Enbridge cites economic uncertainty, a challenging regulatory environment, higher interest rates and fierce competition for growth
Citing persistent economic headwinds, Calgary-based pipeline giant Enbridge signalled it’s going to cut its workforce by 650 people next month, while the midstream sector faces a changing landscape.
The energy infrastructure firm, which has a large presence in both Canada and the United States, sent a memo Tuesday informing its staff of planned cuts across the company, which will begin in February and be completed by March 1.
“While we delivered strong financial performance in 2023, cost-reduction measures are necessary to maintain our financial strength, be more cost competitive and enable us to grow.”
In the memo, Enbridge pointed to ongoing economic uncertainty, a challenging regulatory environment, higher interest rates, fierce competition for growth, and the reverberations from geopolitical developments for contributing to “increasingly difficult business conditions.”
According to its website, the company has more than 12,000 employees, mainly based in Canada and the United States. The cuts represent slightly less than six per cent of its total workforce.
Enbridge said it will look to reduce vacancies and contract positions, as well as redeploy staff.
“Reducing our operating costs and strengthening our competitiveness will enable us to weather near-term challenges,” the statement said.
Analyst Stephen Ellis with Morningstar noted pipeline companies in the North American industry aren’t benefiting as much from service rates that are tied to inflationary increases as they have in recent years, while rising interest rates have heightened their need to focus on cost-cutting.
During the third quarter of 2023, Enbridge reported adjusted earnings of $1.27 billion, down from $1.37 billion during the same period in 2022.
Enbridge is the largest pipeline company in Canada and the sector has been facing a shifting landscape during the energy transition.
Last September, Enbridge bought three U.S. natural gas utilities — East Ohio Gas Co., Public Service Company of North Carolina (PSNC) and Questar Gas Co. — from Richmond-based Dominion Energy for $19 billion.
The acquired companies have more than 3,000 employees. The deal was the largest acquisition for Enbridge since 2016, when it bought Houston-based Spectra Energy for $37 billion.
In December, Enbridge sold off its interest in the Alliance natural gas pipeline and the Aux Sable joint ventures for $3.1 billion.
Enbridge, which operates Canada’s Mainline crude pipeline network, will soon see increased competition from the Trans Mountain expansion project, Ellis noted.
Calgary-based TC Energy, which has aggressively sold assets in the past year, is also planning to spin off its oil pipeline network — including the Keystone system — into a new publicly traded company named South Bow. The move is expected to occur in the second half of this year.
Laura Lau, chief investment officer with Brompton Group, which has previously owned stock in Enbridge, said Tuesday the midstream sector is facing increased pressure due to the effect of high interest rates and the difficulty to build major infrastructure projects in Canada and the United States.
She pointed to Friday’s decision by the Biden administration to put a temporary pause on approving new LNG export projects as another example of government policy that could impede the industry.
“It used to be, in the good old days, you could do these big projects. It’s harder to find growth now and it’s harder to make numbers work with higher interest rates,” Lau said.
“The operating environment is getting tougher and tougher for permitting.”
There have been some layoffs in the Canadian oilpatch in the past year, with Suncor Energy announcing last summer it was cutting 1,500 positions.
The Canadian economy has largely stalled since the middle of 2023. It’s expected to remain weak in the first quarter before growth gradually resumes, with an annual GDP expansion of just under one per cent forecast by the Bank of Canada’s latest monetary policy report.
Meanwhile, energy prices have dipped in recent months and it could mean less cash flow for the country’s oil and gas industry in 2024.
Based on the current pricing outlook for oil and natural gas, industry revenues in Canada are projected to drop by 12 per cent to $162 billion from last year’s levels, said Jackie Forrest, executive director of ARC Energy Research Institute.
“The lower commodity prices are putting a bit more fiscal pressure (on). I’m not sure that will result in layoffs but, for sure, you’re going to see the slowdown in spending,” Forrest said.
“Add to that the massive policy that we’re getting here — the layering of policy on top, potential for legal challenges, political uncertainty. I think that’s another factor that’s going to slow down investment over the next year.”
Chris Varcoe is a Calgary Herald columnist.
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.
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Yuri Kageyama is on X:
The Canadian Press. All rights reserved.
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.
Companies in this story: (TSX:SHOP)
The Canadian Press. All rights reserved.
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.
Companies in this story: (TSX:REI.UN)
The Canadian Press. All rights reserved.
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