These are stories Report on Business is following Wednesday, Jan. 18, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
U.S. rejects Keystone Prime Minister Stephen Harper told President Barack Obama today that Canada will move to diversify its energy exports following the U.S. decision to reject the proposed Keystone XL pipeline.
As The Globe and Mail's Shawn McCarthy reports, the Obama administration turned down the project but said TransCanada Corp. can reapply after it completes rerouting the project to skirt an environmentally senstive region of Nebraska.
The U.S. State Department said it told the President the pipeline, which would carry 800,000 barrels of day of oil sands bitumen from Canada to the Gulf Coast, isn't in America's national interest.
Mr. Harper's office said the Prime Minister expressed his "profound disappointment" over the decision, and said Canada will try to diversify its oil exports.
Republicans had forced the administration to rule on the permit by late February.
TransCanada is working on an alternate route, and said today it will reapply, having expected the outcome.
"While we are disappointed, TransCanada remains fully committed to the construction of Keystone XL," said chief executive officer Russ Girling.
"Plans are already underway on a number of fronts to largely maintain the construction schedule of the project. We will reapply for a presidential permit and expect a new application would be processed in an expedited manner to allow for an in-service date of late 2014."
Mr. Girling did not mince words in his statement, pointing out what's at stake for both countries.
"Until this pipeline is constructed, the U.S. will continue to import millions of barrels of conflict oil from the Middle East and Venezuela and other foreign countries who do not share democratic values Canadians and Americans are privileged to have," he said. "Thousands of jobs continue to hang in the balance if this project does not go forward. This project is too important to the U.S. economy, the Canadian economy and the national interest of the United States for it not to proceed."
The cost of Europe's troubles The crisis in the euro zone is going to cost Canada about $10-billion in lost out, the Bank of Canada said today.
It's the first time central bank Governor Mark Carney and his colleagues have put a pricetag on the debt crisis and what is believed to be a recession in the 17-member monetary union, The Globe and Mail's Jeremy Torobin reports.
The Bank of Canada said in its monetary policy report, which followed yesterday's rate decision, that by the end of the year, the crisis will have cut global gross domestic product by more than 1 per cent and U.S. GDP by 0.8 per cent, reducing the size of Canada’s $1.6-trillion economy by 0.6 per cent.
In the euro zone itself, a recession that began in the fall will last four quarters, cutting the region’s production by 1.5 per cent, the central bank said.
Yesterday, the Bank of Canada held its benchmark rate steady at 1 per cent.
- Euro crisis to cost Canada $10-billion, Bank of Canada warns
- Carney holds rate steady even as his concerns increase
- Kevin Carmichael's Economy Lab: The mixed blessing of low rates
- Flaherty keeping wary eye on housing market
- Rob Carrick: Even more debt. How cool is that?
Kinross fallout Analysts are taking a dimmer view of shares of Kinross Gold Corp. given its troubles in West Africa.
UBS Securities Canada analyst Brian MacArthur cut his 12-month price target on Kinross shares to $18 (U.S.) from $23, citing the higher costs and delayed plans announced by the miner yesterday. He rates the shares at "buy."
As The Globe and Mail's Sean Silcoff writes in today's Report on Business, Kinross was hammered in the markets yesterday after disclosing it will take six to nine months longer than expected to examine and plot its Tasiast project in Mauritania. It also will write down the mine's value.
"Of note, the study will include the assessment of various ore processing options for Tasiast’s expansion project to improve project economics," Mr. McArthur said.
"The recent infill drilling program at the West Branch has indentified a high-grade core that is surrounded by a lower-grade halo that may be better suited to a heap leach operation (the current plan calls for a 60,000 tonne-per-day process plant and related infrastructure). This review process is expected to result in a six- to nine-month delay and we note that production is likely going to be pushed out until 2016 as a result."
Goldman profit slips Fourth-quarter results from Goldman Sachs Group Inc. today further illustrate the trading troubles on Wall Street.
Goldman profit fell more than 55 per cent in the quarter to $1.01-billion (U.S.) or $1.84 a share, from $2.39-billion or $3.79 a year earlier. That beat the estimates of analysts, but it's worth noting that revenue from investment banking tumbled almost 45 per cent.
"This past year was dominated by global macro-economic concerns which significantly affected our clients’ risk tolerance and willingness to transact," Goldman chief executive officer Lloyd Blankfein said in a statement.
"While our results declined as a consequence, I am pleased that the firm retained its industry-leading positions across our global client franchise while prudently managing risk, capital and expenses. As economies and markets improve - and we see encouraging signs of this - Goldman Sachs is very well positioned to perform for our clients and our shareholders."
Citigroup Inc. and JPMorgan Chase & Co. have also reported hits from trading.
- Goldman profit falls but still beats estimates
- Citigroup profit falls 11%, misses Street view
- Wells Fargo earnings climb as loan-loss provision improves
- Bank of New York Mellon profit falls 26%
- JPMorgan profit falls as EU debt crsis hits trading
- U.S. banks: A Wall St.-Main St. divide
RBC likes yoga pants RBC Dominion Securities has boosted its price target on shares of Lululemon Athletica Inc. after the yoga retailer upgraded its forecasts.
"We continue to believe in the power of the LULU product and their strong holiday performance among a highly promotional environment proves their brand’s strength," analyst Howard Tubin said, referring to the company by its U.S. stock symbol as he hiked his target to $70 (U.S.) from $60.
"In addition, better in-stock levels should help fuel continued top line momentum despite difficult comparisons. We remain buyers of the shares and are raising our target price to $70."
Lululemon has hiked its forecasts for revenue and profit in the fourth quarter, projecting earnings per share of 47 cents to 49 cents, compared to an earlier forecast of 40 cents to 42 cents. Revenue is projected to be between $358-million and $363-million, up from an earlier call of between $327-million and $332-million.
- Lululemon shares jump as it boosts outlook
- Fabrice Taylor: Rich valuation makes more Lululemon gains a stretch
RIM falls after rumours dashed It might be wiser to bet on a turnaround at Research In Motion Ltd. , or possibly a licencing deal, rather than a takeover.
Analysts have been warning not to buy RIM shares on takeover speculation, but investors jumped in nonetheless yesterday on a blog report that Samsung Group was eyeing the BlackBerry maker. Needless to say, the air went out of that balloon as soon as Samsung denied any such thing.
First, the outlook for RIM is uncertain, though looking up after the debut at the Consumer Electronics Show of its upgraded PlayBook. Analysts believe any suitor would wait for the stock to drop further, if it does.
Coupled with that is the fact that the company is poised to change its board structure and then embark on a strategic review. While that review could lead who knows where, it's certain to take some time. RIM still has a lot going for it, with more than 70 million subscribers, patents, etc., and I wouldn't count this board out just yet.
Also, while Samsung is huge, and has billions to play with, it's not known for big takeovers.
One last point: This has happened before, as recently as late December, on reports that potential acquirers had studied the possibility of bidding for the Waterloo, Ont., company.
Analysts say that while no takeover is in the offing, they don't rule out a licencing deal, possibly with Samsung or HTC, for example.
"We see RIM licensing BlackBerry 10 and charging $10 per device,” Jefferies analyst Peter Misek said in a research note, according to Reuters.
“Samsung and HTC would do this to gain access to RIM’s subscriber base, diversify away from sole dependence on Android and create more enterprise exposure. BlackBerry 10 is effectively an Android derivative and, therefore, many bridges are possible.”
- RIM shares jump on talk of possible sale to Samsung
- Bums v. thumbs: Lululemon now worth more than RIM
- RIM tries a PlayBook reboot
- Fools rush in? RIM surges, but don't bet on a takeover
Germany cuts forecast Germany today cut its economic projections for the year, a troubling sign given that it is the engine of the struggling euro zone, though it's not forecasting a recession.
The government now projects growth of 0.7 per cent for 2012, down from an earlier expectation of 1 per cent, and 1.8 per cent before that. That marks a sharp slowdown from 2011's 3-per-cent pace, though is no surprise given that the Europe is seen plunging back into recession this year.
The new German numbers come as the World Bank slashes its projections for global growth over all, as The Globe and Mail's Kevin Carmichael reports from Washington.
Separately today, borrowing costs in Germany also slipped, to a record low.
In Greece, meanwhile, markets are watching as Athens resumes negotiations with creditors. If there's no deal with bondholders, default looms.
"Greek officials enter a showdown with private bondholders today, as the nation that started the euro zone crisis all those months ago edges closer towards the abyss of default," said analyst Chris Beauchamp of IG Index.
"The talks broke down last week over the reluctance of some participants to accept an excessively large haircut on their bond holdings. If a deal is not resolved, then Greece will officially run out of ready cash at the end of March, although the denouement could come much sooner than that if markets think that this is the likely outcome."
- Germany lowers 2012 growth forecast
- U.K. jobless rate hits 17-year high of 8.4%
- Kevin Carmichael's Economy Lab: World Bank downgrades global outlook
Questionable expenses Ever thought twice about what you're expensing? Chief financial officers, so it seems, have seen it all, from toilet paper and lottery tickets to, my personal favourite, a fine for crashing into a toll booth.
Robert Half Management Resources today provides an amusing, though serious, look at the issue of corporate expense claims with a survey of 1,600 CFOs in the United States and Canada. Here are just some of what CFOs have seen:
- Pet food
- Trailer rental for a family reunion
- $12,000 for a family trip
- Hotel charge for viewing adult movies
- A day at the spa
- Toilet paper
- Hot tub supplies
- Costs of son's birthday party
- Flowers for a spouse
- Wedding anniversary dinner
"Although these examples seem unusual and humorous, this issue can be quite serious and affect the organization's bottom line," Robert Half's Canadian president, David King, said in a statement.
"Employees who are unsure whether or not to expense an item should take the initiative to ask before including it in the report. Companies can also assist employees with this by frequently clarifying policies, making sure they are easy to locate, and communicating any changes to avoid misunderstandings."
How one could misunderstand "expensive lunch for the employee without clients" is beyond me.
- China property, other data add to slowdown worries
- More arrests in U.S. insider trading probe
- Oil demand falling as recession fears mount: IEA
- Catalyst Paper files for protection in U.S.