Skip to main content
business briefing

These are stories Report on Business is following Friday, Dec., 6, 2013.

Follow Michael Babad and The Globe's Business Briefing on Twitter.

Sacred dividend
The dispute between the province of Saskatchewan and Potash Corp. is a case study in the relationship between a government and a region's corporate powerhouse.

To recap, Potash Corp. announced plans this week to slash 18 per cent of its work force, a move that will cost 440 jobs as the agriculture giant cuts costs and curtails some production.

The company's statement contained all the usual language in such announcements, about how difficult the decision was, the harsh impact on the communities and how it's working hard to help people through the painful, challenging times.

What really got Premier Brad Wall's goat, and prompted him to write to Potash chairman Dallas Howe, was chief executive officer Bill Doyle's comment that the company's dividend is sacrosanct.

"I understand that PotashCorp's board of directors and CEO need to look after the best interests of your shareholders," the premier wrote.

"So do I. My shareholders are the people of Saskatchewan, who also happen to own the potash resource."

According to the premier, Mr. Doyle phoned him later in the day to "state his regret" over what he'd said, though what would be done remained unclear.

Mr. Wall then asked the company to "revisit" its dividend in hopes of scaling back the number of layoffs.

The premier, remember, helped shelter Potash, mounting a spirited defence against a hostile takeover attempt by BHP Billiton Ltd. several years ago.

In a response to the premier late yesterday, the Potash chairman put up his own spirited defence, saying the board takes Mr. Wall's plea seriously, but that it doesn't work that way.

"The numbers of employees who will be impacted is not connected in any way to the amount of the company's dividend," said the chairman.

"If we reduced our dividend to zero, we still need to right-size our operations in order to protect the long-term sustainability of our company – and all of the remaining jobs."

Mr. Howe ran through the troubles of the industry, and his company in particular, citing the fact that a work force of just 1,600 churned out more than 8 million tonnes of potash in Saskatchewan in 2007. In 2012 and 2013, Mr. Howe said, that production is nearer 7 million tonnes a year, but with a work force of 2,600 built up on expectations of stronger demand.

"In terms of the dividend itself, let me clarify that we believe it is important to regularly return cash to investors in our company," the chairman said.

"Our shareholders provide us the capital to run and grow our business – enabling the benefits that flow to our employees, communities and other stakeholders. We believe our dividend is important in ensuring we optimize our cost of capital."

And, he noted, shareholders have "shared the burden" amid a plunge in the company's stock price of some 35 per cent from its 52-week high to the levels of today.

"These shareholders rely both on the value of the shares and on the stability of our dividend," he added.

"This depreciation in share value is a real and material sacrifice for them. Our shareholders clearly have shared in the pain even if we have not added to that pain by also denying them their dividends."

The company indeed has a long history there, most recently boosting its quarterly dividend to 35 cents from 28 cents in mid-May, the fifth hike since 2011, with Mr. Doyle boasting that "with a cumulative dividend increase of 950 per cent in just over two years, the board and management team remain committed to enhancing returns for our long-term shareholders."

Still, as Mr. Howe told Mr. Wall last night, "I want to be clear that the dividend is not sacrosanct."

(For the record, Potash interpreted Mr. Wall's letter as suggesting "employee interests were sacrificed in order to protect shareholder interests." I interpreted it somewhat differently, that the premier was saying workers were sacrificed while shareholders were protected. Mr. Wall made that clear speaking to reporters yesterday, saying "all people involved in a downturn like this for a company, including the shareholders, need to share in the effect of that." A small distinction, but a distinction nonetheless.)

Jobless rate holds at 6.9 per cent
Canada jobs market picked up again in November, but largely on the back of part-time work.

Overall, The Globe and Mail's Tavia Grant reports, the economy churned out almost 22,000 jobs last month, while the jobless rate held at 6.9 per cent for the third consecutive month.

The private sector accounted for the job creation, while the public sector cut back.

Having said that, 20,000 of November's new jobs were part-time positions, the rest full-time.

So Canada's labour market continues to gain, but at a far slower pace than last year.

In the first 11 months of the year, Statistics Canada said, jobs growth has averaged 13,400 a month, compared to 25,400 last year.

"The solid headline gain and mixed details are consistent with continued moderate growth in Canada," said senior economist Benjamin Reitzes of BMO Nesbitt Burns.

"The big gain in manufacturing is certainly encouraging, but we'll need to see some consistency before getting too excited. There's nothing here to prompt the [Bank of Canada] to become even more dovish …  It's steady as she goes for the economy and monetary policy."

U.S. jobless rate eases
In the United States, our Washington correspondent Kevin Carmichael reports, employers added on 203,000 jobs, while the unemployment rate eased notably to 7 per cent in November, the lowest since late 2008 when the recession was setting in.

It's a good sign for America's battered jobs market, where millions are without work.

It also raises the stakes in the "tapering" guessing game, fueling speculation that the Federal Reserve will soon begin to pull back on its bond-buying stimulus program known as quantitative easing, or QE, something investors don't want to see.

That could come as early as the next meeting of the central bank this month or early next year.

Scotiabank profit climbs
Bank of Nova Scotia today posted a 12-per-cent jump in fourth-quarter profit, boosted by its purchase of ING Direct.

Scotiabank profit climbed to $1.7-billion or $1.30 a share from $1.5-billion or $1.18 a year earlier.

Sears to spin off Lands' End
Shares of Sears Holdings Corp. are climbing in premarket action after the retailer announced plans to spin off its Lands' End Inc. business to shareholders.

The spinoff still must be approved by the board, the company said in a statement today.

Sears shares are up 4.7 per cent with more about 15 minutes of the Nasdaq open.

Sears has been hobbled by losses, recently scaling back in Canada, for example.

Streetwise (for subscribers)

Economy Lab

ROB Insight (for subscribers)

Business ticker

Report an error

Editorial code of conduct

Tickers mentioned in this story