These are stories Report on Business is following Wednesday, Feb. 12, 2014.
Sinkhole swallows cars
A huge sinkhole at a U.S. car museum has swallowed eight vintage Corvettes, one of them half-a-century old.
“It is with heavy hearts that we report that eight Corvettes were affected by this incident,” the National Corvette Museum in Bowling Green, Ky., said today.
The local fire department estimates the size of the collapse at 40-feet wide and between 20 and 30 feet deep.
The cars swallowed were classics, including a 1962 black Corvette. The others included a 1984 PPG pace car, a white 1992 version that marked the millionth Corvette, a 1993 ‘Ruby Red’ 40th anniversary edition, a 2001 Mallett Hammer Z06 version, and a white 2009 car that put the company at 1.5 million.
Also swallowed were two on loan from General Motors Co., a 1993 ZR1 Spyder and a 2009 ZR1 Blue Devil.
No one was at the museum when its motion detectors went off before 6 a.m., prompting its security company to respond.
“A structural engineer is now on-site to assess the existing damage and stability of the surrounding areas,” said the museum, which is located in the city where GM produces the vehicle, and, indeed, sits across the street from the plant.
There’s no estimate of damage yet, though the museum’s executive director, Wendell Strode, told CNN the value of the cars in question is “substantial.”
Grupo Bimbo buys Canada Bread
Mexico’s Grupo Bimbo today struck a $1.83-billion deal for Canada Bread, the bakery division of Maple Leaf Foods Inc., The Globe and Mail's Eric Atkins reports.
The Mexican giant is offering $72 a share for the company, whose brands include Dempster’s, Sunshine and Villagio, as well as a line of frozen baked goods.
“This is an excellent outcome for our bakery businesses and shareholders,” said Richard Lan, Canada Bread’s chief executive officer. “Becoming part of Grupo Bimbo, the world’s leading bakery company and benefiting from its focus, expertise and resources, will create new opportunities for our people, customers and business partners.”
Sales of its frozen food have fallen by almost 5 per cent over the past three years while fresh goods have slipped by almost 2 per cent.
Air Canada sinks
Air Canada reported record adjusted profit in 2013, but severe winter weather in December took a bite out of fourth-quarter profit, knocking down its shares, The Globe and Mail's Greg Keenan writes.
Adjusted net income grew to $340-million the airline said today, up from $55-million in 2012. That translated into adjusted profit of $1.20 a share compared with 20 cents a year earlier.
Weather issues delivered a $15-million hit in December that held adjusted profit to $3-million or 1 cent ashare, compared with a loss of $5-million or 3 cents a share in the fourth quarter of 2012. The consensus estimate for adjusted earnings per share in the fourth quarter was 11 cents.
Talisman takes hit
Talisman Energy Inc. is promising better results in 2014 as it soaks up an unexpected $1-billion quarterly loss and launches a second phase of asset sales in the $2-billion (U.S.) range, The Globe and Mail's Bertrand Marotte reports.
The Canadian oil-and-gas company that is undergoing a major restructuring and narrowing its focus to just two regions said today it posted a net fourth-quarter loss of $1.01-billion or 98 cents per share, compared with a profit of $376-million or 37 cents in the year-earlier period.
The company said production at its troubled North Sea operations fell 33 per cent to 14,000 barrels of oil equivalent per day from the previous quarter, with higher costs resulting from scheduled turnarounds and continued reliability issues.
Under the direction of president and chief executive officer Hal Kvisle, and with activist investor Carl Icahn as a major shareholder, Talisman has been selling off assets and shifting to higher-margin natural gas liquids.
China buoys hopes
Trade numbers from China are buoying hopes today, though there are questions surrounding the latest data.
According to the official numbers, exports surged 10.6 per cent in January, far better than expected, while imports climbed 10 per cent.
“At face value then, these figures are strongly positive signals of overseas demand,” said economists Mark Williams and Julian Evans-Pritchard of Capital Economics.
“But the scale of the acceleration is much greater than we would expect given the gradual warming of economic conditions under way in key export markets,” they added in a research note.
“What’s more, we have not seen a similar surge from other Asian exporters.”
There’s talk that the export levels reported by Beijing are “once again being inflated by over-invoicing so as to allow illicit capital into the country,” they noted, but there’s little evidence of this, and the best guess is the “seasonal volatility” related to Chinese New Year.
Carney ‘Canadianizing' the Bank of England
Mark Carney is putting a decidedly Canadian stamp on his new home at the Bank of England.
Among other things, the British central bank painted a better economic outlook today, revising its growth projection for this year up to 3.4 per cent.
But Mr. Carney, who left the Bank of Canada in the midst of his tenure, also updated the Bank of England’s so-called forward guidance, which is a hint to markets of what it will take to change course.
In this case, the central bank is doing away with a jobs target, but sending a signal it's looking at economic slack.
“BoE governor Mark Carney and his monetary policy council have made the BoE sound rather like the BoC,” said Derek Holt and Dov Zigler of Bank of Nova Scotia.
“They’ve done this by tossing aside the unemployment rate as a policy trigger in favour of turning the central bank's framework into one that almost entirely mimics the Bank of Canada's,” they said in a research note.
“The BoC has long explained its inflation thinking in the context of an output gap and spare capacity framework - long before Carney became governor in 2008. As an inflation-targeting central bank, the BoC used this framework to provide policy rate guidance and shifted its bias around accordingly while bolting on financial stability considerations over recent years. Carney is now Canadianizing the BoE by returning to this familiar framework on the other side of the pond.”
Rogers posts lower profit
Rogers Communications Inc. posted a reduced profit in the fourth quarter on a decline in wireless revenue due to lower-priced roaming plans and simplified sharing packages that cut into revenue growth.
The Toronto-based telecommunications, media and cable company reported fourth-quarter profit of $320-million or 62 cents a share, compared with $522-million or $1.01 per share in the year-earlier period.
On an adjusted basis, profit in the fourth quarter was $357-million or 69 cents, compared with $448-million or 86 cents.
Revenue fell 2 per cent in wireless, the key profit-driver at Rogers.
Canada targets credit cards
Among the pledges in the Canadian government’s latest budget is one that would drive down credit card acceptance fees it says are among the highest in the world.
Like other parts of the budget unveiled yesterday, there are plans that lack details.
Finance Minister Jim Flaherty also promised to help narrow the gap between consumer prices in Canada and the United States, though there are questions about how that would work.
Still, retailers, restaurant owners and small businesses praised the government’s proposal in its modest budget.
Where shopping is concerned, the budget document notes that merchants pay a fee of between 1.5 per cent and 4 per cent of a transaction when consumers use their credit cards.
The stores, in turn, pass along “some or all” of that cost to shoppers via higher prices.
“Canada has among the highest credit card acceptance costs in the world,” the budget says.
“In 2013, the Competition Tribunal found that certain of Visa’s and MasterCard’s network rules have an adverse effect on competition, which results in higher costs to merchants,” the small section on cards adds.
“In light of this finding, the government will work with stakeholders to promote fair and transparent practices and to help lower credit card acceptance costs for merchants, while encouraging merchants to lower prices to consumers.”
The government says it also plans to beef up of 2010 code of conduct for credit and debit card issuers.
The Canadian Federation of Independent Business, which says such costs amount to between $5-billion and $7-billion, welcomed the move to “end the ‘arms race’ of ever higher tiers of high-cost premium cards.”
- Barrie McKenna, Richard Blackwell and Marina Strauss: Flaherty faces uphill battle on 'country pricing'
- Rob Carrick: Ottawa keeps focus on pleasing 'consumers'
What observers say
Over all, the Canadian government is sticking to its guns on deficit reduction and a return to balanced books.
Here’s what observers are saying:
“This year’s budget looks eerily close to the 2013 version. There was a new cover to the budget plan and a new title The Road to Balance: Creating Jobs and Opportunities, but the feel of the document was largely the same. The economic assumptions and fiscal plan resembled those in the federal fall update. The government anticipates a deficit of $16.6-billion (or 0.9 per cent of GDP), $1.3-billion better than the target set out last fall. The plan still is to return a surplus position in fiscal 2015-16.” Sonya Gulati, Toronto-Dominion Bank
“After the difficult trade-offs and cutbacks involved in balancing the books, Ottawa, for the next budget, can look forward to structuring longer-term policies that would best support broad-based growth and prosperity across Canada. This budget offers some interesting first steps in areas such as skills matching, for future consideration. Evidence of the government’s anticipated fiscal flexibility is the debt service. It is expected to absorb just 10.5 cents of each revenue.” Mary Webb, Bank of Nova Scotia
“Four hundred, nineteen pages and $2-billion. That just about sums up the 2014 budget, in which a wide range of policy announcements, some having no bearing on government taxation or spending, or already captured in previous budget allocations, adds up to a modest $2-billion reduction in the status quo deficit outlook. On the fiscal side, this is largely a ‘wait until next year’ budget.” Avery Shenfeld, Warren Lovely, Peter Buchanan, CIBC World Markets
“As was widely expected going into Budget 2014, the focus was on assuring a return to surplus in fiscal 2015/16. On this score the federal government is still on track to succeed, even demonstrating a slight outperformance. In fact the prospects are such that absent an unexpected negative shock, there is the strong likelihood that a surplus could come a year earlier in 2014/15.” Craig Wright, Paul Ferley, Royal Bank of Canada
“Ottawa has always had an easier run than most others in the global austerity Olympics, now four years old, and the finish line is clearly within sight for Canada. The measured pace of fiscal restraint continues, at least at the federal level, with the 2014 fiscal plan a self-proclaimed ‘stay-the-course’ affair - there’s little here in terms of major new measures from a macroeconomic standpoint.” Douglas Porter, Robert Kavcic, BMO Nesbitt Burns
“One measure that may attract some market attention is the intention to close the gap between Canadian and U.S. prices on consumer items. This seems politically driven, in our opinion, as this has been an issue for some consumers. However, this measure could worry the Bank of Canada, as it could force some consumer prices lower in a context where inflation is already below the BoC’s target. However, this mainly provides more power to the Competition Bureau to investigate the reason for large price differentials and may not force retailers to align their prices with the U.S.. As such, we believe that we are unlikely to see the impact of this announcement for some time.” Charles St-Arnaud, Nomura Securities
- Bill Curry: Federal budget takes aim at erasing deficit by 2015
- Josh WIngrove, Kathryn Blaze Carlson and Kim Mackrael: 13 must-know items from the 2-014 federal budget
- Steven Chase: Federal budget gives a boost to auto sector
Streetwise (for subscribers)
ROB Insight (for subscribers)
- Home prices rise in January, economists still cautious
- CPPIB signs debt-financing deal for real estate development in India
- Toyota recalls 1.9 million Prius cars worldwide to fix software glitch
- Thomson Reuters posts 50-per-cent drop in operating profit