This story is part of The COVID Economy, a CBC News series looking at how the uncertainty of the coronavirus pandemic is affecting jobs, manufacturing and business in regions across Canada.
As harbingers of pandemic doom go, there was little more startling news for residents of Newfoundland and Labrador over the last month than learning that Hibernia would stop drilling for oil.
Hibernia is many things — the name of an oil field, the company that owns it, the name of the massive platform that sits on the ocean floor about 315 kilometres southeast of St. John’s — but it is also a symbol of the province’s economy, and how dramatically it has changed in a generation.
The revelation last week that lead operator ExxonMobil would halt drilling for as much as 18 months was just one of a cascade of announcements that underline the deep, deep trouble that Newfoundland and Labrador is in.
Many of these problems — a crushing government debt, an oil industry that has been struggling, an economy that is not yet diversified enough to withstand the roller-coaster rides of the global commodities trade — were all there before COVID-19 crashed into Canada this winter.
If anything, the pandemic just pushed existing problems into high relief, and proved that even pillars of the economy, like Hibernia’s sturdy gravity-based platform, can be shaken to the core.
From cod to oil
Hibernia has enjoyed a special status for more than two decades. It was the first field to go into production off Newfoundland’s east coast, ushering in an economic change that has been transformative.
It’s also critical to understand Hibernia’s timing. It arrived on the scene just when a beleaguered economy needed it.
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In 1992, the cod fishery off Newfoundland’s northeast coast was shut down, wiping out 20,000 harvesting and processing jobs. Other fishery closures would follow, and the industry that had sustained England’s first colony for centuries became a fraction of its former self.
The cod moratorium happened in July 1992. Only three months later, construction began on the Hibernia gravity-based platform. Within five years, Hibernia was producing oil, and a very different economic narrative starting taking place in Newfoundland and Labrador.
Dwight Ball has appeared at many daily briefings on COVID-19 — a role he did not expect when he announced plans to resign as premier in February. (CBC)
Well, for a while, anyway.
In the boom years, when Brent Crude — the commodity that is followed closely in St. John’s, in the same way West Texas Intermediate is followed in Alberta — was selling well over $100 US a barrel, money was flowing in Newfoundland and Labrador. In 2008, then-premier Danny Williams struck lucrative deals with labour unions, offering four-year contracts that effectively hiked wages by almost 20 per cent.
Falling oil prices, mounting debt
The global economy collapsed later that year, but N.L. bounced back, its revenues driven largely by oil revenues and royalties.
That bounce did not last. By 2015, the global collapse in oil prices caught up with N.L.’s ledger, which has been running in ever-deeper shades of red ink since.
Employees at seafood processing plants, like this one in St. Anthony, N.L., typically work in proximity. It is not clear if physical distancing can work in such plants. (Bruce Tilley/CBC)
One of the key reasons has been the Muskrat Falls hydroelectric megaproject, which is nearly complete at a cost of $12.7 billion, far above the $7.4 billion cost that the government of Kathy Dunderdale approved at sanction in 2012.
But Muskrat Falls isn’t the province’s only debt headache. The government has continued to spend more than it earns. The latest report from the auditor general, last December, put the per capita debt at $29,250 for every person in the province — a dubious record — with the government facing a net debt of $15.4 billion.
Debt servicing was already a serious issue before the pandemic, but the urgency now is even more severe. On March 20, Premier Dwight Ball wrote to Prime Minister Justin Trudeau about worries that the government could “go under.” Days later, after N.L. was unable to raise money in the markets, the Bank of Canada bought up short-term provincial bonds, and Ball would later say the government was not at risk of failing to make payroll.
Newfoundland and Labrador has been — on paper, at least — a so-called have province since 2008, when it no longer qualified for federal equalization payments. That’s largely because the impact of the oil industry on gross domestic product is so dramatic.
Trouble in almost every sector
At street level, N.L. has not felt like a have province for the last few years, and one by one, indicators for hope have been knocked down amid the pandemic.
The fishing industry — which transformed itself after the cod moratorium, with a focus on shellfish and live exports to Asian markets — is in great peril. At sea, working on the boats necessitates physical proximity, and it’s no different in seafood processing plants, like other industrialized food businesses.
Newfoundland and Labrador’s advertising, featuring idyllic — and stylized — images like this, has been credited with driving dramatic growth in the province’s tourism industry. (Newfoundland and Labrador Tourism/YouTube)
Brenda Greenslade, who runs the Fish Harvesting Safety Association, says physical distancing is extraordinarily difficult on fishing vessels, where every nook and cranny has a purpose. “A harvester told me the other day, their accommodations when they sleep, their heads are so close together, they share the same dream,” she told CBC News last week.
Other industries that Newfoundland and Labrador has been nurturing are in trouble. Tourism has grown substantially in the last decade, powered by colour-drenched, whimsical advertising campaigns that play up the rugged coastlines and down-home values of the place — an excellent locale for physical distancing, but impossible to reach while most travel remains effectively grounded.
Other elements of the economy have, one after another, fallen into trouble:
‘There is going to be an economic crisis’
Ball has not sugar-coated the circumstances, and during daily COVID-19 briefings he often reminds residents that while the health emergency is the top priority, an economic one will then need to be solved.
The floating platform at the Terra Nova oil field had been set for an upgrade later this year in Spain, but the COVID-19 pandemic has deferred those plans. (Suncor Energy)
“Coming out of this, there is going to be an economic crisis, and the provinces and the country will be indeed economically sick as well,” Ball said at the end of March.
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Ball himself, though, will likely not be tasked with resolving Newfoundland and Labrador’s fierce economic woes. In February, under considerable pressure from his own ranks, the Deer Lake pharmacist and businessman — who last spring led the Liberals to a significantly reduced majority — announced plans to step down as premier.
Like almost everything else, those plans have been pushed aside. The Liberals deferred a leadership convention that had been set for May 9, and the candidates to succeed him have suspended their campaigns. Ball has said he will stay on as long as it takes.
So, for now, as almost every industry struggles, Ball finds himself in the unexpected position of steward of a have province that is effectively broke, and with nothing but storm clouds overhead.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
