Venture capital investment headed for 14-year low November 10, 2009
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Investment in Canadian emerging high technology companies is headed for its lowest level in 14 years, an industry association said Tuesday.
Canada’s Venture Capital & Private Equity Association said a total of $191 million was invested in the industry in the third quarter, down 51 per cent from the $388 million raised in the same period in 2008.
Investment in emerging Canadian technology is headed toward its worst levels in 14 years.(CBC)
The study looked at industries ranging from clean technology ? such as renewable energy ? to biotech.
Ontario was worst hit, it said, with $24 million invested, a drop from a year ago of 87 per cent. The province took in only 13 per cent of all Canadian venture capital.
Dollars invested over the first nine months of this year totalled $682 million, a 36 per cent drop from the $1.1 billion raised in the same period a year ago. At this rate, capital raising for the year could come in below the $1-billion mark for the first time since 1995.
The association said despite a “handful” of larger deals done during the summer ? such as the $50 million US financing of Montreal’s Enobia Pharma ? the average amount per firm was $2 million. Last year’s average was $3.2 million.
The association has called for the federal and provincial governments to introduce investment incentives, including improved tax credits and requirements for major government contractors to invest in new and emerging technology companies.
It also wants Ottawa to set up a panel of company executives, university presidents, entrepreneurs and venture capitalists to come up with a plan for supporting Canada’s technology industries.
Loonie climbs to one-year high October 13, 2009
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While many Canadians were home from work and eating turkey dinner for Thanksgiving, the loonie surged to a new one-year high on Monday.
The Canadian dollar continued its recent rise by climbing to an intraday high of 96.93 cents US, the highest it’s been since September 2008.
The currency’s rise was helped by unexpectedly strong Canadian employment numbers for September, when 30,000 new jobs were created, sending the unemployment rate down to 8.4 per cent from 8.7 per cent in August.
The dollar was also helped by a Bank of Canada business outlook survey, which found that companies are facing easier credit conditions for the first time in two years and are expressing greater optimism regarding their future prospects.
Canadian financial markets were closed on Monday for the Thanksgiving holiday.
U.S. unemployment hits 26-year high October 4, 2009
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The U.S. economy shed 263,000 jobs in September, much worse that the 175,000 economists had been expecting.
Jobs brochures are seen on display at a California unemlpoyment office..(Paul Sakuma/Associated Press)
The bleak data released Friday from the U.S. Labour Department’s non-farm payroll employment report means the country’s unemployment rate sits at 9.8 per cent, a 26-year high.
“The only reason the jobless rate didn?t rise more is that the participation rate [in the survey] sank to 23-year lows of 65.2 per cent, a sign of growing discouragement,” BMO economist Sal Guatieri said in a note.
There were 706,000 of what the agency calls “discouraged workers” in September, up by 239,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.
The report, which measures the number of people with salaried employment across all sectors of the economy except for certain volatile industries such as agriculture, found that the largest job losses were in construction, manufacturing, retail trade and government.
In September, construction employment declined by 64,000, manufacturing fell by 51,000, retail trade fell by 39,000 and government employment was down by 53,000.
Since the start of the U.S. recession in December 2007, the number of unemployed persons has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled. The 9.8 per cent rate is the highest level since 1983.
Some 35.6 per cent of those unemployed in September are what the department calls “long-term unemployed” ? people who have been jobless for 27 weeks of more. The total number of such people rose 450,000 to 5.4 million during the month.
“Though the underlying trend in job losses is slowing, the September report almost cements the jobless-recovery view,” Guatieri said.
The agency initially reported that 276,000 jobs were shed in July. But it revised that number to 304,000 Thursday.
August’s report was also revised, from 216,000 jobs lost to 201,000 losses.
The average workweek for production and nonsupervisory workers on private non-farm payrolls edged down by 0.1 hour to 33 hours. But average hourly earnings edged up by one cent US, or 0.1 per cent, to $18.67.
Natural gas price hits 7-year low August 20, 2009
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Natural gas prices on the New York Mercantile Exchange dipped below the $3 US level on Thursday for the first time in seven years.
The September natural gas contract was trading at $2.94 US per thousand cubic feet in afternoon NYMEX trading ? down 18 cents from Wednesday’s close. The front-month gas contract hasn’t been that low since August 2002.
Consumers could see lower heating bills this winter as natural gas prices drop. (CBC)
The drop followed the release of U.S. supply data that showed yet another increase in gas storage levels. The Energy Information Administration reported Thursday that the amount of gas stored underground in the U.S. grew by 52 billion cubic feet last week to 3.2 trillion cubic feet. That’s 19 per cent higher than the five-year average of gas storage levels.
In Calgary, the AECO-C one-month spot price tumbled 17.5 cents to $2.36, according to data from the NGX.
Natural gas prices have plunged by 80 per cent in the last year as buoyant supplies and sluggish demand combined to create the most bearish market for gas in years.
Supplies have soared as the recession led industrial users to use a lot less power. At the same time, advances in exploration have made it economical to reach natural gas trapped in shale deposits ? gas that was previously too difficult or uneconomical to recover.
The oversupply has reached the point that analysts say many of the available gas storage facilities in North America are now almost full. In an average year, the facilities don’t approach capacity until early fall.
Low prices have led to a 58 per cent drop in the number of rigs drilling for natural gas since last September. Some producers have scaled back exploration or production. Others now routinely hedge their gas production in an attempt to insulate themselves from future price drops.
Analysts say prices could drop further
Even this summer’s first tropical storms in the Atlantic failed to boost prices as so much production has moved onshore. In the past, even the possibility that storms might develop into damaging hurricanes would cause prices to spike.
Analysis by the Energy Information Administration suggests that the ample storage and increased imports of liquefied natural gas from offshore could cause prices to “fall below current projections before space-heating demand picks up this winter and economic conditions improve.”
The drop in gas prices, while good news for consumers, has dealt a big blow to the Alberta economy. Besides the thousands of layoffs among producers and energy service companies, the Alberta treasury relies on gas royalties for a sizable portion of provincial revenues.
In the 2008-09 fiscal year, Alberta took in $5.8 billion from gas royalties, more than triple what it got from oil royalties. Every 10-cent drop in gas prices costs the provincial treasury $126 million in lost revenue.
Economy to shrink 2.9% this year, World Bank says June 23, 2009
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The World Bank warned Monday that the international economy will shrink by 2.9 per cent this year, a sharper decline than the 1.7 per cent drop predicted in March.
“The need to restructure the banking system, combined with emerging limits to expansionary policies in high-income countries, will prevent a global rebound from gaining traction,” Justin Lin, World Bank chief economist, said in a news release.
Less money for everyone
The bank’s forecast for 2009 predicts the gross domestic product (GDP) per capita will by fall by $600 US to $8,362 worldwide this year. In other words, the production of goods and services will drop by that amount.
In the “high income” countries, the decline will be $2,164, to $38,470. For Canadians, given that about 60 per cent of GDP is spent on consumption, it means about $1,300 less to spend.
Developing countries could help drive the recovery, but they need capital, and that means a resumption in the flow of credit, the bank said.
But private capital inflows to developing countries are forecast to drop to about 30 per cent of the 2007 level this year. The flow, which peaked at $1.2 trillion US in 2007, will hit $363 billion this year, the bank said.
A drop in capital flows will cut growth, jobs and trade, and hurt the neediest people.
“To prevent a second wave of instability, policies have to focus rapidly on financial sector reform and support for the poorest countries,” said Hans Timmer, director of the bank’s prospects group.
Global GDP growth will rebound to two per cent in 2010 and 3.2 per cent by 2011.
The bank called for the “quick implementation of detailed reforms” and said governments have to give up ownership stakes in the financial system to make room for private capital.
Like other economic forecasters, it also said the advanced countries will have to unwind the expansion of the money supply and cut deficits “in the medium term,” to avoid a debt crisis.
Federal officials reveal $2.2B deficit for fiscal year May 30, 2009
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A $3.6-billion deficit in March sent the federal government $2.2 billion into the red for the 2008-09 fiscal year, officials said Friday.
The latest reading on the status of the government’s coffers comes just days after Finance Minister Jim Flaherty said the deficit for the current 2009-10 fiscal year is projected to hit more than $50 billion.
For the 2007-08 fiscal year, the government ran a surplus of $11.4 billion.
In its monthly fiscal monitor released Friday, the Finance Department said the government slipped into the hole in March as its budgetary revenues fell $3.1 billion, or 14.4 per cent, from March 2008, due to declines in tax revenues.
For the full 2008-09 fiscal year, the government’s revenues decreased by $9.2 billion, or 3.8 per cent, mainly due to lower corporate income tax and goods and services tax revenues.
Corporate income tax revenue was down $11.1 billion, or 27.2 per cent, year-over-year due to lower business profits and the impact of tax reductions. GST revenues dropped by $4.4 billion, or 15 per cent, reflecting the one-percentage-point reduction in the GST on Jan. 1, 2008.
Government program expenses grew by $6.8 billion, or 3.5 per cent, due to higher transfer payments. That included a $2 billion increase in employment insurance benefits as more people lost their jobs due to the recession.
Public debt charges were down $2.3 billion from last year, due to lower interest rates.
After delivering the news that the government’s deficit projection for the current fiscal year will go from $33.7 billion to more than $50 billion, Flaherty will provide an update to the House of Commons about the government’s finances in June.
Airline stocks may start to recover this year April 3, 2009
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When Air Canada Inc. replaced its chief executive on March 30 with a veteran of the company’s restructuring in March, red flags went up for those people who watch the sector.
To be sure, Canada’s largest air carrier had myriad homegrown woes.
Industry experts are still pondering, however, whether, if Air Canada’s struggles send the airline into bankruptcy protection once again, other flyers might follow suit.
“It could spell more bankruptcies for an industry that?s already seen more than its share of them over the years,” wrote Bob O’Brien, who runs a well-followed U.S. investment blog.
How many? The answer is maybe fewer than you might think.
“We think the airline sector will outperform all other sectors,” said Vaughn Cordle, chief executive officer and chief analyst for Washington-based AirlineForecasts, a company specializing in the carrier industry.
Air Canada’s cash woes
To be clear, Air Canada is probably headed into a patch of prolonged difficulty.
The resignation of Montie Brewer as CEO, to be replaced by Calin Rovinescu, had industry watchers anticipating a new wave of cost-cutting at Canada’s biggest carrier.
Air Canada struggles with cash issues(Canadian Press)
Rovinescu was known for swinging the corporate ax earlier in the decade as he helped restructure the airline and its affiliates the last time Air Canada slipped into bankruptcy.
Taking another run at the company’s cost structure might be in order after Air Canada lost $146 million on an operating basis in the final three months of its fiscal year.
Air Canada already has a goal of saving $100 million in total expenses to add to $20 million and $40 million in cash reductions the airline has already secured from its suppliers.
Still, Air Canada’s executives could still see a money crunch looming.
“While lower fuel prices and ongoing monitoring of capacity should provide some relief, the recession is expected to place significant pressure on Air Canada’s passenger and cargo revenue,” said the company in February when Air Canada released its fourth-quarter earnings.
The company saw its existing $400 million line-of-credit get yanked last fall.
That forced management to negotiate a number of smaller borrowings ? including $238 million from GE Capital ? to shore up the $1 billion in cash and short-term notes that Air Canada had at the end of 2008.
Other airlines follow tough flight path
Air Canada is not alone in facing financial problems.
Delta Air Lines lost $350 million U.S. in the final three months of 2008, as the huge American carrier suffered through dropping demand and rising costs, in that case mainly driven by historically high jet fuel prices.
As well, Delta is not expecting 2009 to improve that quickly.
“The worsening global economy continues to place additional pressure on the airline industry,” said Richard Anderson, Delta’s chief executive officer, and president Edward Bastian in a March memo to employees.
American Airlines among U.S. carriers grappling with large financial losses(Tony Gutierrez/Associated Press)
Fort Worth, Texas-based AMR Corp., the parent company of American Airlines, also lost $340 million U.S. in the fourth quarter.
Traffic for most air carriers continued to turn south for the first months of 2009.
American Airlines saw its passenger traffic tumbled 11 per cent in February.
JetBlue Airways Corp., the New York-headquartered discount airline, said its revenue passenger miles ? a sales measure ? took an 8.3 per cent smackdown in the second month of the year.
For its part, JetBlue posted a pre-tax loss of $49 million US for its fiscal fourth-quarter.
As well, Seattle-based Alaska Air Group Inc., which owns Alaska Airlines and Horizon Air, noted that its revenue passenger miles dropped by 10 per cent.
Many sector watchers view the ongoing reluctance of individuals to spend money on casual travel, the reduction of corporate travel and fewer cargo shipments as a trend that will continue.
Many industrialized economies will contract throughout much of 2009.
In addition, the International Air Transport Association forecast a drop of 5.7 per cent in the number of passengers that will fly in 2009.
Finally, the Association of Corporate Travel Executives said that 71 per cent of its members, managers who book company flights, say they will be cutting travel budgets in 2009.
Possible recovery?
A sputtering economy, however, does not necessarily equate with a lousy year for airlines, sector specialists said.
“We do expect a major rebound in airline shares this year,” Cordle said.
JetBlue among air carriers cutting flights and parking planes to save costs(Henny Ray Abrams/Associated Press)
To some extent, a recovery in airline stocks is inevitable given the pounding that this group has taken in equity markets in the past year.
The Standard & Poor’s 500 airlines index currently stands at 60.97 compared to 159 in early September 2008, a drop of 62 per cent.
AMR has seen its share price take a 65 per cent haircut, at $3.60, compared to its equity value six months earlier. Delta’s stock is off 26 per cent over the past year.
In Canada, Air Canada’s valuation collapsed in recent months, as its equity price now stands at 83 cents versus a 52-week high of $9.84.
Aggressive competitor WestJet Airlines has fared better with a current stock price of $12.20, still down 36 per cent versus the Calgary airlines’ year-high share price.
The pounding, however, presents investors with a buying opportunity, stock watchers said.
In January, Cordle and Stifel Nicolaus & Co.’s Hunter Keay agreed that an improvement in the shares of these companies could happen if investors begin to see air stocks as cheap compared to other equity issues.
Reining in costs
What has analysts more excited ? or at least not as negative ? about the air sector’s prospects, however, is the industry’s cost-cutting of the past few months.
Many carriers have cut their capacity by parking empty airplanes, a situation which also reduces variable costs, such as fuel consumption. The move was taken to match up how many planes are flying with the number of people who actually want to fly, experts said
“This (sector) will have a decent balance between supply and demand,” Keay said in a January television interview.
Alaska Air, for example, knocked down its flying capacity by 9.4 per cent in February which allowed the company to boost its load factor ? a measure of carrier efficiency ? in the month despite seeing traffic drop.
American Air forecast a cut to its flight capacity of 6.5 per cent in 2009 which would be on top of a nine per cent chop to the number of available seats for the previous year.
Overall, in the first three months of 2009, there were 491,000 fewer flights worldwide, according to OAG Facts, a London-based airline data company.
Tanking fuel costs
Besides flying fewer planes, airlines will be fueling those craft with cheaper gas.
Last year, aviation fuel spiked in sympathy with rising overall crude prices. That cost increase had a direct effect on carriers’ profit line.
Alaskan Air, for example, estimated that each $1 US increase in jet gasoline prices translated into $9 million less in pre-tax earnings.
Now, however, as world oil prices have slid below $50 a barrel in 2009, the costs of getting a jet off the ground have fallen proportionately.
Dropping crude oil prices have cut aviation fuel(Associated Press)
Glenn Johnson, Alaska Air’s chief financial officer, told an industry conference in March that his airline was spending $100 for a gallon of aviation fuel last year.
“Now, we’re spending $45,” he told analysts in New York.
Less fuel equals more money for an airline’s bottom-line.
In January, Cordle estimated that Delta’s jet fuel costs will total $7.5 billion, down almost 40 per cent from the $12 billion the company paid in 2008.
Similarly, American Air will pay $5.1 billion in 2009 versus $9.1 billion in fuel costs one year earlier.
Still many clouds in this sky
Regardless of those positive signals, however, investors might be excused if they remain wary of airlines.
IATA also forecasts that carriers worldwide will lose $4.7 billion in 2009 with revenue falling $467 billion. That red ink is on top of the likely loss $8 billion in 2008.
Desjardins loses $476 million in Q4, ends year with small surplus March 5, 2009
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Quebec’s largest credit union operator has reported its worst quarterly loss ever, blaming the global economic slowdown and the collapse of the asset backed commercial paper (ABCP) market for the fall.
Desjardins Group President and CEO Monique Leroux, shown in a 2008 file photo, is confident about the organization’s financial future.(Clement Allard/Canadian Press) Desjardins Group suffered a $476-million loss in the fourth quarter, before member dividends. During the same period in 2007, the financial co-operative reported a surplus of $273 million.
“Obviously, [the results] were unsatisfactory,” André Chapleau, a Desjardins spokesperson, told CBC News on Wednesday.
“We would have preferred to post better results. But when we exclude the impact of the financial crisis and the famous ABCP issue, Desjardins would have done probably better than the year before.”
Chapleau said the surplus would have been $1.2 billion for 2008. However, he said, it slipped to $78 million by year’s end after Desjardins absorbed its losses from ABCP, a type of short-term investment that lost its viability as a result of the sub-prime mortgage crisis in the United States.
Revenues for Desjardins for the entire year totalled $8.37 billion, a 13 per cent ? or $1.30-billion ? drop over 2007.
Member dividends take hit
As a result of the financial losses, members of the Caisse populaire Desjardins credit unions received fewer dividends for 2008. Dividends sank to $215 million last year, a 64 per cent tumble compared with 2007.
“The caisses (credit unions) are encouraged to pour surpluses into their reserves, which would have the effect of reducing the amounts that they could put into dividends for its members,” Desjardins president Monique Leroux said Monday.
Despite the numbers, she said the institution is still in very good shape.
When asked if investing in ABCP was a mistake, Leroux suggested that Desjardins was merely another victim of the global financial crisis.
“I think that we need to always look at things moving forward and to learn from the past,” she said.
In Quebec, Desjardins is the leading supplier of residential mortgages, farm credit and personal savings accounts, with assets growing 5.7 per cent to $152.3 billion.
With files from The Canadian Press (more…)
Feds in smaller surplus through 9 months of fiscal year March 1, 2009
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The federal government ran a surplus of $459 million between April and December of 2008, the first nine months of its fiscal year.
In its latest update on its finances, the federal government said Friday that its revenues were $173.39 billion, down year over year from $174.61 billion.
Personal income tax revenues rose $4 billion, year over year, while corporate income tax revenues dropped $5 billion, or 18.4 per cent, on the weakening economy and lower tax rates.
“This decline reflects weaker profits as well as the impact of the 1.5-percentage-point reduction in the general corporate income tax rate and the elimination of the corporate surtax in 2008,” the federal Finance Department said.
Government income from the GST was down $3.1 billion, or 13.1 per cent, reflecting the one-percentage-point reduction in the GST rate on Jan. 1, 2008.
Federal program expenses for April-December 2008 were $149.06 billion, up from $141.05 billion, on higher transfer payments, Crown corporation expenses, and operating expenses of government departments and agencies.
The government’s public debt charges for the first nine months of its fiscal year decreased by $1.2 billion, or five per cent, to $23.86 billion due to lower interest rates.
For December alone, the federal government ran a $241-million surplus, down from $1.85 billion a year earlier.
In his most recent budget, presented last month, Finance Minister Jim Flaherty said the government is projecting a $1.1-billion deficit for the current fiscal year that ends March 31.
The budget also predicts a deficit of $33.7 billion for the 2009-10 fiscal year and $29.8 billion the following year.
CAE nabs 20-year deal to make Canadian military flight simulators February 17, 2009
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CAE president and CEO Robert Brown, left, and Prime Minister Stephen Harper pose with a miniature version of the company’s flight simulator on Friday in Montreal.(CBC) Montreal-based CAE will build state-of-the-art flight simulators for the Canadian Forces as part of a 20-year deal worth nearly $330 million, the federal government announced Friday.
Prime Minister Stephen Harper made the announcement at the company’s headquarters in the Montreal borough of Ville St-Laurent.
Harper said the project is part of his government’s plan to stimulate the Canadian economy and protect jobs across the country.
“Not only does today’s announcement ensure that the men and women of the Canadian Forces get the best flight training, it will also create well-paying jobs now and for the 20-year length of the contract,” said Harper.
CAE leads a pan-Canadian team that will build simulators for the Hercules C-130 aircrew.
The team includes:
Xwave of St. John’s, N.L.Montreal-based Bombardier.Atlantis Systems International of Brampton, Ont.Cascade Aerospace of Abbotsford, B.C.
CAE says the contract will create and sustain 330 jobs for the first three years and 50 jobs for the next 20 years in various Canadian locations.
The 50 long-term jobs will be located at a soon-to-be-built training facility at CFB Trenton. The facility is expected to be ready in 2012.
Contract includes simulators, training systems
CAE will provide two full-mission simulators, one flight training device, three procedures trainers and one fuselage trainer.
Work will be subcontracted to the partner companies.
CAE chief executive Robert Brown said the 7,000-employee company is proud to help prepare the Canadian Forces for its missions abroad.
He said the company will also be able to “leverage the valuable experience of this program to contracts with other nations.”
CAE shares, halted pending the announcement, gained 12 cents after the news to close at $7.57 on the Toronto Stock Exchange, with a 52-week range between $13.95 and $5.62.
With files from the Canadian Press (more…)
