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Energy sector ravaged as TSX plunges 10.3 per cent amid global oil price war – Financial Post

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Canadian stocks took a historic hammering Monday after global crude prices collapsed and the spread of the new coronavirus continued to threaten the global economy.

The S&P/TSX Composite Index lost about 10.3 per cent of its value, or more than 1,660 points, in what was the biggest single-day decline since 1987. Canada’s main stock index finished Monday at 14,514.24, a 14-month low.

The suddenness with which stocks fell to start the trading day even triggered so-called circuit breakers, which briefly halted trading on the TSX. In the end, the only stock in the S&P/TSX index that finished Monday in the green was Dollarama Inc., the Montreal-based discount retailer.

Investors didn’t fare much better with stocks in the United States, where circuit breakers were also tripped soon after the opening bell sounded.

The blue-chip Dow Jones Industrial Average ended up shedding more than 2,000 points, or about 7.8 per cent, finishing the day at 23,851.02. The S&P 500, meanwhile, closed at 2,746.56, 7.6 per cent lower, after losing more than 225 points.

Monday’s equity meltdown appeared to be prompted by anxieties about the ongoing coronavirus outbreak and by a swift swoon in oil prices.

“It’s hard to find a bull case,” said Barry Schwartz, chief investment officer at Toronto-based Baskin Wealth Management. “It’s shocking, because two weeks ago it was impossible to find a bear case. We’ve just totally turned on a dime.”

There have now been more than 109,000 confirmed cases and 3,800 deaths linked to COVID-19, according to the World Health Organization, with the outbreak directly affecting companies in sectors such as airlines and hospitality. The virus has also raised concerns about disrupted supply chains and prompted talk of governments injecting fiscal stimulus into their economies, potentially via tax breaks or infrastructure spending.

Another side-effect of the outbreak has been a drop in expected demand for oil, which has put pressure on crude prices. Those prices dropped even lower recently following a failed attempt by the Organization of the Petroleum Exporting Countries to strike a deal with Russia for new production cuts. The decline then accelerated further after Saudi Arabia then decided to slash the cost of its crude, sparking a price war in global energy markets.

The Brent and WTI benchmarks for oil have now fallen into the range of US$30 to US$35 per barrel, around half the level at which they started 2020. The Western Canada Select benchmark for oil has fallen further as well, finishing Monday at US$17.80, down more than 50 per cent year-to-date.

All of this has added up to trouble for Canadian oil and gas producers, shares of which were walloped on Monday. The S&P/TSX Capped Energy Index, a collection of oil and gas companies, declined by more than 27 per cent for the day.

Raymond James analysts said in a report that they were making a “tactical decision” to lower the ratings for “all but a very small handful” of the Canadian oil and gas producers they cover until the fog clears.

“At this juncture, there remains a considerable amount of uncertainty, not the least of which being the Kingdom’s (Saudi Arabia’s) intended strategy,” said the Raymond James analysts. “While share prices of oil and gas producers were already facing generational lows, the potential for a sustained period of sub-US$40/bbl oil is almost certainly to result in a flight to (relative) safety within the sector.”

Investors searching for safe havens from the storms raging across the equity and commodities markets helped push down bond yields again as well. The yield on the Government of Canada’s 10-year bond skidded to approximately 0.54 per cent, which was almost the same as that of the five-year bond.

“Ultimately, the narrative is changing daily, but there are two commonalities which are becoming more entrenched,” wrote Ian Pollick, the head of North American rates strategy at CIBC World Markets. “The first is that we are now on the cusp of a proper liquidity event. The second is that we are concurrently experiencing a negative inflation shock. Together, these forces represent a damning combination for bond yields.”

Central banks in Canada and the U.S. have already cut their key interest rates in response to the coronavirus, but expectations are rising now for further monetary easing. Eyes are also turning towards governments for action on their end.

“This move is just too fast, too violent and too worrisome for some kind of a policy stimulus not to be put up,” Schwartz said.

Financial Post

• Email: gzochodne@nationalpost.com | Twitter: GeoffZochodne

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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