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Ireland's Prime Minister Enda Kenny addresses a news conference at the end of an European Union leaders summit in Brussels June 24, 2011. (Stinger/Reuters/Stinger/Reuters)
Ireland's Prime Minister Enda Kenny addresses a news conference at the end of an European Union leaders summit in Brussels June 24, 2011. (Stinger/Reuters/Stinger/Reuters)

Top Business Stories

A deeply troubled Ireland raises risk with referendum Add to ...

These are stories Report on Business is following Tuesday, Feb. 28, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Ireland calls referendum Ireland added yet another threat to the embattled euro zone today, calling a referendum on the fiscal pact struck late last year among members of the European Union.

That's not to suggest Prime Minister Enda Kenny was wrong to put such a key issue to the test - I think it's the right move - only that there's more uncertainty now in a region where troubles appear endless. In fact, a recent poll showed a vast majority of Irish want a referendum, according to Bloomberg News.

The Irish have said no to certain treaty changes before, at least on the first pass, and there are concerns they could do so again this time out.

And this one's different from the earlier threat of a referendum in Greece, which was called off after the prime minister of the day got what he wanted. The Irish vote was at the recommendation of the attorney general.

"There is a high possibility the Irish could vote no," warned CMC Markets analyst Michael Hewson.

"If this happens then Irish could lose access to bailout funds," he told me.

"It seems the referendum could be used as a negotiating ploy to get more concessions in terms of lower interest rates, in which case you could find that there could be more than one referendum. Ireland votes No, gets concessions and then has another one and votes yes. That's what happened when they first joined the euro. It certainly adds a new element of uncertainty to the European equation."

Megan Greene, head of European economics at Roubini Global Economics, said she expects the vote to pass, but that depends on the wording. And, she warned, public support will not come easy. And, she warned, should Ireland go the way of Greece and need a further bailout, it would risk a "hard default" if the referendum fails.

"I have real concerns about the Irish economy over the next few years given its reliance on exports and the poor economic performance I expect for ireland's main export markets (U.S., U.K., euro zone) in 2012-13," Ms. Greene added. "Furthermore we haven't seen mortgage defaults yet, but we will, and Irish banks may need additional recapitalization. I expect Ireland will stagnate at best in 2012-13, and consequently do not think Ireland will be able to return to the markets in 2014."

SNC cuts outlook, probes payments Canada's SNC-Lavalin Group Inc. has slashed its forecast for 2011 profits, a move related to events in Libya and what the company says were questionable payments in the fourth quarter.

Those payments are the subject of an independent probe, the Montreal-based company said before markets opened today. When trading did begin, the stock plunged.

The engineering and construction giant said today it expects profit for the year to be about 18 per cent, or $80-million, below its earlier forecast.

SNC also delayed the release of its quarterly earnings, due Friday, until March 30. The company has been reeling from a series of allegations relating to its work in Libya its close ties to the family of Moammar Gadhafi, The Globe and Mail's Paul Waldie reports.

SNC disclosed about $35-million "relating to certain payments made in the fourth quarter of 2011 that were documented to construction projects to which they did not relate and, consequently, had to be recorded as expenses." It did not specify where those payments were made.

It also cited a loss of $23-million related to its Libyan projects.

"The company’s board of directors initiated an independent investigation, led by its audit committee, of the facts and circumstances surrounding the $35-million of payments referred to above and certain other contracts," SNC said in a statwement.

"Independent legal counsel were retained in this connection. The investigation’s current findings support the company’s accounting treatment of these payments. The board of directors is taking steps to implement changes and further appropriate actions arising from the investigation.

"The company is working with its external auditors and legal advisors to resolve all issues relating to the investigation to permit the auditors to deliver their audit report on a timely basis. The company is working towards announcing and filing its 2011 fourth quarter and year-end financial results as soon as reasonably possible and in any event prior to March 30, 2012."

Analyst Neil Linsdell of Versant Partners in Montreal cut his recommendation on SNC shares to “neutral” from “buy,” warning that investors will probably “shy away” from the stock given the latest developments come amid other concerns.

“Allegations of involvement with Saadi Gadhafi and other items have tarnished SNC’s image,” Mr. Linsdell said in a research note. “Investors will likely wait for reports on investigations before warming up to the stock.”

Apple plans iPad 3? The folks at Apple Inc. are such teases.

The technology giant sent out media invitations today inviting reporters to San Francisco a week from tomorrow for something "you really need to see. And touch."

It came with a partial image of an iPad, sparking speculation that Apple plans to unveil the third generation of its wildly popular tablet computer.

The Wall Street Journal says the upgrade is likely to have a screen with a sharper resolution, and support 4G wireless networks.

Denison leaving CPPIB The man who spearheaded more active investing at the Canada Pension Plan Investment Board is retiring at the end of June.

David Denison will be replaced by Mark Wiseman, the current chief of investments, The Globe and Mail's Tara Perkins reports.

Mr. Denison, who was born in Newfoundland and raised in Montreal, has had a lengthy career in financial services, working at firms such as Merrill Lynch, Midland Walwyn and Mercer Consulting. Before joining CPPIB he was president of Fidelity Investments Canada.

BMO profit climbs Bank of Montreal kicked off first-quarter earnings season among Canada's major banks with stronger-than-expected results today.

Profit climbed 34 per cent to $1.11-billion or $1.63 a share from $825-million or $1.34 a year earlier, The Globe and Mail's Grant Robertson reports.

Revenue rose 18.7 per cent to $4.12-billion.

Lower credit losses and the integration of Marshall & Isley Corp in the United States offset results in the Canadian retail and capital markets businesses.

"Overall, we believe that the recovery that is underway in the United States will lead to gradually more favourable economic and market conditions throughout North America," said chief executive officer Bill Downe. "Our businesses, customers and shareholders all stand to benefit from this."

Maple Leaf Foods profit slips A "challenging" fourth quarter capped what was otherwise a decent year for Canada's Maple Leaf Foods Inc. , the company said today, adding it's on track to meet its targets through 2015 and is passing on its higher costs.

Profit slipped to $9.2-million or 6 cents a share in the quarter, down from $30.6-million or 21 cents a year earlier. The latest quarter included a hit from restructuring.

Sales rose 3 per cent to $1.25-billion.

"We are very pleased with our results for the year and we remain on track to deliver our earnings and margin growth for 2012 through 2015," said chief executive officer Michael McCain.

"We realized strong earnings growth for the year in our protein operations, which contributed to a 40-per-cent rise in our adjusted earnings per share," he said in a statement.

"However, we experienced a challenging fourth quarter as a result of unseasonably strong raw material costs which impacted continued margin growth in prepared meats. We also experienced short-term higher operating costs in our bakery business. These factors, combined with lower pork and poultry processing margins from year ago highs, contributed to lower relative performance in the fourth quarter. We are now actively passing through pricing to help mitigate these challenges and we remain committed to executing our value creation initiatives."

Oil prices threaten recovery High energy prices are threatening the economy at a crucial point in the global recovery.

Analysts may be divided over the severity of the threat, but they're watching prices closely and rejigging their forecasts.

The price of oil dipped today, easing some fears, but they're up sharply this year amid the tensions related to Iran and other regions in the Middle East, threatening to dampen the U.S. recovery just as it's finding its feet.

Reuters today reported that more than 1 million barrels a day, or 1.1 per cent of demand, are believed to be offline.

"Energy price inflation is complicating the outlook for global growth," says National Bank of Canada's chief economist Stéfane Marion.

"Our forecast calling for 3.5-per-cent global GDP growth in 2012 was based on crude oil averaging around $90/barrel for the WTI," Mr. Marion said in a report, referring to the U.S. benchmark.

"While it remains to be seen how much longer the tension in the Middle East will endure, the current price of gasoline is beyond our comfort zone."

Pump prices in the United States have climbed by 13 per cent since the beginning of the year, Mr. Marion said, equating the increase to an estimated loss of buying power of more than $40-billion (U.S.) on an annualized basis.

"The situation is certainly not better in the euro zone where the price of Brent expressed in euros surged to an all-time record high in February."

Julian Jessop of Capital Economics in London, however, isn't as grim in his outlook. The increase in oil prices since the fall, he said, reflects more optimism over the outlook for the global economy and thus is "relatively benign."

"But the increasing Iran premium is an additional headwind that Europe in particular could do without," he warned.

Mr. Jessop expects prices to fall sharply this year because weaker demand will more than compensate for the angst over Iran, which he also expects to ease.

That's not to suggest that prices aren't "heading back into the danger zone," but they aren't there yet, he said, pegging the premium related to Iran at still below $10 a barrel.

"What's more, the world economy seems able to grow at a decent pace even with oil prices at much higher levels than had been imagined a few years ago (when thresholds as low as $40 per barrel were seen as the breaking point)," he said. "The rate of change in oil prices appears to be more important than the level, but the recent increase is still well short of the doubling within a year or so that has previously been associated with a drop back into recession."

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