Good morning! May your Friday be short and your weekend long. Shari Kulha (@FPExecEditor) here, prepping you with our top business stories for your reading pleasure this morning. One developing story is that B.C. said late yesterday it’s putting together a legal team to seek a reference case for its plan to prevent pipeline expansion through the province. But there may be signs the interprovincial trade war is softening.
Autoparts maker Magna International says it is open to major acquisitions, after reporting record sales of $38.9 billion in 2017 and a net income of $556 million in Q4, which was better than expected. Alicja Siekierska writes that the company has been outpacing the industry thanks in part to global acquisitions, and it clearly expects to do more.
Quote: “We are generating a lot of cash… so we have the ability to do a sizeable acquisition if it makes sense,” CEO Don Walker said. “We have been tending to look at some of the new technologies out there….”
BANK LIKE A BOSS
The first of the Big Six banks to report earnings, CIBC posted adjusted net income for Q1 of $1.43 billion, up from about $1.17 billion. Geoff Zochodne reports that gains south of the border buoyed the results. Tax reforms in the U.S. caused the bank to take an $88-million charge, but its acquisition last summer of PrivateBankCorp more than made up for that.
Bottom line: CIBC recorded $134 million in reported net income from its U.S. commercial banking and wealth management unit for Q1 2018, an increase of $105 million (or 362%) from last year’s Q1. So, cross-border shopping does pay.
A RUTABAGA ROUT?
Hollie Shaw reveals Loblaw results, which took a $230-million hit from the bread-pricing scandal and merging of Optimum and PC loyalty cards. Loblaw said net earnings in Q4 fell to $19 million from $201 million a year earlier. “The Shoppers (purchase) looks genius now,” one consultant said, as the drug store chain’s same-store sales outstripped its grocery counterpart’s. “A drugstore business is still a more profitable business than selling rutabagas and meat.”
Quote: “Grocery is cyclical and there are up and downs in the marketplace. Right now we happen to be in a period where you have to decide if you are in the market share business or the profit business, and that happens in grocery more than it does in other categories,” the consultant said.
HOME SALES HUSTLE
Expect Toronto to follow suit if Vancouver’s “very aggressive” speculation tax on property succeeds. In its first full budget, Naomi Powell writes, B.C.’s NDP government created a new tax on investors who own empty properties and pay no income taxes in the province.
Quote: “… if we start to see evidence that the (Toronto) market’s taking off again and foreign investment starts rising, I think B.C’s speculation tax in particular is a key measure they’ll need to take a closer look at,” said Robert Kavcic, senior economist at BMO Capital Markets.
With just a few days left until B-Day on Tuesday, Jesse Snyder has rounded up some details on what might be handed down in the federal budget. There’ll be no Trump-like tax cuts, but businesses are hoping for something that will make the playing field more even. Fixes to last fall’s tax fiasco, which angered so many in the small-business category, are still on wish lists. Many small businesses rely on innovation funding, which may fare well given Ottawa’s support of the tech industry. Hints have been heard about a gender parity program of some sort, but spending on infrastructure “seems implausible.” Most observers are hoping for spending restraint.
Quote: With inflationary whispers out there, “You want to have enough cushion on the fiscal side to deploy a reasonably effective stimulus program to complement what the Bank of Canada is going to do,” Scotiabank’s Senior VP and chief economist Jean-François Perrault said he told Morneau. Only four more sleeps til we know.