These are stories Report on Business is following Thursday, April 26, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
Juggling taxes You know you're in Canada when ... you can change the oft-heard phrase to "debt and taxes."
Late yesterday, Standard & Poor's cut its outlook for Ontario, to "negative" from "stable," citing the challenges of the province in meeting its fiscal targets.
Not all of Canada's governments are in as dire a position as Ontario. Far from it, but the S&P warning does highlight an era of governments scrambling to control swollen debt levels.
(Then there's the issue of personal debt levels, which are at record highs in Canada, prompting repeated warnings from policy makers.)
On the other side, of course, are taxes, which are a mixed bag across the country. And, a new study by CIBC World Markets shows today, what one hand gives, the other takes away.
To the point where federal cuts are cancelled by provincial increases, meaning "the needle on tax policy won't move much" this year, said economists Avery Shenfeld, Emanuella Enenajor and Warren Lovely.
"Ontario’s tax hike on incomes over $500,000 will raise about $300-million in 2012/13 (in addition to revenues from selected fee increases), while Quebec’s sales tax rate hike will net $1.2-billion," they wrote.
"New Brunswick will have small scale revenue gains from increases to property transfer and financial corporate capital taxes," according to the study of this season's budgets.
"At the federal level, premiums for employment insurance will rise by $600-million due to a rate increase, and $500-million will be raised from closing tax loopholes as measures announced in the 2011 budget kick in. But the final stage of federal corporate tax rate reductions represents a cut of roughly $3-billion, or enough to essentially offset policy-related federal/provincial tax increases. Transfer programs were also not fundamentally changed. The fiscal drag, therefore, will be about operating and capital spending."
Potash profit sinks Potash Corp. of Saskatchewan posted a sharp drop in first-quarter profit today and cut back its forecast for the year.
The Canadian potash giant missed the expectations of analysts, as measured by Bloomberg, earning $491-million (U.S.) or 56 cents a share in the quarter as farmers held back, compared to the record $732-million or 84 cents a year earlier.
“Fertilizer buyers continued to move cautiously at the beginning of the year, especially with potash purchases, which impacted our performance during the quarter,” said chief executive officer Bill Doyle.
The potash giant said dealers are now starting to buy so they can "meet strong demand at the farm level." It projected "record or near-record" results for the second quarter, of 90 cents to $1.10 a share, and annual profit of $3.20 to $3.60.
Obama on energy President Barack Obama isn't saying where he stands on the controversial Keystone XL pipeline at this point, but he does stress that Canada's going to push ahead on the oil sands no matter what the United States does.
In an interview in the May 10 edition of Rolling Stone, the president was asked about the comments of a NASA scientist, James Hansen, that the pipeline would spell trouble for the environment. As in, it would be "game over."
"James Hansen is a scientist who has done an enormous amount not only to understand climate change, but also to help publicize the issue," the president said in the interview with the magazine's co-founder, Jann Wenner.
"I have the utmost respect for scientists. But it's important to understand that Canada is going to be moving forward with tar sands, regardless of what we do. That's their national policy, they're pursuing it. With respect to Keystone, my goal has been to have an honest process, and I have adamantly objected to Congress trying to circumvent a process that was well-established not just under Democratic administrations, but also under Republican administrations."
The Obama administration rejected the original Keystone XL proposal, forcing TransCanada Corp. to reroute the pipeline around an environmentally sensitive region in Nebraska and apply to the government again.
"The reason that Keystone got so much attention is not because that particular pipeline is a make-or-break issue for climate change, but because those who have looked at the science of climate change are scared and concerned about a general lack of sufficient movement to deal with the problem," the president said in the interview.
"Frankly, I'm deeply concerned that internationally, we have not made as much progress as we need to make," he said, though he heralded the administration's action in areas such as auto fuel standards.
He noted, too, that the priority for many people over the past several years has been finding a job, paying bills and juggling high gasoline prices.
"In that environment, it's been easy for the other side to pour millions of dollars into a campaign to debunk climate-change science. I suspect that over the next six months, this is going to be a debate that will become part of the campaign, and I will be very clear in voicing my belief that we're going to have to take further steps to deal with climate change in a serious way."
Precision Drilling profit up Precision Drilling Corp. posted a sharply higher first-quarter profit today, noting strong demand in both Canada and the United States.
The Calgary-based energy services company earned $111-million or 39 cents a share, diluted, in the quarter, compared to $66-million or 23 cents a year earlier.
Revenue climbed to $640-million from $525-million.
"Despite a significant decline in dry gas drilling activity, drilling rigs performing horizontal drilling for oil and gas liquids and the related services provided by Precision remain in demand," said chief executive officer Kevin Neveu.
"Compared to the first quarter of 2011, all of Precision’s drilling and service lines operating in Canada and the United States contributed both increased revenue and improved operating margins during the period."
The company did, however, cut its planned spending.
"Although [Precision Drilling]continues to expect a stronger for longer rig market as oil-directed drilling picks up what gas lays down, the company has prudently trimmed its 2012 capital budget to $975-million, down $150-million from initial guidance," said analyst Chad Friess of UBS Securities Canada.
"The decrease reflects deferral of infrastructure, reduced maintenance and deferral of non-contracted projects. Still, [Precision Drilling] continues to receive interest for new build rigs and upgrades and the company may revisit its capital budget later in the year.
Imperial posts stronger profit Imperial Oil Ltd. is raking it in.
The Calgary company said today its first-quarter profit surged 30 per cent to top $1-billion, or $1.19 a share, diluted, from $781-million or 91 cents a year earlier.
Imperial did give a nod in its earnings statement to the discrepancy between Canadian and world crude prices.
"This quarter saw an increasing discount for our Western Canadian crude oil production caused by supply/demand imbalances in the North American mid-continent," said chief executive officer Bruce March.
"Our integration provided strong shareholder value as our downstream segment posted record quarterly earnings, mostly on the performance of three of our four refineries that can capture the value from processing discounted Western Canadian crudes."
Domtar sinks Canada's Domtar Corp. blamed low pulp prices and higher costs as it posted a sharply lower first-quarter profit today.
The Montreal-based company's profit fell to $28-million (U.S.) or 76 cents a share, diluted, from $133-million or $3.14. Sales edged up to $1.4-billion.
"Our businesses performed well in the quarter, but cyclically low prices in global pulp markets and higher costs affected results," said chief executive officer John Williams.
Forest products company Tembec Inc. , meanwhile, sand to a quarterly loss of $14-million (Canadian) or 14 cents a share, from a profit of $6-million or 6 cents a year earlier.
Revenue slipped to $407-million from $452-million.
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