Financial statistics for enterprises

Corporate profits rose to their second highest level ever last year, as both manufacturers and retailers reported sharp gains. Canadian corporations reported a total of $156.3 billion in profits in 2002, up 5.8% from 2001.

Last year's level was second only to the peak of $173.0 billion recorded in 2000, when high profits in energy and the booming electronics and telecommunications industry led the way. The increase in profits in 2002 followed a 14.6% decline in 2001.

Non-financial profits surged 9.6% in 2002 to $123.9 billion. However, the financial group of industries suffered a 6.5% profit slide in 2002, led by a decline in the depository credit intermediaries, mainly chartered banks.

On a quarterly basis, corporate profits rose 5.1% to $41.9 billion in the fourth quarter, following a 1.0% gain in the third. Profit gains during the last half of 2002 were well below growth rates in the first six months of the year.

Robust year for manufacturers

Manufacturers enjoyed an upbeat 2002, as a 3.9% increase in operating revenue contributed to a 13.5% jump in operating profits to $41.7 billion.

Manufacturers of motor vehicles and parts saw profits improve 36.5%, with hefty incentive programs and low interest rates sustaining sales growth throughout most of the year. Strong US demand drove up exports of automotive products.

Manufacturers of primary metals cited stronger shipments and firming prices as factors in the more than tripling of annual profits to $2.0 billion. Profits of chemical producers advanced 18.9% to $6.6 billion in 2002. Other notable profit gains were reported by manufacturers of non-metallic minerals, machinery and equipment, and clothing. Computer and electronics manufacturers remained mired in a prolonged slump, but nonetheless reduced operating losses to $0.5 billion from losses of $1.2 billion in 2001.

On a negative note, wood and paper producers' operating profits fell to $3.4 billion, 30.9% below 2001 levels. Profits were squeezed by the imposition of export tariffs by the United States in May. Demand for lumber was strong, sustained by the vibrant North American housing market. However, lumber prices softened because of oversupply, as some Canadian producers cranked up production following the imposition of the export tariffs. The Monthly Survey of Manufacturing recently reported that overall shipments of wood products in 2002 increased 7.1%.

Petroleum and coal producers earned $5.0 billion in operating profits in 2002, down 10.4% from the $5.6 billion earned in 2001. Despite climbing steadily throughout the year, petroleum prices did not reach the highs attained early in 2001.

Retail profits much improved in 2002

Retailers reported $9.5 billion in operating profits in 2002, up from $6.6 billion in 2001. Operating revenue jumped 9.2% to $312.8 billion.

Retail motor vehicle dealers took advantage of low interest rates, strong employment and generous incentive programs, as operating revenue increased 6.1% to a record $82.5 billion. Operating profits reached $1.8 billion, 30.2% ahead of 2001. The December release of New motor vehicle sales reported that an all-time high number of new motor vehicles were sold in 2002.

General merchandise stores benefited from strong consumer demand to post a 57.4% leap in annual operating profits. Furniture stores' profits rose 73.0% to $0.9 billion, spurred by the robust housing market.

Transportation bounced back

The transportation and warehousing industry saw profits increase to $7.3 billion in 2002 after falling to a six-year low of $4.7 billion in 2001. Operating revenue edged up 1.8% to $81.1 billion, recovering somewhat from the impact of the events of September 11, 2001.

Lower commodity prices early in the year trimmed annual oil and gas profits

Oil and gas extraction companies suffered a $4.6 billion (-23.2%) decline in operating profits in 2002. Despite recovering steadily throughout the year, average crude oil prices were tempered by weakness earlier in the year. Average natural gas prices in 2002 were well below 2001 levels.

Depository credit intermediaries hampered by loan loss provisions

The depository credit intermediaries suffered a 19.8% decline in operating profits in 2002. Profits of $11.8 billion were the lowest since 1995. Provisions for future loan losses, partly the result of the downturn in the telecommunications sector, rose from $6.6 billion in 2001 to $9.7 billion in 2002. Interest revenue was significantly down in 2002, but this was more than offset by lower interest expense for the year.

Quarterly profits up again

Overall corporate profits climbed 5.1% in the fourth quarter of 2002, up from a 1.0% gain in the third quarter, but well below the 10.6% and 13.2% increases registered in the first two quarters of the year.

The non-financial industries boosted profits 6.1% in the fourth quarter, and the financial industries turned in a more modest 1.0% quarterly rise.

Improved quarterly profits for manufacturers, but growth rate slows

Manufacturers earned $11.4 billion in operating profits in the fourth quarter, up 3.2 % from the third. Profits had risen 8.5%, 11.0% and 9.2% in the first three quarters of 2002.

Petroleum and coal producers took advantage of rising energy prices to post a 26.4% jump in operating profits to $1.7 billion in the fourth quarter. Continued uncertainty in the Middle East and supply disruptions in Venezuela contributed to the higher prices. Domestic sales of refined petroleum products were up in the quarter.

Wood and paper manufacturers earned $0.9 billion in fourth quarter operating profits, up 27.1% from the third quarter. Although prices for most products remained generally weak, efficiency gains and cost-cutting initiatives helped bottom line results. Despite slowing somewhat in the quarter, demand from the construction sector remained strong. Wood and paper industry profits peaked in the first quarter of 2000 at $2.4 billion, and had been on a downward trend since.

Motor vehicle and parts manufacturers earned $1.4 billion in fourth quarter operating profits, down from the $2.0 billion reported in the third quarter, but more than double the profits earned in the final quarter of 2001. Operating revenue dropped 4.8% to $35.1 billion. Exports of automotive products slowed over the quarter, as US demand showed signs of softening.

Computer and electronics manufacturers returned to profitability for the first time in 2002, earning $0.1 billion in the fourth quarter. Nonetheless, fourth quarter profits paled in comparison with the high of $1.2 billion earned in the third quarter of 2000. Operating revenue increased 7.3% to $8.4 billion, but weak demand continued to plague the computer and telecommunications equipment sector. Operating revenue peaked at $13.0 billion in the fourth quarter of 2000.

Higher prices lift oil and gas profits in fourth quarter

Operating profits in the oil and gas extraction industry in the fourth quarter were up 7.8% from the third quarter to $4.3 billion. Average crude oil prices changed little from the third quarter, but were 38.0% higher than in the fourth quarter of 2001, in response to lower inventory levels and concerns over supply. Energy exports increased in the quarter with rising demand from the United States.

Other quarterly results

Wholesalers posted a marginal 1.8% increase in operating profits, and gains by retail motor vehicle dealers and general merchandise stores spearheaded an 8.0% increase in total retail profits in the fourth quarter.

In the financial group of industries, higher insurance company profits were somewhat offset by lower profits of the depository credit intermediaries.

Profitability ratios

The operating profit margin for 2002 edged up to 6.9% from 6.8% in 2001. The annual profit margin recently peaked at 8.0% in 2000. The return on average shareholders' equity increased to 8.6% from 8.2% in 2001, but remained well below the 11.7% earned in 2000.

For the fourth quarter of 2002, the operating profit margin rose to 7.2% from 7.0% in the third quarter. The return on shareholders' equity jumped a full percentage point, rising to 9.5% from 8.5% in the third quarter, lifted by higher operating profits and capital gains.

Available on CANSIM: tables 187-0001 and 187-0002.

Information on methods and data quality available in the Integrated Meta Data Base: survey number 2501.

The fourth quarter 2002 issue of Quarterly financial statistics for enterprises (61-008-XIE, $26/$86) will be available soon.

For general information or to order data, contact Jeannine D'Angelo (613-951-2604). To enquire about the concepts, methods or data quality of this release, contact Bill Potter (613-951-2662) or Haig McCarrell (613-951-5948), Industrial Organization and Finance Division