Author: Consultant

Canada Pension Plan reports $23-billion loss in June quarter as markets churn

The Canada Pension Plan Investment Board said it lost 4.2 per cent in its most recent quarter, subtracting $23-billion from the fund’s assets.

It could have been worse: The three months ended June 30 were awful for most investors. According to Royal Bank of Canada’s RBC I&TS All Plan Universe, defined benefit pension plan assets decreased by 8.6 per cent, tied with the third quarter of 2008 for the biggest decline in the 28 years RBC has been began tracking Canadian plan performance.

The S&P Global LargeMidCap Index, a measure of stocks CPPIB uses as 85 per cent of its benchmark reference portfolio, fell nearly 13.5 per cent in the quarter. The FTSE Canada Universe All Government Bond Index, the remaining 15 per cent of the benchmark, fell nearly 6 per cent. Blended, that means CPPIB beat a benchmark of negative 12.4 per cent by more than eight percentage points.

CPPIB closed the quarter with assets of $523-billion, compared to $539-billion at the end of the previous quarter. The investment losses were offset by $7-billion in contributions from the Canada pension Plan.

In the early days of the COVID-19 pandemic, when global markets tumbled, the CPPIB asset mix blunted the pain, and the pension fund manager lost much less money than an ordinary investor in the stock market. However, CPPIB often trails when public stock markets rise rapidly, as they did in several recent quarters when investors shook off their pandemic fears.

Now, we have returned to falling markets, and CPPIB is outperforming them.

“Financial markets experienced the most challenging first six months of the year in the last half century, and the fund’s first fiscal quarter was not immune to such widespread decline,” John Graham, CPPIB chief executive officer, said in a statement accompanying the returns. “The uncertain business and investment conditions we noted in the previous quarter continue, and we expect to see this turbulence persist throughout the fiscal year.”

CPPIB said its loss was driven by declines in public stock markets, but investments in private equity, credit and real estate also contributed “modestly.” CPPIB also lost money in fixed income investments, such as bonds, due to higher interest rates imposed by central banks to fight inflation.

Gains by external portfolio managers, quantitative trading strategies and investments in energy and infrastructure contributed positively. CPPIB also recorded foreign exchange gains of $3.1-billion as the Canadian dollar weakened against the U.S. dollar. (Most of CPPIB’s investments are held outside Canada, but it reports results in Loonies.)

The Canada Pension Plan, founded in 1966, is the primary national retirement program for working Canadians. The government created CPPIB in 1999 to professionally manage the plan’s money. Over time, CPPIB has embraced active management and its blend of stocks, bonds, real estate, infrastructure, private equity and other specialized investments has outperformed public markets and its reference portfolio.

While CPPIB reports quarterly, it points to its multigenerational mandate and likes to emphasize its long-term returns. The plan’s five-year net return, net of investment costs, was 8.7 per cent through June 30; the 10-year net return was 10.3 per cent.

CPPIB’s annualized return for the 10 years ended last Sept. 30 was, at 11.6 per cent, the highest 10-year performance figure in its history.

Canada Goose Reports Results For First Quarter Fiscal 2023

Business Wire – Thu Aug 11, 5:45AM CDT

Canada Goose Holdings Inc. (“Canada Goose” or the “Company”) (NYSE:GOOS, TSX:GOOS) today announced financial results for the first quarter ended July 3, 2022 (“Q1 2023” or “Q1 ended July 3, 2022”). All amounts are in Canadian dollars unless indicated.

“Our first quarter fiscal 2023 results reflect strong early leading indicators for the year, and we have seen encouraging trends in store productivity,” said Dani Reiss, Chairman and CEO. “This fall, we look forward to our planned store openings, in some of the most exciting cities and shopping districts around the world, as well as our upcoming collection launches, thoughtfully curated and designed to drive brand heat and capture new consumers globally.”

Canadian Tire Corp. Ltd. Reports Second-Quarter Profit Fell From A Year Ago

Canadian Tire Corp. Ltd. reported lower second-quarter profit compared to a year ago.

The retailer reported its net income attributable to shareholders totalled $145.2 million or $2.43 per diluted share for the quarter, down from $223.6 million or $3.64 per diluted share a year earlier.

Canadian Tire says retail sales rose 9.9 per cent and comparable sales, excluding petroleum, gained 5.0 per cent. Retail sales at its SportChek banner grew 0.6 per cent as comparable sales gained 4.1 per cent, and retail sales at its Mark’s banner rose 21.1 per cent as comparable sales rose 20.9 per cent.

On a normalized basis, Canadian Tire says it earned $3.11 per diluted share, down from a normalized profit of $3.72 per diluted share a year earlier.

The company says while the performance of the retail segment of the business remains significantly above pre-pandemic levels on a normalized basis, higher expenses including foreign exchange resulted in earnings coming in lower in the second quarter compared to the prior year.

Canadian Tire also says its financial services revenue grew 15.0 per cent, driven by growth in receivables and growth in credit card sales, due to increased customer activity and new account acquisitions.

This report by The Canadian Press was first published Aug. 11, 2022.

Brookfield profit declines 39% as rates rise

Brookfield Asset Management Inc. BAM-A-T +1.31%increaseCEO Bruce Flatt says the inflationary environment is enhancing the value of its investments – but the company’s second-quarter results show the company is not completely immune from current market conditions.

The company reported a 39-per-cent decline in net income, to US$1.48-billion, owing, in part, to decreased gains on the sale of assets and an increase in interest expenses that outpaced revenue gains.

The company’s funds-from-operations metric, which removes a number of non-cash items from the calculation, and the company’s “distributable earnings,” which removes additional expense items and adds back in dividends from Brookfield’s investments, fell by more modest amounts.

Brookfield recorded US$2.41-billion in interest expense in the quarter, up 31 per cent from 2021′s second quarter. The amount of corporate borrowings on the balance sheet rose 11 per cent, to $12.05-billion.

‘Interest rate stress caused significant market disruption in the second quarter of 2022, but it is important to keep this in context,” Mr. Flatt wrote in his shareholder letter, addressing the interest-rate rises in a macroeconomic context.

Despite two U.S. Federal Reserve rate increases, and more to come, Mr. Flatt theorizes, “rates are expected to settle at historically “low-ish” levels, which should still be very conducive to business … balance sheets for individuals and companies are in a good position to withstand this shift, and before we know it, we expect to be in a recovery.”

Brookfield has billions of its own money invested in giant portfolios of what it calls “alternative assets” – real estate, infrastructure, energy and distressed debt. Brookfield also attracts outside money, from institutional investors and the wealthy, to invest alongside it. The assets it buys are placed in partnerships, some of which trade on U.S. and Canadian exchanges, and other private funds.

“With many of our infrastructure, renewables and real estate assets positioned to benefit from inflation, our revenue streams and cash margins are widening as the compounding effect of inflation takes hold,” Mr. Flatt wrote. “With equity markets down 20 per cent to 30 per cent from their peak and credit markets “turning sideways for many corporate borrowers,” he wrote, “the investing environment for businesses like ours continues to strengthen. We are therefore investing capital at excellent returns—much higher than we would have otherwise achieved under conditions like those experienced in late 2020 and 2021.”

Indeed, Brookfield seems to have no trouble attracting dollars from current and new clients. Brookfield said it had record inflows of US$56-billion since the end of the last quarter. Fee-bearing capital – the amount of outside investor money Brookfield manages – was US$392-billion at June 30.

In the quarter, Brookfield closed its green-energy Global Transition Fund at US$15-billion Mr. Flatt said Brookfield is completing a first close for its latest infrastructure fund of US$20-billion and private equity fund of US$8-billion. Brookfield has also raised about US$14.5-billion for an opportunistic real estate fund.

Mr. Flatt said a US$16-billion opportunistic debt strategy fund will soon be mostly invested, which will set the stage for Brookfield to launch another.

Brookfield said in May it will spin off a new asset-management business to shareholders by the year’s end, creating a roughly US$80-billion entity that will pay most of the dividends its shareholders now receive. The company invests for itself, which requires it to raise billions of dollars in capital, but also manages money for others. Money managers who need little capital tend to get higher valuations from investors, a benefit Brookfield wasn’t receiving with the two businesses yoked together as one.

Mr. Flatt said in his letter that former Bank of Canada governor Mark Carney, who joined Brookfield as as an advisor to its Transition funds, will serve as chairman of the board of the new money manager, which will be called Brookfield Asset Management Ltd.

Mr. Flatt will be CEO of the asset manager while also remaining CEO of the current company, which will be renamed Brookfield Corp.

The separate asset-management company would add to a dizzying array of Brookfield entities available to investors. Three limited partnerships – Brookfield Infrastructure Partners LP, Brookfield Renewable Partners LP and Brookfield Business Partners LP – trade on the New York and Toronto exchanges. Brookfield Infrastructure Corp., a subsidiary of the limited partnership, trades on the NYSE. Brookfield Asset Management Reinsurance Partners Ltd. trades on both exchanges. And the Brookfield Global Infrastructure Securities Income Fund trades in Toronto.

METRO REPORTS 2022 THIRD QUARTER RESULTS

2022 THIRD QUARTER HIGHLIGHTS

•  Sales of $5,865.5 million, up 2.5%
•  Food same-store sales up 1.1%
•  Pharmacy same-store sales up 7.2%
•  Net earnings of $275.0 million, up 9.0% and adjusted net earnings⁽¹⁾ of $283.8 million, up 8.7%
•  Fully diluted net earnings per share of $1.14, up 10.7%, and adjusted fully diluted net earnings per share⁽¹⁾
  of $1.18, up 11.3%

https://www.newswire.ca/news-releases/metro-reports-2022-third-quarter-results-869872959.html

Manulife reports drop in second-quarter core profit

Manulife Financial Corp slightly beat analysts’ estimates for second-quarter core profit but saw earnings drop from a year earlier, due to market volatility that weighed on its asset management unit and COVID-19 restrictions in Asia.

Canada’s largest life insurer reported core earnings of $1.56-billion, or 78 cents a share, in the three months ended June 30, compared with $1.68-billion, or 83 cents a share, a year earlier. Analysts had expected 76 cents a share.

Analysts had forecast a muted second quarter for Canadian life insurers, on expectations that their substantial asset management units would take a hit from equity market declines. They also noted that lingering COVID-19 restrictions in Asia could prove a challenge, a headwind the company had flagged in its previous quarterly results announcement.

Manulife reported core earnings declines of 14% in its global wealth and asset management unit as fee income and assets under management declined; 4.6% in its U.S. business on lower demand for some insurance products due to higher inflation; and 2.5% in Asia, on lower sales, particularly in Hong Kong and Japan.

An 8.5% increase in its Canadian earnings, lifted by growth in new business value, helped offset the declines somewhat.

Net income attributable to shareholders was $1.09-billion or 53 cents per share, compared with $2.65-billion, or $1.33 a share, a year earlier.

West Fraser cuts production, mill shifts in B.C. for loss of 147 jobs

West Fraser Timber Co. Ltd. WFG-T +2.37%increase says it is cutting a shift at three B.C. mills for a loss of 147 jobs as it reduces production in part because of lack of timber supplies.

The wood products company says the shift reductions will mean a loss of 77 jobs at its Fraser Lake Sawmill, 15 positions at Williams Lake Lumber, and 55 jobs at Quesnel Plywood.

The job cuts, expected to take place over the fourth quarter, come as the company permanently cuts about 170 million board feet of combined production at its Fraser Lake and Williams Lake sawmills and about 85 million square feet of plywood production at its Quesnel operation.

The Vancouver-based company says it expects to reduce the impact on affected employees by providing work opportunities at other West Fraser operations.

Access to timber has become an increasing challenge in British Columbia as the mountain pine beetle, wildfires and other issues hit supplies, while West Fraser notes that transportation constraints have also reduced its ability to access markets.

West Fraser has been increasingly expanding in the southern U.S., including purchases of mills in Texas and South Carolina.

U.S. inflation rate slips from 40-year peak but remains high at 8.5%

Falling gas prices gave Americans a slight break from the pain of high inflation last month, though the surge in overall prices slowed only modestly from the four-decade high it reached in June.

Consumer prices jumped 8.5% in July compared with a year earlier, the government said Wednesday, down from a 9.1% year-over-year jump in June. On a monthly basis, prices were unchanged from June to July, the smallest such rise more than two years.

Still, prices have risen across a wide range of goods and services, leaving most Americans worse off. Average paychecks are rising faster than they have in decades – but not fast enough to keep up with accelerating costs for such items as food, rent, autos and medical services.

Last month, excluding the volatile food and energy categories, so-called core prices rose just 0.3% from June, the smallest month-to-month increase since April. And compared with a year ago, core prices rose 5.9% in July, the same year-over-year increase as in June.

President Joe Biden has pointed to declining gas prices as a sign that his policies – including large releases of oil from the nation’s strategic reserve – are helping lessen the higher costs that have strained Americans’ finances, particularly for lower-income Americans and Black and Hispanic households.

Yet Republicans are stressing the persistence of high inflation as a top issue in the midterm congressional elections, with polls showing that elevated prices have driven Biden’s approval ratings down sharply.

On Friday, the House is poised to give final congressional approval to a revived tax-and-climate package pushed by Biden and Democratic lawmakers. Economists say the measure, which its proponents have titled the Inflation Reduction Act, will have only a minimal effect on inflation over the next several years.

While there are signs that inflation may ease in the coming months, it will likely remain far above the Federal Reserve’s 2% annual target well into next year or even into 2024. Chair Jerome Powell has said the Fed needs to see a series of declining monthly core inflation readings before it would consider pausing its rate hikes. The Fed has raised its benchmark short-term rate at its past four rate-setting meetings, including a three-quarter point hike in both June and July – the first increases that large since 1994.

A blockbuster jobs report for July that the government issued Friday – with 528,000 jobs added, rising wages and an unemployment rate that matched a half-century low of 3.5% – solidified expectations that the Fed will announce yet another three-quarter-point hike when it next meets in September. Robust hiring tends to fuel inflation because it gives Americans more collective spending power.

One positive sign, though, is that Americans’ expectations for future inflation have fallen, according to a survey by the Federal Reserve Bank of New York, likely reflecting the drop in gas prices that is highly visible to most consumers.

Inflation expectations can be self-fulfilling: If people believe inflation will stay high or worsen, they’re likely to take steps – such as demanding higher pay – that can send prices higher in a self-perpetuating cycle. Companies then often raise prices to offset higher their higher labour costs. But the New York Fed survey found that Americans’ foresee lower inflation one, three and five years from now than they did a month ago.

Supply chain snarls are also loosening, with fewer ships moored off Southern California ports and shipping costs declining. Prices for commodities like corn, wheat and copper have fallen steeply.

Yet in categories where price changes are stickier, such as rents, costs are still surging. One-third of Americans rent their homes, and higher rental costs are leaving many of them with less money to spend on other items.

Data from Bank of America, based on its customer accounts, shows that rent increases have fallen particularly hard on younger Americans. Average rent payments for so-called Generation Z renters (those born after 1996) jumped 16% in July from a year ago, while for baby boomers the increase was just 3%.

Stubborn inflation isn’t just a U.S. phenomenon. Prices have jumped in the United Kingdom, Europe and in less developed nations such as Argentina.

In the U.K., inflation soared 9.4% in June from a year earlier, a four-decade high. In the 19 countries that use the euro currency, it reached 8.9% in June compared with a year earlier, the highest since recordkeeping for the euro began.

Justin Trudeau’s reality: Much of the country dislikes him

Will Justin Trudeau know when it’s time to go?

Surely, this is something occupying at least some of his energy during his much-discussed vacation to Costa Rica. Will he return reinvigorated, primed for a fall battle against the presumptive new leader of the Conservative Party of Canada, Pierre Poilievre? Or will he begin laying the groundwork for his departure?

There has been conjecture that he might even trigger a fall election. I don’t believe that for a second. The man has never been as unpopular as he is now, so why would he do that? Particularly given that he is still in a position to govern for almost three more years under the confidence-and-supply agreement reached with the NDP.

My guess is he won’t return from vacation with any grand revelation resulting from a walk on the beach – the summer version of his father, Pierre’s, famous walk in a snowstorm that inspired his retirement in 1984. Instead, Justin will likely gird for a fight with Mr. Poilievre while trying to refurbish an agenda that has been hijacked and uprooted by a series of unfortunate events: a pandemic, inflation, war in Ukraine, and a new political adversary who is skilled in landing devastatingly effective political punches.

But the Prime Minister must also face another reality: he is not well-liked by broad swaths of the public.

Mr. Trudeau incites a visceral response in many Canadians, and not just those living in Western Canada. After a certain length of time in office, most politicians accumulate unsightly barnacles that are difficult to shake. Mr. Trudeau is no exception.

Justin Trudeau is spending two weeks in Costa Rica. So what?

There has always been a “to-the-manor-born” aura about the Prime Minister, something that comes with being the scion of a famous family. Many people have never felt comfortable with the way he speaks – it can seem affected, unnatural. It’s a subjective matter, but one that can influence the way a person thinks about you.

Mr. Trudeau has also been hurt by self-inflicted wounds. He has cemented the impression that there is one set of rules for him, and another for the rest of us. The whiff of privilege enveloping him appeared early on, when he spent the Christmas of 2016 on the Aga Khan’s private island, in violation of federal conflict-of-interest laws. That feeling extended to his latest holiday in Costa Rica, where he and his family emerged from a private jet, maskless. Again, one rule for him, another for the lumpenproletariat forced to fly commercial.

The Prime Minister is seen by many as a woke virtue signaller, more concerned with image than substance. There was his showy trip to Kyiv in May to reopen the Canadian embassy, which hasn’t been occupied since. He travelled to Tofino, B.C., for a surfing holiday on the first-ever National Day of Truth and Reconciliation last year, despite his oft-repeated declaration that nothing is more important to him than treating Indigenous peoples with respect and dignity.

Fair or not, Mr. Trudeau is taking the blame for just about every travel woethese days: security delays and chaos at airports, days-long lineups for passports, flight cancellations. It’s all because of the federal government’s COVID-19 mandates and the ArriveCAN app, his critics protest. It’s not, of course, but the PM is wearing it anyway.

In a response to a previous column, one letter writer suggested to me that when people feel their interests and values are systemically being disregarded by governments, they begin to look for alternatives – as unappealing as some of those other options might be to them. That may explain a recent Abacus poll that showed the Conservatives up five points over the Liberals if an election were to have been held last month.

A dangerous rage is sweeping the land

The same poll asked respondents if they had a positive or negative impression of Mr. Trudeau. Fifty-one per cent responded in the negative – his worst number on this question, ever. The survey also indicated that a dwindling number of people believe the country is heading in the right direction.

Mr. Trudeau has always been unpopular in the Prairies. But that enmity is now spreading. There is an impression that the Prime Minister is a master of wedge politics, which has divided the country more than anything the Conservatives have done in recent memory. Many Canadians haven’t been able to trust the PM since the SNC-Lavalin scandal and his showdown with Jody Wilson-Raybould.

Can Mr. Trudeau rise from the stupor in which he currently finds himself? It’s possible. He has a fairly long runway ahead of him thanks to the NDP. But a lot of the damage that has been done to the Trudeau brand is likely irreversible.

The Prime Minister is many things, but stupid he is not. He can see what’s going on. The question is – what will he do about it?