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Quarterly financial statistics for enterprises
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Canadian corporations earned record high operating profits of $262.5 billion in 2007. Led by gains in the banking, retail, wholesale and petroleum refining industries, operating profits rose 7.8% for the year, compared with an increase of 8.8% in 2006 and double-digit growth in the preceding three years.
Profit growth slowed in the fourth quarter of 2007. Fourth quarter operating profits edged up 0.5% to $67.7 billion, following quarterly gains averaging 3.7% in the previous two quarters. About half of the 22 industry groups lost ground in the quarter, with the manufacturing sector reporting the biggest decline.
Profitable year for retailers and wholesalers
Consumers continued to spend in 2007, propelling total retail profits to an all-time high of $16.5 billion from $13.6 billion in 2006. Operating revenues jumped 7.5% to $433.2 billion for the year. Strong employment levels and higher disposable income helped prop up consumer demand.
Clothing, department and other general merchandise stores fared well, as profits surged 26.3% to $5.6 billion. Retailers of furniture, home furnishings and appliances pulled in profits of $1.9 billion, up from $1.1 billion in 2006. Record high levels of residential building activity contributed to the demand for household related merchandise.
Wholesalers earned operating profits of $19.1 billion in 2007, a 12.1% improvement over 2006. Gains were widespread, as all five wholesale industries reported sizeable growth in profits.
Note to readersThese quarterly financial statistics are based on 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. Quarterly profit and revenue numbers referred to in the text are seasonally adjusted. |
Petroleum boosts manufacturing profits in 2007
Manufacturers earned operating profits of $45.0 billion in 2007, up 5.4% from 2006 levels. Much of the gain was concentrated in the petroleum, food and soft drinks, and computers and electrical products manufacturing industries.
Petroleum and coal manufacturers earned record high operating profits of $12.7 billion in 2007, an increase of 17.9% over 2006. Export and domestic sales of petroleum and coal products were up for the year. Profit gains were fuelled by rising petroleum prices and higher refining margins.
Food and soft drink producers' operating profits jumped 22.4% to $5.3 billion in 2007, the strongest growth in three years.
Computers and electrical products manufacturers churned out $3.2 billion in operating profits in 2007, one-third more than in the previous year. Profits in this sector have shown steady improvement since 2002, when an annual operating loss had been reported.
The remaining manufacturing industries saw operating profits slide 5.5% in 2007.
Wood and paper manufacturers continued to struggle with weak demand and soft prices in 2007. Operating profits tumbled 75.9% to $0.4 billion, the third consecutive annual decline. Statistics Canada's monthly report on Canadian international merchandise trade recently reported that exports of forestry products have been sluggish, suffering the effects of a strong Canadian dollar as well as the weak US housing market.
Primary metal producers saw profits slide 21.5% to $3.8 billion in 2007. Prices peaked early in 2007 but fell back significantly in the latter months.
Banks lead financial sector growth in 2007
Chartered banks spearheaded an 18.7% upswing in the profits of depository credit intermediaries, which reached a record $32.5 billion in 2007. Higher net interest revenues accounted for a sizeable portion of the gain.
Securities, commodity contracts and other financial investment companies also reported stronger results in 2007. Profits for the year advanced 12.9% to $19.1 billion.
Life insurance companies earned $8.3 billion in profits, up from $5.2 billion in 2006. However, property and casualty insurers saw their profits slide 19.5% to $6.3 billion.
Quarterly profits improve but growth rate slows
Fourth quarter total operating profits edged up 0.5%, following gains averaging 3.7% in the preceding two quarters.
The manufacturing sector registered the biggest fourth quarter decline, as profits slipped 2.8% to $11.3 billion.
Primary metal manufacturers' operating profits fell 33.9% to $0.7 billion. Prices for primary metals slipped for a second straight quarter after peaking earlier in 2007.
Profits in the motor vehicles and parts manufacturing industry declined 21.4% to $0.5 billion. Operating revenues fell 5.2% to $30.0 billion, the third consecutive quarterly decline. The strong Canadian dollar and faltering US demand for automotive products undermined fourth quarter profits.
On the plus side, wholesalers reported fourth quarter profits of $5.1 billion, up 8.6% from the third quarter. Retail profits advanced 5.7% to $4.4 billion in the fourth quarter.
In the financial sector, the profits of securities, commodity contracts and other financial investment companies declined 3.1% to $4.7 billion. Insurance companies saw little change in operating profit levels in the fourth quarter.
The profits of depository credit intermediaries declined 2.3% in the fourth quarter, falling to $8.6 billion from last quarter's all-time high levels.
Profitability ratios
The operating profit margin increased for a sixth consecutive year in 2007, rising to 8.8% from 8.5% in 2006. The return on average shareholders equity edged down to 12.1% in 2007 from 12.5% in 2006.
For the fourth quarter, the operating profit margin slipped to 8.9% from 9.0% in the previous quarter. The return on equity fell to 12.4% from 12.6% in the third quarter. This profit measure had peaked at 14.3% in the second quarter of 2006.
Available on CANSIM: tables 187-0001 and 187-0002.
Definitions, data sources and methods: survey number 2501.
The fourth quarter 2007 issue of the Quarterly Financial Statistics for Enterprises (61-008-XWE, free) will soon be available.
Financial statistics for enterprises for the first quarter of 2008 will be released in May.
For more information or to order data, contact Louise Noel (toll-free 1-888-811-6235; 613-951-2604). To enquire about the concepts, methods, or data quality of this release, contact Bill Potter (613-951-2662; bill.potter@statcan.gc.ca), Philippe Marceau (613-951-4390; philippe.marceau@statcan.gc.ca), or Haig McCarrell (613-951-5948; haig.mccarrell@statcan.gc.ca), Industrial Organization and Finance Division.
Table(s).
