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Canadian corporations posted a record $63.8 billion in operating profits in the first quarter of 2007, up 2.9% over the previous quarter. This represents the fourth consecutive quarterly increase in profits and the ninth gain in the past 10 quarters. About half of the overall profit gain can be attributed to rising commodity prices, which boosted earnings in the petroleum and coal products and primary metal manufacturing industries.
The non-financial industries prospered, earning operating profits of $46.2 billion, up 5.1% from the fourth quarter of 2006. Profits in petroleum and primary metal manufacturing industries showed the strongest results. In contrast, the wood and paper manufacturing industry posted the largest decline. Among the 17 non-financial industries, 10 showed profit gains, 1 remained essentially unchanged and 6 lost ground.
The financial industries did not fair as well. Operating profits dipped 2.5% to $17.6 billion, mainly due to lower profits for property and casualty insurance carriers. Profits of depository credit intermediaries (mainly chartered banks) edged up 1.0%.
Petroleum lifts manufacturing profits
Operating profits of manufacturers advanced 7.4% to $11.8 billion in the first quarter. The gain was fueled by the profits of petroleum and coal manufacturers, which rebounded 33.8% to $2.7 billion following a decline of 42.3% in the previous quarter. Refined petroleum prices increased in the first quarter as a result of refinery output shortfalls, ongoing geopolitical uncertainties and a winter cold spell in North America.
Primary metal producers also showed strength. Boosted by high metal prices, they posted profits of $1.6 billion, up 23.1% from the fourth quarter. Strong demand from China kept prices aloft, with nickel prices at historic highs.
Note to readersThese quarterly financial statistics are based upon a sample survey and represent the activities of all corporations in Canada, except those that are government controlled or not-for-profit. An enterprise can be a single corporation or a family of corporations under common ownership and control for which consolidated financial statements are produced. Operating profits represent the pre-tax profits earned from normal business activities, excluding interest expense on borrowing and valuation adjustments. For non-financial industries, operating profits exclude interest and dividend revenue and capital gains/losses. For financial industries, interest and dividend revenue, capital gains/losses and interest paid on deposits are included in the calculation of operating profits. After-tax profits represent the bottom-line profits earned by corporations. |
Profits for the wood and paper manufacturing industry fell by just over half to $263 million, as the strong Canadian dollar and a reduced demand for lumber, due to the slowdown in the US housing market, continued to challenge producers.
Consumers bolster retail profits
High employment levels and low interest rates helped boost consumer confidence and retail profits, which grew 12.4% to $3.9 billion in the first quarter.
Clothing and general merchandise stores led growth among retail industries, earning $1.4 billion in the first quarter, up 12.8% from the previous quarter. Food and beverage stores' profits rose 24.2% to $623 million for the quarter, while profits for furniture, home furnishings, electronics and appliance stores increased 36.8% to $375 million.
Profits in the real estate and rental and leasing industry rose 9.8% to $3.2 billion. A similar increase was seen in the information and culture industry, where profits were up 9.9% to $3.1 billion, largely due to telecommunications firms and soaring cellular phone use in Canada.
Profits in the oil and gas extraction industry increased 3.4% to $7.4 billion, following a decline of 16.5% the previous quarter. Crude petroleum prices bounced back from the lows experienced in the fourth quarter to help prop up profits.
Property and casualty insurers pull financial industries profits down
Profits of financial industries dipped 2.5% to $17.6 billion in the first quarter, following a 6.7% gain in the fourth quarter. The drop was driven by property and casualty insurers whose profits fell 22.8% to $1.7 billion, after rising 20.9% the previous quarter.
Companies involved in securities, commodity contracts and other financial investment activities earned $4.4 billion, down 3.3%. The chartered banks earned $7.0 billion in first quarter profits, little changed from the previous quarter.
Profitability ratios
The operating profit margin levelled off at 8.6% in the first quarter, maintaining an historical high level.
The first quarter return on shareholders' equity was 11.8%, down slightly from 11.9% in the previous quarter. After-tax profits, the numerator in this profit measure, fell 0.3% in the quarter, as a result of lower interest and dividend revenue as well as higher interest expense on borrowing.
Available on CANSIM: tables 187-0001 and 187-0002.
Definitions, data sources and methods: survey number 2501.
The first quarter 2007 issue of the Quarterly Financial Statistics for Enterprises (61-008-XWE, free) will be available soon.
Financial statistics for enterprises for the second quarter will be released on August 23.
For more information or to order data, contact Louise Noel at Client Services (toll-free 1-888-811-6235; 613-951-2604). To enquire about the concepts, methods, or data quality of this release, contact Danielle Lafontaine-Sorgo (613-951-2634; danielle.lafontaine-sorgo@statcan.gc.ca) or Haig McCarrell (613-951-5948; haig.mccarrell@statcan.gc.ca), Industrial Organization and Finance Division.
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