Canadian corporations earnings dip 6.4% from the previous quarter

Statscan - Canadian corporations earned $50.2 billion in operating profits in the second quarter of 2009, down 6.4% from the previous quarter. This compares with declines of 14.1% in the first quarter of 2009 and 19.2% in the fourth quarter of 2008. As of the second quarter of 2009, operating profits have declined 35.1% since their peak in the third quarter of 2008.

Profits in the non-financial industries fell 4.0% to $37.6 billion in the second quarter, while profits in the financial industries shrank by 13.1% to $12.5 billion. Lower profits in the quarter were mainly attributable to manufacturing, banks and credit unions, and insurance carriers as 12 of 22 industries reported lower profits. This compares with 16 of 22 industries reporting decreases in profits in the first quarter.

Manufacturing profits decrease for the third straight quarter

Manufacturers earned $6.8 billion in operating profits in the second quarter, down 7.1% from the first quarter. Petroleum and coal manufacturers accounted for the bulk of the decline, down 26.3% from the first quarter, earning $1.3 billion in operating profits. Lower prices and longer than normal shutdowns of refineries contributed to the decline.

Motor vehicle and parts manufacturers posted an operating loss of $1.2 billion in the second quarter compared with an operating loss of $1.7 billion in the previous quarter. This marks the seventh consecutive quarter of operating losses.

In contrast, food and soft drink manufacturers reported $1.3 billion in profits in the second quarter, up 10.9% from the first quarter of 2009.

Mining and oil and gas extractors' profits down

Reduced demand for potash and nickel, which prompted stoppages at certain mining operations, contributed to the 11.5% decline in profits to $1.6 billion in the second quarter for this industry. Meanwhile, oil and gas extractors earned $4.2 billion in profits, falling 6.8%, as oil and gas extractors limited production in light of lower prices.

Declines for both retail and wholesale trade

Operating profits for retail trade fell 11.1% to $3.1 billion in the second quarter. Lower profits among major clothing, department and other general merchandise retailers accounted for much of the decline.

Wholesale trade reported operating profits of $3.2 billion, down 11.5%. Both retail and wholesale trade have seen profits fall in three consecutive quarters.

Insurance carriers and depository credit intermediaries contribute to declines in financial industries

Life, health and medical insurance carriers and depository credit intermediaries accounted for the bulk of the 13.1% decline in financial industries' profits in the second quarter. Higher claims expenses pushed total expenses higher for life, health and medical carriers. For banking and other depository credit intermediaries, lower interest revenue accounted for declines in profits.

Note to readers

Quarterly financial statistics for enterprises 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.

Profits referred to in this analysis are operating profits earned from normal business activities. For non-financial industries, operating profits exclude interest and dividend revenue and capital gains/losses whereas for financial industries, these are included along with interest paid on deposits.

Operating profits differ from net profits, which represent the bottom-line profits earned by corporations.

Quarterly profit numbers referred to in the text are seasonally adjusted.