These are stories Report on Business is following Thursday, Dec., 5, 2013.
Wall complains of cuts
Saskatchewan's premier is urging Potash Corp. to "revisit” its dividend policy to save jobs, complaining it “sacrificed” employees while protecting its shareholders.
Brad Wall made the statement in a letter to Potash Corp. chairman Dallas Howe in the wake of the agricultural giant’s announcement this week that it’s slashing its work force by 18 per cent.
Mr. Wall took issue with chief executive officer Bill Doyle’s comment that Potash Corp.’s dividend is “sacrosanct.”
“In the context of yesterday’s announcement, this can only mean that the interests of shareholders were protected while the interests of employees here in Saskatchewan and elsewhere were sacrificed,” Mr. Wall said in yesterday’s letter.
“I understand that Potash Corp.’s board of directors and CEO need to look after the best interests of your shareholders,” he added.
“So do I. My shareholders are the people of Saskatchewan, who also happen to own the potash resource."
Mr. Doyle called the premier late yesterday to express “regret” at the comments, Mr. Wall said, and he wonders what takes place next.
“With this in mind, I am asking you and your board to revisit Potash Corp.’s dividend policy and yesterday’s decision, with a view to considering whether the number of layoffs could be mitigated,” he said.
Potash Corp. unveiled deep cuts on Tuesday, revealing plans to cut more than 1,000 jobs, 440 of them in Saskatchewan, and curtail some operations.
In a letter posted on Potash Corp.’s website late Thursday, Mr. Howe thanked Premier Wall for his candour, and said the board, too, regrets that the decision to cut jobs had to be made.
But Mr. Howe also appeared to refute some of Mr. Doyle’s comments. He said it’s not true that employee interests were sacrificed to protect shareholder interests. He emphasized that while the dividend is important it is not “sacrosanct.”
“The numbers of employees who will be impacted is not connected in any way to the amount of the company’s dividend,” Mr. Howe wrote.
At the same time, the letter said the board will take seriously Premier Wall’s request that it revisit the company’s dividend policy.
Canada sinks in ranking
We’re still in the top 10. But not No. 5, like last year. Or, more importantly, No. 1 the year before that.
Canada sank again in the latest Forbes ranking of the “best countries for business,” falling to the No. 8 spot as Ireland ascended to No. 1.
The magazine says it uses 11 measures to grade the 145 countries on its annual list: Property rights, innovation, taxes, technology, corruption, personal, trade and monetary freedom, red tape, investor protection and stock market performance.
Here’s how Canada ranked in the breakdown: No. 6 on trade freedom, No. 77 on monetary freedom, No. 9 on property rights, No. 21 on each of innovation and technology, No. 2 on red tape, No. 4 on investor protection, No. 9 on corruption, No. 1 on personal freedom, No. 8 on tax burden and No. 58 on market performance.
We know, of course, on that last bit that the S&P/TSX composite index has lagged others. Ireland’s stock market, by the way, has returned about 45 per cent this year.
Outranking Canada this year after Ireland were New Zealand, Hong Kong, Denmark, Sweden, Finland and Singapore.
Trailing Canada in the top group were Norway and the Netherlands.
Notably, the United States fell to No. 14, continuing what Forbes says is a four-year slide, because of the Federal Reserve’s “easy money program which has distorted prices and risked long-term inflation.”
In with the new
The changing of the guard continues in Canada’s business community.
Yesterday it was Barrick Gold Corp.’s Peter Munk. Today, it’s Royal Bank of Canada’s Gordon Nixon.
As The Globe and Mail’s Tim Kiladze reports, Mr. Nixon today announced his decision to retire as chief executive officer next August, to be succeeded by Dave McKay, who’s now chief of personal and commercial banking.
This came as Canada’s biggest bank posted an 11-per-cent jump in fourth-quarter profit to $2.1-billion or $1.40 a share from $1.9-billion or $1.25 a year earlier.
- Tim Kiladze: RBC chief Gordon Nixon to retire next summer, bank’s profit rises 11%
- Boyd Erman in Streetwise (for subscribers): Look for RBC to de-emphasize trading
- Rachelle Younglai’s exclusive interview interview with Peter Munk: On ‘hubris,’ ‘stupidity’ and the future of Barrick
CIBC profit dips
Canadian Imperial Bank of Commerce, meanwhile, posted a decline in fourth-quarter profit, ending what Mr. Kiladze writes was a year of muted growth.
CIBC profit slipped to $836-million from $852-million a year earlier, though on a per-share basis climbed to $2.05 from $2.02.
- Tim Kiladze: CIBC profit slips on charges, dividend unchanged
- Tim Kiladze: CIBC snags Toronto airport rights deal
TD profit inches up
And then there’s Toronto-Dominion Bank, whose fourth-quarter profit inched up amid stronger results from personal and commercial banking in Canada and the United States.
TD earned $1.62-billion or $1.69 a share in the latest quarter, compared to $1.6-billion or $1.67 a year earlier. The latest results included a restructuring hit of $129-million.
Macklem heading to Rotman
Tiff Macklem is leaving his post as senior deputy governor of the Bank of Canada to become the new dean at the University of Toronto’s Rotman School Management.
No surprise there – he lost out to Stephen Poloz for the governor’s job after Mark Carney left for the Bank of England.
Professor Peter Pauly has been interim dean since July 1, and will hold that job until next July, when Mr. Macklem begins his five-year term.
Inventories boost U.S. economy
The U.S. economy expanded in the third quarter at a far faster pace than originally estimated, but, as in Canada, much of that was on the back of an inventory build-up.
Gross domestic product climbed in the quarter at an annual pace of 3.6 per cent, compared to the first estimate of 2.8 per cent by the U.S. Commerce Department.
That’s the best showing in almost two years.
But much of that gain had to do with stockpiling, which accounted for almost 1.7 percentage points of that.
Last week, Statistics Canada reported that the economy expanded by 2.7 per cent, annualized, in the third quarter, but an inventory build-up was also a big factor there.
What the U.S. build-up could mean, our Washington correspondent Kevin Carmichael writes, is confidence among businesses in terms of future sales. Or it’s something that’s a one-off, which could indicate slower growth in the fourth quarter.
“But that inventory building isn't because sales were disappointing and firms were left with unsold product,” said chief U.S. economist Paul Ashworth of Capital Economics.
“The growth rate of business sales has picked up markedly as well, leaving the inventory-to-sales ratio unchanged,” he added.
“Furthermore, while inventories are likely to be a drag on fourth-quarter GDP growth, there were other signs for optimism in this latest report, in particular, personal income growth and the saving rate were revised higher.”
On the second day of Christmas my true love sent to me ...
It’s supposed to be two turtle doves, but in the world of central banking it’s easy to lose track these days.
Yesterday, the Bank of Canada turned more dovish. Today, Norway’s Norges Bank kicked off the action by leaving its key rate unchanged at 1.5, but pushed back its timeline for a rate hike to mid-2015, which is when everyone thinks the Bank of Canada will move, as well.
The Bank of England and the European Central Bank also held their policies steady, the ECB also trimming its projection for inflation to just 1.1 per cent.
- Economies 'still on life support' from central banks
- Anna Nicolaou in ROB Insight (for subscribers): Draghi has several options, and none of them are good
- Barrie McKenna and Marina Strauss: Bank of Canada cites stores' deep discounting for disinflation threat
- Is Bank of Canada trying to weaken Canadian dollar in a 'stealth easing'?
Britain projects better times
After years of tough slogging and harsh austerity measures that the Opposition blamed for deepening the downturn, Britain’s chancellor predicted today that the government will run a surplus by 2018, our European correspondent Eric Reguly reports.
Speaking in Parliament, George Osborne also revealed that the Office for Budget Responsibility now expects British growth of 1.4 per cent this year, up from the tepid 0.6 per cent in the last forecast, and a surprisingly strong 2.4 per cent in 2014, up from 1.8 per cent. Between then and 2017, growth is expected to range from 2.2 per cent to 2.7 per cent, slightly down from the previous forecasts.
The new growth figures will be robust enough to bring down unemployment. The jobless rate will fall to 7 per cent in 2015, the OBR says, two years earlier than previously forecast. The British jobless figure is now 7.6 per cent.
Streetwise (for subscribers)
ROB Insight (for subscribers)