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After betting its future on Boeing, jetmaker Embraer scrambles for elusive plan B – Investing.com

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© Reuters. Air Astana Embraer E190-E2 aircraft with a snow leopard livery is seen at Almaty International Airport

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By Marcelo Rochabrun, Tim Hepher and Rodrigo Viga Gaier

SAO PAULO/PARIS (Reuters) – Brazilian planemaker Embraer SA (SA:) has been thrust into an uncertain future with no immediate plan B, while not ruling out seeking a bailout after Boeing Co (N:) jettisoned a $4.2 billion commercial aerospace tie-up amid the coronavirus crisis.

The company’s shell-shocked chief executive, in the job for a year with little aerospace experience, sought to rally staff after the board held late-night talks to review the collapse of plans for surviving mounting aerospace competition.

“Our history is full of difficult moments, and we have overcome all of them,” Francisco Gomes Neto told Embraer’s 20,000 staff before giving them a thumbs up.

But Embraer now faces a historic crisis with its isolation reinforced by the breakup – two years after Europe’s Airbus (PA:) absorbed Embraer’s main competitor, the Canadian-designed A220.

“For Embraer, it could be very damaging,” said Teal Group consultant Richard Aboulafia, noting it was the only significant independent jetmaker.

“It’s hard to pressure your suppliers when the volume you’re offering is a fraction of your competition’s”.

Embraer’s immediate aim is to reassure investors. It pledged cost savings and said it had solid liquidity.

It also tore up arguments previously used to persuade unions and regulators to back the deal, saying it could survive without Boeing rather than stating the deal would be its “salvation”.

The former state-owned company has not asked for a bailout but says it is open to “complementary” sources of financing.

Brazilian companies, including airlines and automakers, are in bailout discussions.

Embraer “will need strong government support to recover the (separation) expenses and recover from the economic crisis caused by coronavirus,” said Aurelio Valporto, who heads minority shareholder group Abradin and opposed the deal.

Embraer had two main pitches for investors that have now vanished.

First, it would pay $1.6 billion in dividends from the sale. Second, it would receive enough cash to wipe debts clean and rejuvenate defense and executive-jet units. As a revamped company, Embraer would get a fresh start.

Executives also hoped Boeing’s marketing would be a silver bullet for the commercial arm, to be 80%-owned by Boeing.

Instead, Embraer now has a crisis committee that meets daily and no end in sight for its troubles.

That, analysts say, could not come at a worse time.

Sales of its E2 have lagged. Overall jet demand has vanished due to coronavirus. Now, crashing oil prices have further weakened the case for new jets, sold mainly on fuel efficiency.

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Questions have also been raised over how long high-profile Embraer jetliner CEO John Slattery, who aggressively marketed the E2 jet while lobbying for regulatory approval, will stay without the deal. He did not respond to a request to comment.

In a Twitter post, he said, “Despite this uncertain period in our industry, I’m confident Embraer will emerge stronger.”

On the positive side, analysts expect demand for small jets like the A220 or Embraer’s E2 to lead any future rebound.

The breakup may also spark a distracting legal battle.

In Brazil, alarm bells rang when Boeing lawyers began quizzing Brazilian counterparts on paperwork in recent weeks.

Industry sources said Boeing needed room to maneuver as it seeks U.S. government support for the U.S. aerospace industry. With the crisis expected to resurrect economic barriers, it was seen in a corner over moves to acquire thousands of Brazilian engineers while drawing up plans to lay off its own staff.

“You can’t easily go to Congress and ask for support and spend the money on an acquisition,” a senior source said.

Embraer says Boeing scuppered the deal on technicalities because of its own financial problems. Boeing says it pulled out only because Embraer failed to meet conditions. But the row itself could be damaging.

“Since it came apart in such vitriolic fashion, it’s hard to believe they can pick up the pieces and try again,” Jerrold Lundquist, managing director of The Lundquist Group, said.

That leaves limited options for Embraer though none has been discussed as a serious plan B.

One potential wild card is China, which almost beat Airbus to the A220 program and which remains on the hunt for ways of accelerating its own aerospace ambitions.

“From a strategic point of view, it is an option but it could be politically problematic,” Lundquist said.

Members of the inner circle of Brazilian President Jair Bolsonaro have repeatedly attacked China over coronavirus.

The breakup also leaves uncertainty for Embraer employees, many of whom were expected to work on future Boeing programs.

Embraer had already furloughed more than 90% of its main Brazil plant due to the crisis.

It had also spent $30 million on a new headquarters as it prepared to carve out the commercial unit.

“Our teams were working together, deciding things together. There were thousands of people working on joint decisions, all for it to end this way,” a person close to the discussions said.

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First-quarter GDP worst showing since 2009: StatCan – CTV News

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OTTAWA —
Canada’s economy had its worst quarterly showing since 2009 through the first three months of 2020 owing to COVID-19, Statistics Canada said Friday, warning an even steeper drop may be coming.

Gross domestic product fell at an annualized rate of 8.2 per cent in the first quarter, including a 7.2-per-cent drop in March as restrictions by public health officials began rolling out, including school closures, border shutdowns and travel restrictions.

Preliminary information indicates an 11 per cent drop in GDP for April, but the statistics agency said that figure is likely to be revised as more information becomes available.

Similarly, the agency said first-quarter figures are likely to have larger than usual revisions in subsequent data releases. Some numbers had to be estimated because they were not available.

Early indications are that March and April could end up as the largest consecutive monthly declines on record.

The drastic drop in gross domestic product likely doesn’t fully reflect the experience of every Canadian, said BMO chief economist Douglas Porter, noting GDP is just one barometer of how the pandemic has affected the domestic economy.

“You don’t get the entire picture just from GDP and even from employment (figures) because policy-makers have stepped up with such unusual and aggressive actions that a lot of the common metrics just don’t apply 100 per cent in this episode,” Porter said in an interview.

The federal response to date totals about $152 billion in direct spending. The parliamentary budget officer has said that could leave the deficit at $260 billion, with a national debt north of $950 billion.

A preliminary estimate released by the Finance Department on Friday showed deficit of $21.8 billion for the fiscal year that closed in March. The figure will still be subject to revisions, which may land it closer to the government’s last estimate of $26.6 billion.

The monthly fiscal monitor also showed the debt pushed past $794.4 billion.

Many of the items adding to this year’s deficit are expected to show up in supplementary spending estimates. The documents will be scrutinized for four hours in mid-June based on the motion the adopted this week to put the Commons on extended hiatus until late September.

Budget officer Yves Giroux told a Commons committee on Friday that would provide parliamentarians little opportunity to properly scrutinize tens of billions, if not over $100 billion in proposed spending.

“It comes up as a very expensive four hours potentially for Canadian taxpayers,” he said. “The amount of scrutiny for this unprecedented spending will also be unprecedented, but for the wrong reasons.”

The latest federal spending figures showed $41.44 billion has been paid to 8.29 million people through the Canada Emergency Response Benefit, and $7.9 billion in wage subsidies to 181,883 companies.

MPs on the Commons finance committee were told Thursday the cost of the wage susbidy program is somewhat less than the original $73-billion estimate. Consultations are underway to understand why companies aren’t accessing the program that covers 75 per cent of salaries, subject to a cap of $847 per week, per employee.

Asked about the lopsided spending, Prime Minister Justin Trudeau said the subsidy will become “more and more important” as restrictions ease and businesses reopen. He also said the CERB has helped “support millions of Canadians who need help paying for groceries, paying their rent.”

Statistics Canada said household spending, a backbone of the Canadian economy, was down 2.3 per cent in the first quarter of 2020, the steepest quarterly drop ever recorded.

The drop in household spending was broad, affecting goods like new cars and clothing, and services for food as bars and restaurants in particular were ordered closed. Instead, spending on going out became money spent staying in, Statistics Canada said, noting increases in household food and alcohol by 7.2 per cent and six per cent, respectively.

As a result of less spending overall, the savings rate rose for the quarter to 6.1 per cent from the 3.6 per cent recorded in the fourth quarter of 2019 with higher rates recorded at higher income levels.

The savings built up during the shutdown period could translate into extra spending as restrictions ease, said CIBC senior economist Royce Mendes in a note.

TD senior economist Brian DePratto wrote in a note that it isn’t unreasonable to think a modest recovery may already be forming.

“The key question is what kind of recovery? Given the significant hits to incomes and longer-lasting impacts on some industries, a marathon appears more likely than a sprint.”

This report by The Canadian Press was first published May 29, 2020.
 

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Alberta partners with fast-food restaurants to distribute 4 non-medical masks to every resident – Globalnews.ca

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The Alberta government will provide every resident with four non-medical face masks, as the province continues its phased approach to relaunch the economy.

Health Minister Tyler Shandro announced Friday morning that the government has partnered with A&W, McDonald’s Canada and Tim Hortons to distribute the masks at the restaurants’ drive-thru locations.

The masks will be free of charge.

“Alberta is the first and so far, as far as I know, the only province that has decided to distribute masks province-wide,” Shandro said. “This program will help Albertans get back to work and enjoy everyday activities safely.”

While mask use is not mandatory, Alberta’s chief medical officer of health has recommended Albertans wear a non-medical mask when two metres of physical distance cannot be maintained, such as on public transit.


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A total of about 20 million non-medical masks will be distributed at a cost of around $20 million. Shandro said partnering with the fast-food restaurants will cut down on the distribution cost to government, which is around $350,000.

“These three partners are doing it without added expense to the Alberta taxpayer,” Shandro said.


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The drive-thru pickup also provides safe physical distancing for Albertans, as people will be able to stay in their vehicles.

Shandro said the three restaurant companies have about 600 drive-thru locations in the province, and 95 per cent of Albertans live within 10 kilometres of one of these locations.

The province is working on a plan to ensure distribution of masks is possible to the remaining five per cent of the population, Shandro said.

“Even if you don’t have an A&W, a McDonald’s or a Tim Hortons in your community, you will be able to get your four masks,” he said.


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The government’s distribution cost is “for us to be able to pay for the gap distribution for the other five per cent of folks who may not be able to get to a drive-thru,” according to Shandro.

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Distribution will be done on the honour system.

“We’re not asking for folks to bring in their health-care card and get a punch to show that they’re already picked up,” Shandro said.

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“This is on the honour system, but Albertans are responsible and they’ve shown us that. Throughout the response to this pandemic, Albertans have shown us that they are responsible.

“Obviously there may be some folks who will be unable to make their way to a drive-thru — I’m thinking about one of my parents in particular — and whether it’s me or one of my siblings who has to go pick up for my parents, that’s going to be the case. And the folks at the 600 stores, the employees, are going to just have to trust Albertans and we’re going to have to trust Albertans.”






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Alberta’s Dr. Hinshaw lays out best practices for wearing face masks to slow COVID-19 spread


Alberta’s Dr. Hinshaw lays out best practices for wearing face masks to slow COVID-19 spread

The health minister stressed the three-layered, non-medical face masks are not part of the provincial supply of personal protective equipment (PPE) meant for health-care workers and first responders.

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The masks are single-use, Shandro said.

“They are not medical grade masks. We are not taking away any of the PPE from our front lines,” Shandro said.


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In a media release from the province, all three restaurants expressed their pleasure to be part of the mask program.

“A&W is very pleased to support the government of Alberta with this great initiative. Our restaurants across the province have been quick to step up and help organize the distribution of masks, and are looking forward to welcoming Albertans at our drive-thrus,” A&W Canada president and CEO Susan Senecal said.

“McDonald’s Canada, together with our franchisees, have been committed to helping our communities throughout this pandemic. We welcome this opportunity to use our drive-thru operations to assist the Alberta government, and do the right thing for Albertans when they need us most,” said Jeff Kroll with McDonald’s Canada.

“Throughout the pandemic, the 1,500 Tim Hortons owners across Canada have been eagerly supporting their local communities and stepping up to answer calls for assistance. When we were asked by the Alberta government to help distribute masks through our drive-thrus we did not hesitate. We’re proud to have been asked to participate in this important program and do our part to help Alberta move forward on its relaunch strategy,” Tim Hortons COO Mike Hancock said.

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Tanya Doucette, a Tim Hortons owner who runs eight locations across central Alberta, said the province has asked that they not hand out the mask bags inside the restaurant, just through the drive-thru.

“They want to ensure safe social distancing, and I think because they’re worried people might show up in large numbers and queues in person, that could create risk,” Doucette said.

“We have acrylic shields in our drive-thrus and our team members are wearing non-medical grade masks, so this is a safe distance option to hand out the masks.”


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She said people must be in a vehicle, they cannot walk through the drive-thru.

“What you can do if you don’t have a vehicle or you don’t have access to a vehicle, you can ask a friend or family member to pick up your allotment of masks for you through a drive-thru location at Tim Hortons,” she said.

Representatives from McDonald’s and A&W also say that masks will only be handed out through the drive-thru, and people must be in a vehicle.

The masks have arrived and will be ready for distribution early next month. Further details of the rollout will be released in the coming days.

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Shandro encouraged Albertans to source their own non-medical masks through local businesses or make their own at home.

“This is not meant to be able to provide Albertans with an unlimited supply.”

More information on how to safely put on and take off a non-medical face mask can be found on the government’s website.






1:08
Hinshaw clarifies that N95 masks are not required for ‘typical care to a patient’


Hinshaw clarifies that N95 masks are not required for ‘typical care to a patient’

Shandro said that on Friday morning, Alberta surpassed the 250,000 mark when it comes to how many COVID-19 tests have been performed in the province. He said about 220,000 unique Albertans have been tested, as some people have been tested twice.

On Thursday, Alberta Health reported 29 new cases of COVID-19 in Alberta and two additional deaths related to the disease.

There were 652 active cases of COVID-19 in Alberta on Thursday afternoon.

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© 2020 Global News, a division of Corus Entertainment Inc.

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Laurentian Bank slashes dividend by 40 per cent as profits tumble – The Globe and Mail

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Laurentian Bank of Canada slashed its dividend by 40 per cent on Friday following a sharp drop in profit, becoming the first large Canadian bank to cut its dividend payout in nearly 30 years.

The Montreal-based bank reported a 79-per-cent drop in profit for the three months ended April 30, with net income falling to $8.9-million from $43.3-million in the same quarter last year. This was largely due to a spike in provisions for potential loan losses tied to weakening economic conditions caused by the COVID-19 pandemic.

Laurentian responded by cutting its dividend to 40 cents a share, down from 67 cents. This is the first time a large Canadian bank has cut back dividend payouts since National Bank of Canada did so in 1992, according to data from Refinitiv.

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“Although we believe that current earnings are not reflective of the future earnings power of the organization, we have reduced the dividend to $0.40 per share which improves operational flexibility until we reap the anticipated benefits of our strategic plan,” chief executive François Desjardins said in a press release.

Laurentian shares fell more than 9 per cent in trading Friday morning.

The bank’s earnings cap off a week of dismal results from Canadian banks, which saw profits eviscerated by a rise in loan loss provisions due to expectations of future defaults and weakening credit. Laurentian, a regional bank which focuses primarily on Quebec, managed to keep revenues flat on a year-over-year basis. But higher provisions slammed the bottom line.

Laurentian recorded $54.9-million in provisions for credit losses, compared to $9.2-million a year ago. Gross impaired loans, which are loans that the bank does not expect to be paid back in full, rose to $235-million, up 25.8 per cent year-over-year. The biggest increase in loan impairment came from the bank’s commercial loan book, where gross impaired loans rose 42 per cent year-over-year.

The results were worse than analysts had anticipated. The bank reported an adjusted earnings per share of $0.20, well below the $0.38 average that analysts had expected, according to Refinitiv data.

In a note to clients, National Bank analyst Gabriel Dechaine noted that the miss was driven by a combination of higher than expected provisions for credit losses and elevated expenses, which were partially offset by a lower-than-forecast tax rate.

“While necessary, a 40 per cent dividend cut may be viewed as insufficient, as pro forma payout ratios are still elevated,” Mr. Dechaine wrote.

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The bank’s capital position deteriorated slightly in the quarter, with the closely watched common equity tier 1 ratio falling to 8.8 per cent from 9 per cent.

“This level of capital provides the Bank with the flexibility to pursue organic growth, as well as to continue to invest in the implementation of our core banking system,” the bank said in a news release.

However it added that it expects “regulatory capital ratios will remain below the level observed over the recent quarters.”

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