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Canadian companies need to raise their digital investment

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Canada’s industrial companies – so vital to our economy – are not investing nearly enough in their digital capabilities to remain competitive globally and drive sustainable growth. This is worrisome.

While mining and energy companies already use digital technologies, such as self-driving trucks to haul ore or integrated sensors to monitor pipeline, machinery or equipment integrity, much more could be done.

We recently talked to C-suite leaders at 165 regional and national Canadian industrial companies in the manufacturing, mining, oil and gas, power utilities, construction, transportation and infrastructure sectors.

The KPMG survey found that nearly 75 per cent intend to invest less than 5 per cent of their annual revenue on improving their digital capabilities. That’s not nearly enough to compete with the world’s best.

According to the World Economic Forum, new technology investments were key in driving productivity gains in the decade after the 2008 global economic crisis. But productivity wasn’t uniform across industry players. The gains were actually driven by the top 20 per cent in each industry with the majority seeing their productivity drop.

As a country, we can’t afford to be followers.

At a minimum, Canadian companies need to double, if not triple, their planned digital investments. Why?

If companies are not already investing in and leveraging today’s digital capabilities, how will they be ready to compete in the brave new world of 5G, with its superfast data speed and virtually instantaneous connectivity at every step along the value chain?

The reality is, companies are struggling to drive sustainable growth. While the lower Canadian dollar helps put the exporters on a more competitive footing, industrial companies – regardless of size and sector – really need to use this time now to become digitally ready.

Although, most Canadian firms have made investments, most are too modest and, at times, too linear. As many as 80 per cent appear to be looking for quick wins, expecting a return on investment (ROI) in three years or less. Two in five expect a ROI within two years.

Investments in cloud technology, for example, can deliver noticeable returns quickly because it’s very effective for eliminating friction in business processes; it doesn’t require a lot of IT resources and isn’t complex. But, that’s not enough to move the dial; that’s just the starting point.

Some companies say they are struggling to achieve the integration needed to realize the full potential of data and many seem to have dismissed the opportunities and insights that big data can offer. Our survey revealed that only one in five (21 per cent) are actively leveraging data analytics.

Canadian companies need to do more than make incremental investments to build a modern digital foundation for that great leap forward.

They need to capitalize on the benefits from new exponential technologies, such as robotics, artificial intelligence (AI), machine learning, machine-to-machine (M2M) communication and the Internet of Things (IoT).

Robotics and M2M capabilities can speed up production, while IoT facilitates predictive maintenance, reduces downtime and costs, and provides greater visibility into production and delivery.

Yet only one in four of companies we surveyed use robotics, and just 23 per cent are using IoT technology. In the plus column, nearly half (46 per cent) plan to implement intelligent automation.

Productivity expectations are only going in one direction: up – consumers and investors expect advances almost daily. This means companies should already be investing in IoT-compliant technology, especially to connect their legacy equipment. It’s fast becoming a baseline requirement for companies in these capital-asset-intensive sectors; those that fail to invest in IoT will quickly fall behind.

Here is what you should consider:

  • Think strategically about your technology investments. Direct funds where they will make the biggest impact on your long-term competitiveness.
  • Begin with the problem. With so many exciting technologies, it can be easy to get carried away. Focus on the problem you are trying to solve.
  • Re-evaluate your ROI expectations: You can realize important value from digital technology, but full transformation takes time.
  • Increase investments in digital transformation.
  • Identify internal skills gaps.
  • Create a plan for data collection based on what’s important to your business. Define the problems you’re trying to solve with data, then determine the types of data that needs to be collected and mined for insights.

To truly stand the test of time, companies need to link their front, middle and back offices to become a more powerful, seamless, connected enterprise.

Digital transformation is no longer an option; it is an imperative.

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Bank of Montreal CEO sees growth in U.S. share of earnings

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Bank of Montreal expects its earnings contribution from the U.S. to keep growing, even without any mergers and acquisitions, driven by a much smaller market share than at home and nearly C$1 trillion ($823.38 billion) of assets, Chief Executive Officer Darryl White said on Monday.

“We do think we have plenty of scale,” and the ability to compete with both banks of similar as well as smaller size, White said at a Morgan Stanley conference, adding that the bank’s U.S. market share is between 1% and 5% based on the business line, versus 10% to 35% in Canada. “And we do it off the scale of our global balance sheet of C$950 billion.”

($1 = 1.2145 Canadian dollars)

 

(Reporting by Nichola Saminather; Editing by Leslie Adler)

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GameStop falls 27% on potential share sale

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Shares of GameStop Corp lost more than a quarter of their value on Thursday and other so-called meme stocks also declined in a sell-off that hit a broad range of names favored by retail investors.

The video game retailer’s shares closed down 27.16% at $220.39, their biggest one-day percentage loss in 11 weeks. The drop came a day after GameStop said in a quarterly report that it may sell up to 5 million new shares, sparking concerns of potential dilution for existing shareholders.

“The threat of dilution from the five million-share sale is the dagger in the hearts of GameStop shareholders,” said Jake Dollarhide, chief executive officer of Longbow Asset Management. “The meme trade is not working today, so logic for at least one day has returned.”

Soaring rallies in the shares of GameStop and AMC Entertainment Holdings over the past month have helped reinvigorate the meme stock frenzy that began earlier this year and fueled big moves in a fresh crop of names popular with investors on forums such as Reddit’s WallStreetBets.

Many of those names traded lower on Thursday, with shares of Clover Health Investments Corp down 15.2%, burger chain Wendy’s falling 3.1% and prison operator Geo Group Inc, one of the more recently minted meme stocks, down nearly 20% after surging more than 38% on Wednesday. AMC shares were off more than 13%.

Worries that other companies could leverage recent stock price gains by announcing share sales may be rippling out to the broader meme stock universe, said Jack Ablin, chief investment officer at Cresset Capital.

AMC last week took advantage of a 400% surge in its share price since mid-May to announce a pair of stock offerings.

“It appears that other companies, like GameStop, are hoping to follow AMC’s lead by issuing shares and otherwise profit from the meme stocks run-up,” Ablin said. “Investors are taking a dim view of that strategy.”

Wedbush Securities on Thursday raised its price target on GameStop to $50, from $39. GameStop will likely sell all 5 million new shares but that amount only represents a “modest” dilution of 7%, Wedbush analysts wrote.

GameStop on Wednesday reported stronger-than-expected earnings, and named the former head of Amazon.com Inc’s Australian business as its chief executive officer.

GameStop’s shares rallied more than 1,600% in January when a surge of buying forced bearish investors to unwind their bets in a phenomenon known as a short squeeze.

The company on Wednesday said the U.S. Securities and Exchange Commission had requested documents and information related to an investigation into that trading.

In the past two weeks, the so-called “meme stocks” have received $1.27 billion of retail inflows, Vanda Research said on Wednesday, matching their January peak.

 

(Reporting by Aaron Saldanha and Sagarika Jaisinghani in Bengaluru and Sinead Carew in New York; Additional reporting by Ira Iosebashvili; Editing by Sriraj Kalluvila, Shounak Dasgupta, Jonathan Oatis and Nick Zieminski)

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U.S. to work with allies to secure electric vehicle metals

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The United States must work with allies to secure the minerals needed for electric vehicle batteries and process them domestically in light of environmental and other competing interests, the White House said on Tuesday.

The strategy, first reported by Reuters in late May, will include new funding to expand international investments in electric vehicles (EV) metal projects through the U.S. Development Finance Corporation, as well as new efforts to boost supply from recycling batteries.

The U.S. has been working to secure minerals from allied countries, including Canada and Finland. The 250-page report outlining policy recommendations mentioned large lithium supplies in Chile and Australia, the world’s two largest producers of the white battery metal.

President Joe Biden‘s administration will also launch a working group to identify where minerals used in EV batteries and other technologies can be produced and processed domestically.

Securing enough copper, lithium and other raw materials to make EV batteries is a major obstacle to Biden’s aggressive EV adoption plans, with domestic mines facing extensive regulatory hurdles and environmental opposition.

The White House acknowledged China’s role as the world’s largest processor of EV metals and said it would expand efforts to lessen that dependency.

“The United States cannot and does not need to mine and process all critical battery inputs at home. It can and should work with allies and partners to expand global production and to ensure secure global supplies,” it said in the report.

The White House also said the Department of the Interior and others agencies will work to identify gaps in mine permitting laws to ensure any new production “meets strong standards” in terms of both the environment and community input.

The report noted Native American opposition to Lithium Americas Corp’s Thacker Pass lithium project in Nevada, as well as plans by automaker Tesla Inc to produce its own lithium.

The steps come after Biden, who has made fighting climate change and competing with China centerpieces of his agenda, ordered a 100-day review of gaps in supply chains in key areas, including EVs.

Democrats are pushing aggressive climate goals to have a majority of U.S.-manufactured cars be electric by 2030 and every car on the road to be electric by 2040.

As part of the recommendations from four executive branch agencies, Biden is being advised to take steps to restore the country’s strategic mineral stockpile and expand funding to map the mineral resources available domestically.

Some of those steps would require the support of Congress, where Biden’s fellow Democrats have only slim majorities.

The Energy Department already has $17 billion in authority through its Advanced Technology Vehicles Manufacturing Loan program to fund some investments.

The program’s administrators will focus on financing battery manufacturers and companies that refine, recycle and process critical minerals, the White House said.

(Reporting by Trevor Hunnicutt in Washington and Ernest Scheyder in Houston; Editing by Mary Milliken, Aurora Ellis and Sonya Hepinstall)

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