of the Mackenzie Valley pipeline. So I poked around and dug up some facts for his perusal.
But, first, a recap. A day before the hearings into the Northern Gateway pipeline, Joe Oliver released an open letter complaining that the regulatory process is broken and that "environmental and other radical groups" are slowing things down when it comes to forestry, mining and energy and energy projects.
Mr. Oliver was quite forceful, warning that such groups "threaten to hijack our regulatory system to achieve their radical ideological agenda.
As I wrote yesterday, if he's only looking for sanity in the regulatory system, I agree completely. Having said that, he didn't specify who he was talking about, and thus tarred everyone with the same brush. And there are legitimate concerns about various and sundry projects that should not be dismissed, or lumped in with Mr. Oliver's radicals.
Here's the section from his letter that also gave me pause: "Anyone looking at the record of approvals for certain major projects across Canada cannot help but come to the conclusion that many of these projects have been delayed too long. In many cases, these projects would create thousands upon thousands of jobs for Canadians, yet they can take years to get started due to the slow, complex and cumbersome regulatory process. For example, the Mackenzie Valley Gas Pipeline review took more than nine years to complete. In comparison, the western expansion of the nation-building Canadian Pacific Railway under Sir John A. Macdonald took four years."
Comparing the issues of building a railway in the 1800s to the environmental, First Nations and other concerns of today are, of course, ridiculous. But since Mr. Oliver raised the issue, there are some facts that should be noted.
First, thousands of Chinese workers were brought in to help build the line. Not only were they paid less, many succumbed to disease or died in work accidents. It was, of course, an ugly period of history. Here's how the Kids' Site of Canadian Settlement puts it:
"Between 1881 and 1884, as many as 17,000 Chinese men came to B.C. to work as labourers on the Canadian Pacific Railway. The Chinese workers worked for $1 a day, and from this $1 the workers had to still pay for their food and their camping and cooking gear. White workers did not have to pay for these things even though they were paid more money ($1.50-$2.50 per day). As well as being paid less, Chinese workers were given the most back-breaking and dangerous work to do. They cleared and graded the railway's roadbed. They blasted tunnels through the rock. There were accidents, fires and disasters. Landslides and dynamite blasts killed many. There was no proper medical care and many Chinese workers depended on herbal cures to help them.
"The Chinese railway workers lived in camps, sleeping in tents or boxcars. They did their own cooking over open outdoor fires. They mainly ate a diet of rice and dried salmon, washed down with tea. With their low salaries they could not afford fresh fruit and vegetables, so many of the men suffered from scurvy (a painful disease caused by a diet without vitamin C).
"The camps were crowded. Diet and living conditions were poor. Many got sick. In the winter it was very cold and the open fires were the only way of keeping warm. Whenever the workers put down more tracks, the camps had to be moved further down the line. When it was time to move camp, the Chinese workers would take down their tents, pack their belongings and move everything to the next camp, often hiking over 40 kilometres."
Prime Minister Stephen Harper apologized on behalf of the government in mid-2006 for the head tax and other restrictions slapped on the Chinese beginning in 1885, acknowledging the conditions under which the men worked.
"Beginning in 1881, over 15,000 of these Chinese pioneers became involved in the most important nation-building enterprise in Canadian history – the construction of the Canadian Pacific Railway," Mr. Harper said at the time. "... The conditions under which these men worked were at best harsh, and at times impossible: tragically, some 1,000 Chinese labourers died building the CPR."
There were many other issues, as well, of course, notably the negotiations with First Nations, talks that ended with Treaty 7, and which are a source of debate.
"The Dominion of Canada, eager to secure land for the Canadian Pacific Railway, sought lasting settlements with First Nations in the West," according to Calgary Economic Development.
"Persuaded that such agreements represented the best hope for lasting peace and survival of their people, Southern Alberta's chiefs – notably Chief Crowfoot of the Siksika (Blackfoot) Nation – signed Treaty 7 in 1877. Under the terms of the treaty, First Nations ceded their traditional hunting territory in exchange for designated reserves and annual payments from the Queen and/or continued hunting and trapping rights in the annexed territories.
"Treaty 7 succeeded in securing the survival of Southern Alberta's First Nations, but at great cost. Adapting a traditional nomadic way of life to a sedentary agrarian existence was a difficult transition and the area following the new treaty was time of struggle and hardship for the Blackfoot."
Much of the documentation about Chief Crowfoot notes that he got a lifetime pass for the CPR, as did Albert Lacombe, the missionary who helped the railway in negotiations.
Perhaps, Mr. Oliver, there's a reason the railroad was built so quickly. And, hopefully, time has taught Canada how to proceed.
- Oliver's comments roil Northern Gateway environmental hearings
- For the Harper government, the Gateway must be open
- 'Radical groups' spur Tories to speed pipeline review process
- Environmentalists sound alarm over Tory stand on pipeline review
- Northern Gateway: Your guide to the hearings
- Northern Gateway: The unheard argument
Lululemon boosts guidance Lululemon Athletica Inc. shares surged today after the yoga retailer, clearly having had a good holiday season, boosted its outlook for profit and revenue in the fourth quarter.
The king of yoga wear said today it now projects earnings per share of 47 cents (U.S.) to 49 cents, compared to an earlier forecast of 40 cents to 42 cents. Revenue is expected to be between $358-million to $363-million, up from the earlier forecast of $327-million to $332-million. That would also mark a sharp increase from $245-million in last year's final quarter.
"Our work throughout the year building our inventory position is driving our success in the fourth quarter," said chief executive officer Christine Day. "Guests have responded exceptionally well to the robust assortment and bright colour palette for holiday, and momentum continues with the new spring product offerings."
Same-store sales, the main measure in retailing, is also projected to climb sharply in the fourth quarter.
"Two things really set [Lululemon]apart and support its long term success: the maniacal product focus and the fact that the company is creating a market that didn't really exist before," Macquarie analyst Liz Dunn said in a research note, according to Reuters.
Nexen shakes it up Analysts see the surprise management shakeup at Nexen Inc. as a "drastic step" meant to close a years-long "valuation gap." The move sent the Canadian energy giant's stock up sharply today.
As The Globe and Mail's Carrie Tait reports, Nexen last night that chief executive officer Marvin Romanow is gone, effective immediately, and chief financial officer Kevin Reinhart is taking his place on an interim basis. Also gone is Gary Nieuwenburg, executive vice-president for Canada.
Nexen chairman Francis Saville was blunt as he announced the shuffle: "We are committed to closing the value gap for our shareholders through execution of our oil sands, conventional offshore and unconventional gas strategies as outlined at the company's investor day in early December."
As Ms. Tait writes, Nexen's struggling Long Lake oil sands project has turned many investors sour.
"We see this as a drastic step by the board in restoring shareholder confidence in the company, and closing a valuation gap that has been persistent for several years," said analyst George Toriola of UBS Securities Canada.
"We expect investors to refocus on the company’s fundamentals – significant discount to sum of the parts, oil levered assets, near-term growth, and improving Long Lake performance over the medium to long term," Mr. Toriola added in a research note.
"With the start-up of Usan in Nigeria (36,000 barrels of oil per day) possibly in late Q1/12, and the improved performance of Buzzard, we believe the stock is currently attractively valued."
As for Mr. Reinhart, he's "capable, knowledgeable about his business and very genuine," the UBS analyst said.
"In our meetings with him, we always came away with a deeper understanding of the issues, the challenges, and the opportunities. We expect this to be well received by shareholders, while the company conducts a search for a new CEO."
Talisman glum on gas Canada's Talisman Energy Inc. has trimmed its budget by about $500-million this year as it cuts spending on dry gas plays in North America.
The Calgary-based energy company also cited low natural gas prices, saying it will cut exploration spending this year but put more emphasis on oil.
“Our plans for 2012 have been shaped by low North American natural gas prices and a cautious view of the economic landscape in general,” said chief executive officer John Manzoni. “Fortunately, our portfolio provides lots of optionality. At the same time as we trim short-term capital spending, we are investing more into profitable liquids projects, and strengthening and focusing our portfolio."
Talisman plans to spend about $4-billion in 2011. It forecast an increase of 5 per cent in production this year.
"We are reducing capital spending in dry gas plays in North America, which accounts for the majority of the decrease over 2011," Mr. Manzoni said.
"Underpinning this is a belief that North American gas prices will remain low for some time; we have also assumed a relatively conservative oil price forecast," he said in a statement.
"Production from ongoing operations averaged approximately 425,000 [barrels of oil equivalent a day]in 2011, an increase of 9 per cent. We expect production growth of up to 5 per cent in 2012. Had we maintained spending into dry gas, we could have achieved our medium-term target of 5 per cent to 10 per cent growth in 2012. However, given the current gas price environment, we believe value will be maximized by focusing on profitability rather than headline production growth."
Banks warn on real estate Two of Canada’s biggest banks are expressing caution over the Canadian housing market in the year ahead, particularly in Vancouver and Toronto, The Globe and Mail's Grant Robertson reports.
The heads of Royal Bank of Canada and Bank of Montreal told an investor conference in Toronto today that a softer housing market is a concern across the country, with particular focus on the condo markets in Toronto and Vancouver, where capacity is significantly overbuilt.
Housing starts climb Not that it's expected to last all that long, but residential construction picked up in Canada last month.
Housing starts in Canada climbed in December to an annualized pace of 200,200 units, Canada Mortgage and Housing Corp. said today, up from November's 185,600 and driven largely by construction of multiple units, such as condos, in Ontario and Atlantic Canada.
Toronto's condo market has boomed, but observers expect that to slow down somewhat.
"Looking beyond the month to month volatility in the housing starts numbers, the upward trend in homebuilding evident in the first half of 2011 has clearly tapered off as 2011 came to a close," said Emanuella Enenajor of CIBC World Markets.
"A sideways market in residential building permits confirms that while low interest rates are helping to support housing construction from measurably deteriorating, the market will likely flatten out from here - feeling the brunt of a slower pace of economic growth."
- Housing starts rise on Ontario, Atlantic Canada gains
- Will housing decline be mild or 'something much nastier'?
China seen easing Demand in China is slowing from its rapid pace, raising fears of what that could mean to the global economy but also boosting hopes that authorities could ease policy.
China's trade surplus widened in December to $16.5-billion (U.S.) as exports climbed 13.4 per cent and import growth slowing markedly to 11.8 per cent.
"This may simply be a correction after a couple of months of relative strength, but it adds to the picture of slowing growth in China’s domestic demand," said Mark Williams and Qinwei Wang of Capital Economics in London.
They noted that commodities imports remained strong, suggesting the slip came in the area of products aimed at domestic use, rather than those that are simply inputs.
"On balance, today's figures reinforce our view that the economy has slowed substantially since the end of Q3 but theydon't make us more pessimistic about the outlook than we already were," the economists said. "We expect policy stimulus to help the economy turn around by the middle of the year and for China still to grow 8.5 per cent in 2012."
The numbers do raise questions about the impact on the global economy given China's importance in the recovery.
"Strong demand from the growing Chinese market is good news for global growth," said senior economist Jennifer Lee of BMO Nesbitt Burns. "And that's where the disappointment comes in ... But the focus today is not on slower growth, but the hope that slower growth will lead to lower rates in the world's most populous country."
Corus boosts dividend Corus Entertainment Inc. is boosting its dividends by 10 per cent as it looks ahead to better times, The Globe and Mail's Steve Ladurantaye reports.
The television and radio broadcaster said today its monthly dividend for class A and B shares would increase to 8 cents. That brings the annual payout to 95 cents for the A shares and 96 cents for the B shares.
Corus also posted a first-quarter profit of $50.5-million or 61 cents a share, up from $46.2-million or 59 cents a year earlier.
- Europe to recommend blocking DB-NYSE tie-up
- TransCanada steps up Keystone PR campaign
- Debt still rising, but Canadians better at paying credit cards: Equifax
- Fitch does not expect French downgrade
In Economy Lab Mark Carney’s debut at the Financial Stability Board meetings was supposed to be dull and predictable, Eric Reguly reports from Basel, but the resignation of the chief of the Swiss National Bank makes it anything but.
In International Business Jewelry retailer Tiffany & Co. said today that its sales growth weakened in the U.S. and Europe during the holiday season, raising fears that the wealthy may be beginning to rein in spending, The Associated Press reports.
In Globe Careers Imagine that every waking hour, of every waking day, you were working. Welcome to life as a fat cat, writes Brett Nelson of Forbes.com.
In Personal Finance Alexandra Macqueen on how today’s generation needs to break out of the outdated model of how their parents saved and spent their money.
From today's Report on Business
|LLL-T lululemon athletica||63.77||
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|TLM-T Talisman Energy||12.19||
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|CJR.B-T Corus Entertainment||25.61||
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