These are stories Report on Business is following Friday, Jan. 17, 2014.
Who could win and lose
National Bank Financial has released an exhaustive study projecting the “big” and “moderate” winners in an era of a low Canadian dollar. And where there are winners, there must be losers.
The loonie, as Canada’s dollar coin is known, is now down in the area of 91.5 cents U.S., having lost almost 7 per cent last year and 3 per cent more in a very young 2014.
Most observers believe the currency is going lower still, with Goldman Sachs Group Inc. calling for an 88-cent loonie and others in the 90-cent to 93-cent range.
National Bank believes the currency will sit at about 90 cents by the end of this first quarter and will average 93 cents through the year, in the end marking the fastest two-year erosion since 1999.
“We view this development as a net positive for the economy and for S&P/TSX earnings,” the bank’s analysts said.
Others see it as an overall win, as well, because of the impact on exporters that can sell their goods cheaper in the United States, and because it should help the tourism sector and some retailers trying to keep Canadian shoppers from crossing the border.
But it also raises the price of imports, which hits shoppers, as well.
Here’s a snapshot of the National Bank report:
Analyst Robert Winslow on the agriculture and infrastructure sectors: The big winner could be Ag Growth International Inc., the bulk of whose costs are in Canadian funds but most sales in U.S. dollars. Moderate winners include Agrium Inc., Potash Corp. and Vicwest Inc., for similar reasons. There should be no impact on several, including SNC-Lavalin Group Inc.
Analyst Greg Colman believes there will be no big winners in energy services, though moderate winners include Canadian Energy Services and Xtreme Drilling, among others. No losers mentioned. Oil and gas producers should generally benefit: “Given that the underlying commodities are US$-denominated, a depreciating Cdn$ results in higher realized prices/revenue for Canadian oil and gas producers, while the majority of costs are Cdn$-denominated.” But many big producers have U.S.-denominated debt, meaning higher interest costs. Companies that hedge some of production in Canadian funds might not win as much.
Patrick Kenny finds no big winners in the pipelines, utilities and energy infrastructure sphere, but several moderate beneficiaries, including Canexus Corp., Veresen Inc., Gibson Energy Inc., Enbridge Inc. and Emera Inc. Brookfield Renewable Energy Partners is seen as a moderate loser.
Similarly, Shubha Rahman Khan sees no big winners in the financials group, though moderate winners include Element Financial Corp., CI Financial Corp., AGF Management Ltd., Fiera Capital Corp. and IGM Financial Inc. TMX Group Inc. is deemed to be a loser.
In financial services, Peter Routledge projects Manulife Financial Corp. And Great-West Lifeco Inc. could be big winners, with Sun Life Financial Inc., Bank of Nova Scotia, Toronto-Dominion Bank, Bank of Montreal and Royal Bank of Canada in the moderate category. No losers, but no real impact on Canadian Imperial Bank of Commerce, National Bank of Canada and Industrial Alliance.
In the consumer products group, Gildan Activewear is found by Vishal Shreedhar to be a big winner, followed by moderate beneficiaries Saputo Inc. and Alimentation Couche-Tard Inc. No “significant” losers, but several that should see no big impact, including Canadian Tire, Loblaw and Shoppers Drug Mart.
Adam Shine doesn’t see in the way of an impact in the media and telecommunications group, though Thomson Reuters Corp. should see a “modest positive” effect.
There are moderate winners in real estate, say Trevor Johnson and Matt Kornack, including American Hotel Income Properties, Artis REIT, HealthLease Properties REIT, H&R REIT and Milestone Apartments REIT.
The winners in the mining industry include Agnico-Eagle Mines Ltd., Detour Gold Corp., Lake Shore Gold Corp., Taseko Mines Ltd. and Copper Mountain Mining Corp., with moderate winners including New Gold Inc., Yamana Gold Inc. and HudBay Minerals Inc., according to Steve Parsons, Ray Ray and Shane Nagle.
In the tech sphere, analyst Kris Thompson pegs Avigilon Corp. as the big winner, with Axia NetMedia Corp., CGI Group Inc., Computer Modelling Group Ltd., Constellation Software Inc. CounterPath Corp., EXFO Inc., GuestLogix Inc., Mediagrif Interactive Technologies Inc., Open Text Corp. and Sandvine Inc. as moderates.
Cameron Doerksen finds both winners and losers in transportation and industrial products. The biggies include Bombardier Inc., CAE Inc. and Héroux-Devtek Inc., with BRP Inc., Manac Inc., TransForce Inc. and railways CN and CP the moderates. Some losers here, including Air Canada, WestJet Airlines Ltd. and Transat A.T. Inc. because of significant costs in U.S. dollars.
- Barrie McKenna and Tavia Grant: Why a lower loonie is (mostly) good for Canada
- The flip side of the Canadian dollar: Frail loonie 'makes us all a bit poorer'
- The sick Canadian dollar: Who wins (exporters, hockey players) and who wins big
Royal Dutch Shell PLC sent a shot across the bow of the oil industry today, saying it expects weaker profits and issuing a warning on the general environment in the sector.
Fourth-quarter profit, the energy giant said, “are expected to be significantly lower than recent levels of profitability, considering current oil and gas prices and the downstream oil products industry environment.”
Shell said it expects to report Jan. 30 that profit was about $2.2-billion (U.S.).
“Shell’s profit warning is a confirmation of the impact of the downward trend in oil prices we’ve seen,” analyst Carsten Fritsch of Commerzbank told Reuters. “In particular, the refined product markets in Europe have been very weak.”
Shell wasn't alone today. UPS also unveiled a lower forecast for fourth-quarter results, citing higher costs and poor weather.
The courier now expects fourth quarter profit of $1.25 (U.S.) a share, and annual results of adjusted earnings per share of $4.57, below its earlier call for $4.65 to $4.85.
It added in a statement, however, that it still expects 2014 profit to climb "in line with its long-term targets" of 10 per cent to 15 per cent, compared to last year.
"U.S. results were negatively impacted by the challenges of the compressed peak season coupled with an unprecedented level of online shopping that included a surge of last-minute orders," it added.
Bombardier in new deal
Bombardier Inc. and its consortium partners have won a $4.1-billion (U.S.) contract for a suburban passenger rail network in Queensland in Australia, The Globe and Mail's Bertrand Marotte reports.
Bombardier’s share of the contract is valued at about $2.7-billion.
The Montreal-based company will supply 75 electrical six-car trains, a new depot and provide maintenance for 30 years.
Sign of an effective manager: Convincing your kidnapper to let you go
Manolis Karamolegos must be one heck of a persuasive businessman.
The well-known owner Karamolegos Bakery, an Athens-listed company that is one of Greece’s biggest such concerns, was abducted late Tuesday by kidnappers who reportedly demanded a ransom of €3-million.
The 55-year-old businessman, who inherited the company, was abducted by three men, according to Greek news reports.
Authorities tracked one of the three via the phone he was using. Which may not have been too bright to begin with, but consider, too, that these kidnappers reportedly were holding Mr. Karamolegos near the offices of the Greek National Intelligence Service, who traced the calls.
Here’s the part that speaks to his management skills, though: Mr. Karamolegos convinced one of the men to set him free, and the two of them went to a nearby police station, along with the abductor’s Makarov pistol and hand grenade. The executive reportedly advised his captor that the outcome would be better that way.
- Greek Reporter: Businessman freed after his abduction alerted Greek police
- EnetEnglish: Kidnapped businessman Manolis Karamolegos freed
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