Canadian Firms, Hard Hit by Recession, Post 61% Decline in First-Quarter Profit
TORONTO -- Canadian corporate profits were skimpy again in the first quarter, but most economists believe their long decline will bottom out later this year.</br></br>It's about time. The latest period was the seventh consecutive quarter in which profits of early-reporting Canadian companies have slid below year-earlier levels. They were pushed down by a recession that started earlier and hit harder than the slowdown in the U.S.</br></br>First-quarter net income of 162 companies surveyed by The Wall Street Journal fell 61% to 803 million Canadian dollars (US$699 million) from C$2.07 billion a year earlier. More than a third of the companies reported losses. Declines were spread across most industries. Canadian Pacific Ltd., the big holding company that's often seen as a proxy for the Canadian economy, reported its worst quarter since 1986. It lost C$5.3 million against a year-earlier profit of C$76.2 million.</br></br>Combined results for the period were better than in the preceding quarter, when the same 162 companies reported a C$56 million loss. But the losses were inflated by a round of year-end write-offs. Steel maker Dofasco Inc., for instance, wrote off C$713 million in last year's fourth quarter.</br></br>The Canadian recession began in the second quarter of 1990. Since then, the unemployment rate has risen to 10.5%. Bankruptcies in this year's first quarter were up 63% from a year earlier. Along with weak domestic demand, business has been burdened by higher-than-U.S. interest rates and exporters by a strong Canadian dollar.