These are stories Report on Business is following Wednesday, July 18, 2012.
More to loonie than commodities
Canada's "Dutch disease" debate is obscuring the fact that the Canadian dollar is being juiced by more than just commodities, BMO Nesbitt Burns says.
Deputy chief economist Douglas Porter was commenting on how the Bank of Canada has changed its commodity price index.
The central bank discussed these changes in its monetary policy released in Ottawa today, explaining how it now better reflects the prices paid to Canadian producers.
And while it "moderately" increases oil's influence in the central bank index, it doesn't change the fact that the loonie appears to be trading about 10 per cent above the commodity price fundamentals.
"There is no mystery behind the gap that has opened up in the past three years - Canada's strong fundamentals have been a magnet for capital inflows," Mr. Porter said, citing a report from Statistics Canada this week that showed record levels of foreign money pouring into the country in June.
"The recent Dutch debate tempest clouded the fact that there is more than commodities driving the Canadian dollar."
Carney takes dimmer world view
The Bank of Canada today cut its growth projections for the United States, Europe, China and the global economy and warns that world prices for oil, Canada’s most lucrative export, could be “substantially weaker” through 2014 than it was expecting three months ago.
In a quarterly forecast released today in Ottawa, policy makers expanded on why, a day earlier, they pushed back their timeline for when Canada will be back at full capacity, The Globe and Mail's Jeremy Torobin reports.
Bank of Canada Governor Mark Carney indicated a cautious optimism in the economy’s ability to stay afloat despite a deteriorating global backdrop, assuming the European crisis is more or less contained.
Yesterday, Governor Mark Carney and his colleagues on the central bank's policy panel held their benchmark overnight rate at 1 per cent and trimmed their forecast for economic growth this year and next. They also suggested that the next move in interest rates would be up, not down, but that won't be any time soon.
- Mark Carney takes dimmer view of U.S., Europe, China
- Carney warns falling oil price could grease economy's slide
- Mike Moffatt's Economy Lab: Why Carney should have cut rates
- Wealth effect: How we'll feel impact of lower commodity prices
Carney on Libor
Bank of Canada Governor Mark Carney said today he is not aware of evidence that any Canadian bank helped conspire to rig key global interest rates, but the facts around the scandal are “deeply troubling” and show that lessons from the financial crisis “have not been learned fast enough.”
As chairman of the global Financial Stability Board, he has already started canvassing relevant central bankers and regulatory authorities about how Libor can be reformed to prevent future episodes, or whether it should be replaced with a new benchmark, The Globe and Mail's Jeremy Torobin writes.
On Capitol Hill in Washington today, Federal Reserve Board Chairman Ben Bernanke said he has discussed the issue with Mr. Carney.
Agrium boosts projections
Canada's Agrium Inc. boosted its earnings forecast today, citing strong demand.
The agricultural products giant said it now expects earnings per share of between $5.40 (U.S.) and $5.50 for the second quarter and $6.72 to $6.82 for the first half of the year.
That's about 15 per cent better than its earlier second-quarter project, and, the company said, would mark record profit for the second quarter and the first half.
“The increase in expected earnings is due to excellent results across our entire crop input business, resulting from the continuation of robust demand through June, despite the very early start to the spring season," said chief executive officer Mike Wilson.
"As a result, the second quarter EBITDA for all three business units is expected to be higher than the same period last year. The outlook remains very positive, supported by the significant increase in grain and oilseed prices globally due to adverse weather in the U.S. and an expected tightening in international crop input markets."
Agrium reports second-quarter results Aug. 2.
Cogeco expands south
Cogeco Cable Inc. is venturing south of the border with a $1.36-billion (U.S.) deal to acquire Atlantic Broadband, the 14th largest cable television system operator in the United States, The Globe and Mail's Bertrand Marotte reports.
Montreal-based Cogeco struck a deal to acquire all of the shares of Atlantic, which serves about 252,000 basic video customers in Pennsylvania, Florida, Maryland, Delaware and South Carolina.
Atlantic is privately owned by ABRY Partners IV, LP and Oak Hill Capital Partners LP.
“This acquisition marks an attractive entry point into the U.S. market for Cogeco Cable,” president and chief executive officer Louis Audet said in a statement.
“There are sizable opportunities for growth including: increasing the penetration of the small and mid-sized business segment, and maximizing the bundling potential of services in the residential sector.”
Canada’s fourth largest cable company, Cogeco Cable’s operations are concentrated in Quebec and Ontario.
Ice cream plant to close
Some 80 employees of Baskin-Robbins in Peterborough, Ont., are so busy "operating around the clock" to meet growing demand for ice cream … that they're losing their jobs.
Baskin-Robbins said today it's closing the operation, rather than spending the money to upgrade, and shifting production to its partner suppliers.
Scotsburn Dairy of Truro, N.S., already a Baskin-Robbins producer, will take over production for all the Canadian stores when all is said and done.
The Peterborough plant now churns out about one-third of the ice cream bound for more than 4,200 stores outside of the United States. While Scotsburn picks up the Canadian business, Dean Foods will get the rest.
A small number of jobs will be cut by the end of this month, but most will go as the plant shuts down in mid-October.
“We deeply regret the need to close the Peterborough plant, but the facility, which is already operating around the clock, is unable to keep up with the demands of our rapidly growing international business,” Peter Laport, the company's vice-president for global strategic manufacturing and supply, said in a statement.
"We have explored other options, but modernizing the facility and adding capacity are unfortunately not viable. We appreciate the dedication of our Peterborough employees and are committed to help them through this transition."
The closure is also part of a wider transition to third parties for production, and Peterborough had been the last plant in North America. The company said it has shifted its focus to franchising, retail and "product innovation."
The company said it will work with the Canadian Auto Workers union, which represents 46 of the employees.
Baskin-Robbins will take one-time charges of $16-million to $18-million, and expects to save up to $5-million a year.
Now she tells us
Germany's Angela Merkel says she's optimistic the euro zone can be saved, but she's not so sure of that.
In an interview posted on the website of the chancellor's Christian Democratic Union today, Ms. Merkel said the leaders of the European project have to keep at it, but her comments raised eyebrows in the markets, pressuring the common currency.
"We have of course not yet organized the European project in such a way that we can be sure it will work, work well," Ms. Merkel said. "That means we need to keep working on this. We have much to do, but I am optimistic that we will succeed."
The nations of the 17-member euro zone have struggled for more than two years to come to grips with a crisis that has sent shockwaves around the world, upsetting markets, hurting other economies and eroding the profits of some companies.
Several countries have been bailed out, and the countries of the euro zone have pumped billions into saving the still young currency union.
"Euro has retraced some of yesterday’s gain and is entering the North American session, down 0.3 per cent against the U.S. dollar after Angela Merkel suggested she has some doubt that the European project will work," said senior currency strategist Camilla Sutton of Bank of Nova Scotia.