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.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
