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(David Higginbotham/NASA/MSFC)

Com Dev International

No. 362 on Top 1000

Almost every communications satellite in space has the company’s components on board

You can find the modest head office and flagship factory of one of Canada’s most sophisticated space technology companies on a narrow road on the outskirts of blue-collar Cambridge, Ontario. Down the street is a hot rod shop. Next door is a supplier of manicure chairs and pedicure benches for beauty salons. Across the road is a maker of dental surgery supplies. Like a lot of people who work in the neighbourhood, employees on Com Dev’s assembly floor wear hairnets. But they also have some of the most intriguing jobs in Canada.

“We’re in a sexy business-—it’s neat to be able to talk about the fact you’re building stuff that goes on spacecraft and gets launched,” says Mike Pley, CEO of Com Dev since 2010. He’s a big and avuncular engineer, with a quick smile and a ready pitch for his company. “We’ve been doing work on the James Webb Space Telescope,” he says, “and every communications satellite known to man seems to have Com Dev equipment on board.” More than 80% of what the industry calls buses—the hundreds of communications satellites that orbit the Earth—have components made by the company at one of its seven plants in Canada, the United States, the United Kingdom and India.

The long-delayed $8.8-billion (U.S.) Webb orbiting telescope—successor to the Hubble—is scheduled to be launched in 2018. NASA is leading a collaborative effort by 17 countries, and the Canadian Space Agency awarded Com Dev a $39-million contract in 2007 to build the telescope’s Fine Guidance Sensor (FGS) and Near-InfraRed Imager and Slitless Spectrograph. The FGS is basically two high-tech cameras that will help the telescope position itself. The spectrograph will analyze even the faintest light from very distant planets, stars and galaxies.

Com Dev delivered the FGS/NIRISS unit to NASA’s Goddard Space Flight Center in Greenbelt, Maryland, where the telescope is being assembled, in 2012. This past March, the company got another $2.6-million contract from Ottawa for follow-up work.

As snazzy as the Webb project is, it’s not typical of what Com Dev does. “Most space companies are more government-focused, with a commercial element to it,” says Pley. “We’re mostly commercial, with a little government.” As a result, Com Dev’s revenues have been remarkably consistent over the past decade: about $200 million a year. That’s much less volatile than revenue at many rivals, who’ve been squeezed as the U.S. Congress has forced the Obama administration to cut back on space spending.

Still, Com Dev is not running high-speed production lines. “We don’t make widgets,” says Nabeel Mirza, Com Dev’s director of lean systems and industrial engineering, as he shows me around the assembly floor in Cambridge. The company uses an approach known in the industry as engineered to order (ETO). The basic design of components and systems Com Dev makes is standardized, and so is the manufacturing process, but all of the assembly work is done by hand, and clients can customize their orders. Racks of parts, benches loaded with scopes, half-assembled switches and large vacuum chambers are spread across the floor. The company has never had an equipment failure in space.

Com Dev has also been adept at keeping up with changes in demand. Its traditional business has been large geosynchronous satellites, of which a few are launched each year; they hang in stationary orbit some 36,000 kilometres above the Earth and cost upwards of $100 million. All the buzz in the industry, however, is now about low-Earth-orbit satellites, for which Com Dev also supplies parts; scores of these cheaper satellites are assembled into “constellations” just a few hundred kilometres above Earth.

Pley calls this burgeoning market “new space”—a super-entrepreneurial commercial boom led by the likes of Elon Musk and Richard Branson. Both men have proposed networks of 700 to 4,000 micro-satellites that would provide worldwide broadband service. “We’re at an inflection point in the business, where there’s a huge opportunity for people who can make equipment,” says Pley.

In March, Branson’s outfit, OneWeb, said it was evaluating bids from five aerospace giants, including Airbus and Lockheed Martin, to build its system. It will announce the victor this summer. “I actually know who’s won the competition,” says Pley, with a big Cheshire cat grin. No matter who wins, Com Dev will be receiving orders. -Shane Dingman



Manulife Financial

No. 8 on Top 1000

The 128-year-old insurance giant now sells half of all its policies in Asia

In the 28 years that Roy Gori worked throughout Asia for the U.S. banking powerhouse Citigroup, he often heard the name Manulife. After all, the venerable Canadian insurer has a long and rich heritage along the Pacific Rim. Manulife opened offices in East Asia when many jurisdictions were still under colonial rule. It established operations in Shanghai in 1897, Hong Kong in 1898, and Japan and Singapore in 1899. When Manulife opened a small representative office in Myanmar last year, it marked the end of a 70-year absence from the country, which gained independence from the United Kingdom in 1948.

Yet Manulife doesn’t fit the mould of a swashbuckling giant in the hotly competitive global financial services market. Gori, a genial 46-year-old Australian, was Citi’s head of retail banking in the region before leaving to become CEO of Manulife Asia in March. But until he began negotiating to get his new job, “I didn’t really appreciate the magnitude of the business,” he says.

Most Canadians probably don’t either. Manulife—known to many at home as the folks who pay for your root canal—has roughly seven million customers across Asia. Last year, Asia accounted for about a third of the $2.9 billion Manulife classified as its core earnings. More than half of Manulife’s sales of insurance are now made in Asia, through a network of 57,000 agents of its own, and more than 100 sales partnerships with regional banks. In Hong Kong, roughly one in every five people is a customer. In Indonesia, a massive Manulife billboard looms down as you grind through the gridlock into Jakarta from the city’s international airport.

Manulife is confident that those earnings will keep expanding because Asia’s middle class is surging. From about 525 million people in 2009, the middle class has grown to an estimated 1.2 billion, and is forecast to hit 2.5 billion by 2025. Populations continue to grow, and incomes are rising. From Manila to Bangkok, millions of people are leaving subsistence farms in the country and crowding into megacities. There, they are determined to create better lives for their children.

In established wealth management and insurance markets like Japan, Hong Kong and Singapore, digital-savvy customers often arrive at meetings after doing their own research and shopping around online for other options. Beyond those markets, however, the whole idea of insurance is a bit of a new concept. “Many years back, the unstated rule—or, in many cases, it was a stated rule—was that the elderly would be taken care of by their family,” says Gori. “The idea of retirement planning was alien, or, frankly, quite offensive.” But he says that younger Asians have the confidence to re-evaluate cultural norms, and the wealth to save for their own retirement. “Now, you’ve got a more modern generation coming through,” he says. And Manulife will be there to tap that new and burgeoning market. -Iain Marlow



(Félix Ledru for The Globe and Mail)

Power Corp. of Canada

No. 28 on Top 1000

Paul Desmarais and Albert Frère built an empire in Europe—Buffett-style

Over more than 30 years of doing business together in Europe, Canada’s Desmarais family and the Frère clan of Belgium have built up an eclectic collection of blue-chip investments that includes a manufacturer of traditional clay roof tiles, the world’s biggest cement maker and a renowned distiller that began producing absinthe in 1805.

Paul Desmarais met Albert Frère in the late 1970s, after Desmarais’s Power Corp. of Canada bought a stake in Compagnie financier de Paribas, one of Paris’s oldest banks. Desmarais joined Frère on its board, and the two of them hit it off. Both were self-made men in their mid-50s, yet still considered outsiders by established financiers in Toronto and Paris.

Desmarais got his start in the 1950s by dropping out of law school to rescue his family’s troubled bus company in Sudbury. He then moved to Montreal and bought Power, a utility that had transformed itself into an investment company, in 1968. He used Power as a base to acquire newspapers, radio stations, and pulp and paper companies. He was also famously rebuffed by Bay Street old boys in 1975, when he tried to take over Argus Corp.

As for Frère, he dropped out of high school in Belgium at 17 to run his father’s nail and scrap-metal business. He built that into a steel conglomerate, then sold it to the Belgian government before a worldwide crisis hit the industry in the mid-1970s.

In 1981, Desmarais and Frère launched Parjointco, a Netherlands-based holding company, each of them owning half. The strategy was classic value investing—make large yet friendly investments in established European companies that looked like bargains, some because they were struggling.

Through two other European holding companies, Parjointco’s biggest investment is a 56.5% share of Imerys, a Paris-based multinational that mines and processes minerals, which are then used in a vast range of products, including paper, paint and the familiar red roof tiles still used by builders across Europe. It also owns 21% of Lafarge, the No. 1 global cement producer, and minority stakes in French oil giant Total and venerable spirits and winemaker Pernod Ricard.

Indeed, both Desmarais and Frère have often been compared with Warren Buffett. Like the Oracle of Omaha, Desmarais built up a hefty core of holdings in insurance, which generates plenty of cash, and has used it as a foundation for patient, long-term investing in other businesses. Great-West Life, which Desmarais bought in 1969, now also owns Investors Group, Canada Life, London Life, Irish Life and Boston-based Putnam Investments. In the 1970s, Desmarais was one of the first Canadians to begin doing business in China.

Desmarais and Frère stuck to a long-term strategy in Europe as well, and deftly avoided fads like the 1990s tech bubble. Both also became pillars of the financial establishment and gained access to politicians at the highest levels.

Desmarais died in 2013, nearly two decades after beginning the transfer of authority to his sons, Paul Jr. and André. Frère is 89, and he retired as chairman of Groupe Bruxelles Lambert, the principal publicly-traded Desmarais-Frère company, this past February. His son, Gérald, succeeded him. Paul Jr. is vice-chairman. In an interview at the time of Paul Desmarais’s death, Gérald said that the two fathers “wanted the partnership to outlast them, and it will.”

Lately, however, there has been a shift in strategy. The sons are hardly reckless, but they are starting to invest in smaller European growth companies and take large positions in them—up to 30%. New holdings include Umicore, a multinational metals and materials company that has a sizable tech component, and PrimeStone Capital, a London-based activist investment management firm.

The risk is that returns from the new businesses could be volatile, while the dividends from the blue chips may slow. “In my opinion, Groupe Bruxelles Lambert’s risk profile has increased,” says Hans D’Haese, financial analyst with Banque Degroof SA in Brussels.

Tech and investment banking stars often fade quickly. Roof tiles, liqueurs and cement endure. -Bertrand Marotte



(DND)

AirBoss of America

No. 323 on Top 1000

Soldiers fighting chemical and biological threats need sophisticated protective gear with a “look-cool factor”

It’s the Western world’s most extreme boot camp. Every year, NATO puts troops from selected countries through a set of absurdly difficult exercises to get them to pull together under pressure. This spring, near a small town in Latvia, forces from that country, Lithuania, Germany, Luxembourg, the United States and Canada joined up to deal with a set of staged perils, one of which was an enemy’s use of a weapon of mass destruction. In military argot, this gave rise to a CBRN situation—a chemical, biological, radiological or nuclear threat.

AirBoss of America, a rubber compounds and products manufacturer headquartered in Newmarket, Ontario, supplied many of the high-tech gas masks, protective gloves and over-boots used in this year’s session. The quirky company name dates back to 1994, when Iatco Industries, an Ontario manufacturer of the Australian-based AirBoss brand of heavy-duty tires for construction vehicles, changed its moniker. The company has grown by acquisition and now has two main business segments: rubber compounding and engineered products, including a wide variety of items, such as rubber auto parts that dampen vibration, and the military gear.

“Our products have been used in Syria by UN inspectors assessing whether sarin gas or chlorine was released,” says Earl Laurie, president of AirBoss’s defence division. “In Iraq, we’ve equipped soldiers getting rid of chemical agents. And the gear is worn by first responders—RCMP busting a suspected meth lab, or police forces [dealing with riots] where there might be toxic tire fires or tear gas.”

The division used to be a very different company: Acton Rubber, a boot manufacturer founded in 1928 and named for its hometown, Acton Vale, Quebec. “What Sorel is to the rest of Canada, Acton is and has always been to Quebec,” Laurie says. “When I joined in 1991, our military department was doing a couple of million in sales, mainly in Canada.”

Laurie asked the U.K. Ministry of Defence about becoming a supplier. “I was young and ignorant. It was pre-Internet, so I filled in the forms, and we got a newsletter every month telling us about their needs.” Thus informed, he pulled together a bid for chemical protective over-boots for the U.K. forces. To almost everyone’s surprise, Acton won it.

So began the shift from provincial boot maker to preferred supplier to armed forces around the world. AirBoss bought Acton in 1999 and sold its consumer footwear business five years later. Defence is the smallest of AirBoss’s product lines, but it has built up a global niche market. About 75% of the division’s $20 million in annual sales are made to U.S. military and law-enforcement clients. Canada accounts for about 10%, and the rest goes to Scandinavia, Germany, France, Australia, Asia and the Middle East.

Gwyn Winfield edits the U.K.-based CBRNe World—the little “e” in the trade publication’s name adds explosives to the already dangerous mix. “AirBoss first came on my radar in the late ’90s, early 2000s,” he says. “The AirBoss gloves are acknowledged to be the best CBRN gloves in the world. No one else comes close.”

Retired Canadian Forces warrant officer Dave Carson is one of many former soldiers Laurie has hired. “I’ve used the gear in life-and-death situations,” Carson says. Years ago, he was asked by the Swiss Army to test decontaminating agents that get rid of things like sarin gas. The trial was at an isolated site near Brno, Czech Republic. “The gas was enough to have killed a town of 30,000 people,” he recalls. Carson put on a protective suit and AirBoss gloves, boots and gas mask. “To make sure of the seal, we went into a tent full of tear gas. If our eyes watered and we started to choke, it’d show the mask wasn’t on right.” Then, he says, “We went out there for six hours, spraying a decontaminating agent on the gassed areas.”

Both the boots and gloves are ambidextrous. “It makes a difference in the field—you just grab them and throw them on. The gloves allow you to do delicate things-—you can even take your pulse in them,” says Carson. The mask has bulletproof lenses, an easy-to-use drinking system and a Lycra-and-nylon mesh bonnet with two adjustable straps. “It was a huge step forward, without the pressure points you had in old masks—after three hours, they caused you so much pain, you wanted to take them off no matter what would happen,” says Carson.

The company has a new mask that Laurie and Carson demonstrated at defence industry conferences this spring in Florida and Finland. Its gear looks sharp, too. “Militaries do buy-and-try orders, and they get feedback from soldiers,” Laurie says. “Function is paramount, but there is also what people call a look-cool factor.” -Alec Scott



Cott Corp.

No. 348 on Top 1000

The beverage company has invested in the hot new energy drink market, but it still faces familiar problems

When Cott Corp. snapped up British food-and-drinks manufacturer Aimia Foods last year, it was part of a push beyond Cott’s traditional—but sinking—soft drink business into fast-rising energy drinks. But the competition on British supermarket shelves is even fiercer than it is in North America, and Cott faces a now all-too-familiar challenge: The price gap between store brands that it produces and name brands such as Red Bull and Monster is narrowing.

Back in Cott’s heyday in the early 1990s, its revenues surged as a producer of private-label soft drinks such as President’s Choice for Loblaws and Sam’s American Choice for Wal-Mart. But Coke, Pepsi and other name brands fought back by cutting prices. Consumer tastes also shifted dramatically in the early 2000s—away from pop and into beverages such as bottled water and iced tea. By 2005, Cott’s sales had levelled off, and it started to lose money. Its share price on the TSX skidded from a peak of more than $40 in 2004 to $1 in late 2008.

The big blow came in January, 2009, when Cott announced that it was losing its 10-year-old contract as exclusive private-label pop supplier to Wal-Mart. The following month, the company promoted Jerry Fowden, a veteran turnaround specialist who had joined Cott in 2007 as head of its U.K. business, to CEO. Since then, Fowden, 58, has been trying to diversify so that Cott no longer depends so heavily on carbonated soft drinks as a product, or on one chain as a customer. The company still has its registered head office in Pointe-Claire, Quebec, and an executive office in Mississauga. Being Canadian gives it tax advantages, but the company has actually been run from another executive office in Tampa for years. The United States is Cott’s largest market by far, but it now sells beverage concentrates in more than 50 countries, and 20% of its revenues come from outside of North America.

When Cott bought Aimia for $133 million (U.S.) in May, 2014, the British firm’s No Fear energy drink was one of the main attractions. Then came Cott’s blockbuster $1.3-billion (U.S.) purchase last November of Atlanta-based DSS Group Inc., which delivers water and coffee to U.S. homes and offices. “We have structured a transformative deal,” Fowden declared in a conference call with analysts at the time.

Shareholders had mixed reactions. New York City-based hedge fund Levin Capital Strategies is Cott’s largest shareholder, with a 15.6% stake reported in a U.S. securities filing in February. Jack Murphy, a portfolio manager with Levin, remains bullish, but he says that Cott is mainly a contrarian value play—although its share price has climbed back to about $12 lately, that is still well below historical highs. Cott has also generated strong operating cash flow in recent years. “We love companies that throw off lots of cash,” he says.

The trouble is that Fowden has borrowed heavily to finance his diversification. He almost quadrupled Cott’s long-term debt in 2014 to $1.6 billion (U.S.). When Cott’s stock price popped this past February after it announced some strong quarterly financial results, Kamran Khan, portfolio manager at Toronto-based Norrep Capital Management, decided to get out and sold his firm’s shares.

As Cott keeps expanding beyond soft drinks, it will bump up against new competitors, such as behemoth Nestlé SA’s water delivery service. In Britain, supermarket chains will be pressing for lower prices as they try to fend off invasions from European discounters such as Germany’s Aldi and Lidl. It leaves Cott with little wiggle room. -Marina Strauss



(Stéphanie Borcard and Nicolas Métraux for The Globe and Mail)

Celestica Inc.

No. 131 on Top 1000

After the downfall of BlackBerry, its biggest customer, the electronics maker is reinventing itself

When executives from the European aerospace giant Airbus SAS landed in Malaysia a few years ago and toured a plant that belongs to Celestica Inc., Craig Muhlhauser, the CEO of the Toronto-based global electronics manufacturer, was pleased to hear about the mild consternation that came out of the visit.

The Airbus brass realized that many of their traditional Tier 1 suppliers of sophisticated equipment—U.S. heavyweights such as Honeywell and United Technologies—weren’t matching the Malaysian factory on quality. “Celestica turns Airbus’s suppliers into better suppliers,” one Airbus executive told the plant’s managers.

That is high praise at the right time for a firm trying to recharge itself and focus on more profitable businesses after years of having the margins sucked out of its core product areas by lower-cost Asian-based rivals. “We have to reinvent ourselves and move up the value chain,” Muhlhauser says.

Formerly a manufacturing division of IBM, Celestica was spun off in 1996 and grew quickly by acquisitions during the tech bubble—eight during 1998 alone. But by the mid 2000s, Celestica’s revenues had stagnated and its profits had evaporated. That’s dangerous in an industry as fast-changing as electronics manufacturing, in which many supply contracts are huge, but also precarious.

Celestica got a boost when Research In Motion chose the firm to build BlackBerrys. But in 2012, the renamed BlackBerry Inc. was being clobbered by Apple and Samsung, and it cancelled Celestica’s contract. For years, it had accounted for about one-fifth of Celestica revenues.

To Muhlhauser, who had been appointed president of Celestica in 2005, and CEO in 2006, the contract was a bit like a drug: It felt good to be along for the ride, but perhaps it was not in the company’s long-term interest. Celestica built millions of BlackBerrys fast and efficiently, but profit margins in phone manufacturing had all but disappeared. The contract also distracted Celestica from pursuing higher-margin business lines. “It made us, and created us,” says Muhlhauser. “[But] we got complacent.”

Executives began to target companies that were outsourcing the manufacturing of more sophisticated systems, such as aerospace and defence contractors. Health care technology also looked promising. Like computer and phone manufacturers before them, these industries were shifting production to Asia to take advantage of lower costs.

Celestica already had facilities in China, Thailand, Japan, Malaysia and Singapore. Cost is still a major factor. This July, Celestica is scheduled to open a new factory in Laos, one of the continent’s lowest-cost countries.

But Celestica is also doing more so-called joint design manufacturing (JDM), in which it is a collaborative partner in creating electronic systems. Many of its Asian facilities are quite capable of taking on those higher-level assignments. In Shanghai, Celestica now has a 300-member design team that works on complex projects such as cloud servers for corporations.

Systems integration also looks promising. As the production of more elaborate systems is outsourced, an exacting company such as Honeywell or Cisco may not want to deal with, say, a half-dozen smaller suppliers building components. Celestica can act as a middleman—co-ordinating those suppliers and maintaining quality control.

Canaccord Genuity analyst Robert Young says that managing other companies’ supply chains will help Celestica establish “stickier” relationships with customers. The trouble is that lots of other electronics manufacturers have the same idea. In particular, Young says that Celestica has “faltered in health care.” It’s a lucrative sector in which U.S. rival Jabil Circuit is strong.

Over all, though, the trend at Celestica is encouraging. When the company lost the BlackBerry contract, the proportion of its revenues that came from the higher-margin “diversified” segment of its business was 19%. Now, it’s about 30%, and Muhlhauser wants to boost that to 50%. He’s also hoping to stay ahead of low-cost rivals such as Taiwan-based Foxconn. It makes BlackBerrys, iPhones and other popular consumer devices, but it is chasing high-margin businesses as well.

Muhlhauser knows that he has to offer more than low prices. “If it’s purely a cost game,” he says, “it’s what my wife says: You get what you pay for.” -Iain Marlow



(Smita Sharma for The Globe and Mail)

Stantec Inc.

No. 103 on Top 1000

The Edmonton-based firm is on an ambitious drive to expand by acquisition—swallowing 75 companies since 2000

If cricket is truly the biggest religion in India, its place of worship is Eden Gardens. The 66,000-seat stadium in Kolkata has a long, rich history. Established in 1864, it has been the site of some of India’s greatest cricket triumphs, including an astonishing come-from-behind victory over Australia in 2001. It has also seen several shameful riots, the worst being when fans pelted the field with debris and set fires during a 1996 Cricket World Cup semi-final, prompting officials to award the match to Sri Lanka.

So when the Cricket Association of Bengal called for bids in 2009 to redevelop and upgrade Eden Gardens for the 2011 World Cup, it was a prime opportunity for any international engineering and design firm to add a marquee project in India. The winner of the design contract was Burt Hill, Pittsburgh’s largest architectural firm, which had 14 offices worldwide. In 2010, Burt Hill was bought by an even more ambitious Canadian firm, Edmonton-based Stantec, which was—and still is—on an drive to expand by acquisition.

Since 2000, Stantec has bought more than 75 engineering, design and environmental firms, all of them in North America. Stantec doesn’t seek out firms with international offices and projects when it buys, but it takes on those that come with its North American deals. In addition to about 250 offices across Canada and the United States, the firm now has four in the Middle East, two in the Caribbean and one apiece in Barbados, the U.K. and India.

For the most part, Stantec’s overseas projects have been prestigious and profitable. Only about 4% of its $2 billion in revenues in 2014 came from outside North America, but that’s double the 2% portion in 2009. “We are generally doing more specialized or higher-skilled types of projects,” says Carl Clayton, Stantec’s executive vice-president, international. “We can compete at world-class levels, and clients see that and are happy to hire us.” The margins are also higher than those on more basic civil engineering contracts, where there’s often a lot of local competition.

The Eden Gardens makeover, however, was far from a success at the start. The goals were to replace concrete seating with plastic chairs, and reduce the stadium’s capacity from 90,000 to make room for restaurants, shops and more corporate boxes. But work was so far behind schedule in February, 2011, that the opening World Cup match between India and England was moved to Bangalore. However, three matches were played in the incomplete Eden Gardens in March.

Stantec was responsible for design, but not construction, so it couldn’t prevent the delay. About half of the stadium's old seating was replaced in the first phase of renovations. The next phases will upgrade the rest.

For Stantec’s staff in India, the assignment is another high-profile opportunity to showcase their abilities. Eden Gardens is home to Indian Premier League’s Kolkata Knight Riders, owned by Bollywood star Shah Rukh Khan. “There are few things that tie all of the states throughout India as one nation,” says Jayesh Hariyani, a senior principal at Stantec’s office in the city of Ahmedabad. “Cricket is one, the other is Bollywood movies.” -Brenda Bouw



Magna International

No. 17 on Top 1000

The company’s workforce in Mexico is surging, along with the country’s auto industry

The school bus that pulls into the Magna Assembly Systems plant in Hermosillo, in northwest Mexico, several times a day brings in many men and women from nearby farming communities. Factory work has its advantages, including steady pay, a free cantina and air conditioning (it’s more than 40 C outside in June). They change into uniforms—khaki pants and navy polo shirts—and start eight-hour shifts in an industry that has transformed the country into a manufacturing powerhouse. “You would not know you’re in Mexico,” says Scott Paradise, Magna International Inc.’s vice-president of marketing and new business development for the Americas. “You could be in Brampton, Ontario, or Akron, Ohio. You really wouldn’t know the difference.”

Well, not exactly. The sprawling 170,000-square-foot factory has a few agave plants in the front walkway, and the cantina serves up Mexican dishes such as arrachera, carne asada and pescado empapelado. On the shop floor, more than 500 employees work in three shifts, six days a week, supplying injection-moulded plastic parts for the front-end modules of Ford Fusions and Lincoln MKZs. There is a constant hum as state-of-the-art machinery pushes heated plastic into moulds. Each day, 30 trucks arrive, delivering parts and resin, while 68 trucks depart for the local Ford plant, where about 300,000 Fusions are assembled each year.

Magna is based in Aurora, Ontario, but has more than 300 factories in 26 countries in North and South America, Europe and Asia; about 85% of the company’s workforce of 130,000 is now employed outside Canada. The company makes parts for virtually every major car manufacturer—turn signals in the outside mirrors on the BMW i8, seamless sliding windows on the new Ford F-150 and thermoplastic liftgates for the Nissan Rogue.

Magna opened its first Mexican factory in Puebla, 100 kilometres southeast of Mexico City, in 1991, to make bumpers and radiator supports for Volkswagens. It now has 30 factories in the country. Virtually all the major automakers have also built or upgraded plants in Mexico since then. Cheap labour was—and still is—an attraction, for sure. Mexican assembly-line workers earn about one-fifth the typical wage of a U.S. worker. As well, Mexico has free trade agreements with much of the world, making it an ideal platform for global auto exports.

The country is now the world’s seventh-largest automaker—far ahead of 10th-ranked Canada—and as its auto industry matures, locals are landing high-level jobs, too. Most of the top executives at Magna’s Hermosillo plant are Mexicans. The company also runs tool-and-die apprenticeship programs—they are cost-effective and show a commitment to the country. “That is quite helpful,” says Paradise, “when we’re talking to the state, federal or local governments, looking for financial support.”

Further expansion in Mexico and other overseas markets is quite likely as manufacturers rely more on Magna for increasingly sophisticated roles, including research and development. The auto-makers “want everybody to be global,” said Magna CEO Don Walker in a conference call with analysts in May. “The suppliers are being asked to get involved much earlier in vehicle programs to develop the new technology and to help define the vehicle.”

The Magna name is still largely under the hood. But the company’s international reach is getting bigger. -David Berman



Brookfield Asset Management

No. 9 on Top 1000

One hundred and sixteen years after entering Brazil, the infrastructure giant is still adding to its holdings

Ben Vaughan takes out a printout of a map of Brazil and traces a line along a 320-kilometre stretch of the BR101 highway running north from Rio de Janeiro to the state of Espírito Santo. He’s demonstrating how Brookfield Asset Management identifies opportunities and controls risks in South America, despite its history of political and economic upheaval.

The company invested in nine toll-road segments in Brazil in 2012, and boosted its stake in them the following year. The stretch of BR101 is “a critical transportation corridor that links Rio with important industrial regions and ports in the north,” Vaughan says. “It has a good mix of commuter traffic and trucking.”

Vaughan, who is a senior managing partner and Brookfield’s chief investment officer for South America, likes toll roads for the same reasons that he and Brookfield like electrical power plants and other utilities. They’re capital-intensive and barriers to entry are high—chances of a competitor setting up shop next door are slim. Rates and tolls tend to be stable, and cash flows grow faster than GDP.

South American infrastructure also fits in with two of Brookfield’s fundamental investing principles: Take the long-term view, and be contrarian. Vaughan says that foreign and domestic investors often get overly excited or pessimistic about Brazil, where Brookfield can trace its lineage, via the Brascan and Edper conglomerates, back to the founding of São Paulo Tramway, Light and Power by Canadian investors in 1899. “The realities on the ground are often different than the sentiment,” remarks Vaughan, who lived in Brazil from 2012 to 2014. Looking at the past 20 years, he says there has been “a steady progression forward and the development of a middle class.” On the other hand, pessimism can help create investing bargains.

Since hard-driving CEO Bruce Flatt took charge in 2002, Brookfield has focused its efforts on four strengths: real estate, hydroelectric power, infrastructure and private equity.

Over the past decade, Brookfield has expanded its assets under management tenfold, to more than $200 billion. Its stable of more than 250 office properties around the world wins a lot of publicity, but Brookfield has also more than doubled its holdings in South America over the past seven years. It now owns and operates $20-billion worth of assets in Brazil, Chile and Colombia, including offices and shopping malls, hydroelectric plants, wind farms, toll roads, ports, farmland and timberland. -John Daly



Saputo Inc.

No. 45 on Top 1000

A Montreal dairy dynasty is positioning itself to satisfy Asia’s growing appetite for cheese

You can understand why a successful Canadian business would choose the giant U.S. market for its first push outside the country, but why did giant Montreal dairy processor Saputo Inc. then leap to Argentina and Australia?

CEO Lino Saputo Jr. says makers of cheese and other dairy products have to “follow the milk.” There are only a handful of countries around the world with mature, low-cost dairy farming regions, including North America, South America (Brazil and Argentina), Oceania (Australia and New Zealand) and several countries in Europe.

But to sell globally, you also want those regions to serve as platforms for exports, especially to fast-growing new markets. That’s why the company bought Argentina’s third-largest dairy, which exported to more than 30 countries, in 2003.

Even then, Saputo also had its eye on Australia. In January, 2014, the company won a politically charged bidding war and spent $450 million to take over the country’s oldest dairy, Warrnambool Cheese & Butter. The goal is to use it to boost sales in China, Korea and Japan. But what about the stereotype that consumers in those countries don’t drink milk and eat cheese? “That’s a myth,” says Saputo. “This next generation is going to be consuming more and more dairy products.”

Indeed, pizza is quite literally the new Chinese food. Annual sales in the country more than doubled to $2 billion (U.S.) between 2007 and 2012, and Pizza Hut is the biggest Western family restaurant chain, with 1,300 outlets.

Lino Jr., 49, is the third Saputo to run the family business, founded by his grandfather, Giuseppe, a cheese-maker from Sicily, in 1954. In a time-honoured tradition of any family-executive-in-waiting, Lino Jr. worked at various jobs that each gave him increasing responsibility—in a cheese plant when he was 13; driving delivery trucks in university; as administrative assistant for his dad, Lino Sr.; as a manager of a plant in Cookstown, Ontario; and, finally, as vice-president of operations in 1993.

Still, Saputo says he was no shoo-in as the new CEO in 2004. The company had gone public in 1997, and the family got 58% of the shares (that has since declined to about 34% as the company has grown). Those shares have just one vote apiece—the Saputos wanted to ensure an orderly succession in management and avoid the controversies over multiple-voting shares that have plagued other Canadian dynasties. “The HR committee selected me as CEO not because my name was Saputo, but because I understood the business very well,” he says.

Saputo, however, had his headaches after assuming the top job. The company had entered the United States in the 1980s. Unlike Canada, there is no supply-management system there to control prices for dairy farmers. U.S. milk and cheese prices were volatile in 2005 and 2006. He also bought two small cheese plants in Germany and the United Kingdom, but then realized that the European market was too mature and tough, and eventually shut them down in

2013. Vachon snack cakes, which Saputo had bought in 1999, also continued to disappoint. The company sold it to Mexico’s Grupo Bimbo last December for $114.3 million.

Over all, though, the company has grown impressively in Saputo’s decade as CEO. Revenue has tripled to $10.7 billion for the 2015 fiscal year ended March 31, and profits tripled, too. That puts Saputo among the top 10 global producers, and it now sells in more than 40 countries, although about half of those sales are in the U.S. and 36% in Canada.

In many ways, Canada is the most problematic market—the only one that maintains strict supply management. That keeps milk prices high. Saputo says the company pays about $70 a hectolitre here, compared with about $35 to $40 in the U.S.

Australia deregulated its dairy sector in the early 2000s. Saputo thinks the proposed Trans-Pacific Partnership trade deal between Canada and 11 other Pacific Rim countries could prompt Ottawa to do that, too. “The opening up of borders would be fa-vourable, because we are an international player,” he says.

And as he contemplates prospects in Asia, Saputo has yet to reach hundreds of millions of potential new customers. -John Daly

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