Tuesday, July 25, 2006, 4:15 PM EST (Thomson Financial Corporate
Services): Bay Street was buoyed by excellent earnings news from major
Canadian companies such as Encana and Canadian Pacific Railways, despite
mixed earnings reports emerging from the States. The energy sector also
announced ambitious new projects and infrastructure improvements, while the
Dow was lifted by surprise consumer confidence figures and lower oil
prices.
* The S&P/TSX Stock Exchange Composite Index surged 129.44 points, or
1.11%.
* The vast oil sands of the West yielded pure gold for the coffers of
Encana, which, combined with a surge in natural gas sales, saw its second-
quarter profit jump 150% to US$2.16 billion from last year's US$839
million. High oil prices and a 5% increase in natural gas production (with
several new fields promised to open soon) helped, along with a number of
one-time gains such as US$582 million on sales of discontinued operations
and US$457 million on tax rate changes.
* However, a different company did not have such good news: Shell
Canada and its minority partner Western Oil Sands admitted that their
Athabasca oil sands expansion project is going to have its first phase
re-evaluated, as labor shortages and galloping equipment costs in the
highly competitive fields of northern Alberta continue to afflict the
project. Primarily because of this, Shell Canada reported lowered
second-quarter profits of C$475 million, down from C$526 million profit the
year before; however, its C$0.58 per share profit beat economists'
estimates of C$0.43.
* Finally, another major player in the oil sands fields is taking
another approach to its costs problems; Canadian Natural Resources released
a review of its Horizon project in northern Alberta, and indicated it is
pleased with its current 2,500 member workforce so far and plans to double
it, having 5- 6000 workers onsite by mid-2007 as part of the C$5.3 billion
Phase I. Despite the aforementioned labor shortages, CNR believes it has
its capital costs well-planned.
* To round off the energy sector news, Enbridge, Inc. jumped when it
approved construction of its US$350 million Southern Access crude oil
pipeline from west of Chicago to a distribution hub at Pakota, IL. The
project is expected to be completed by 2009.
* In materials, one of Inco's hostile suitors, Teck Cominco, proudly
presented record second-quarter earnings today of C$613 million, with
revenue for the first half of the year totaling C$1.1 billion and net
earnings per share at C$2.83, exploding analysts' estimates of C$2.28 per
share. The increase from last year's C$225 million in earnings and C$1.04
per share was attributed by Teck's CEO Don Lindsay to a high commodities
market and sales of several holdings.
* Industrial firms also benefited from strong earnings. Canadian
Pacific Railway reported its second-quarter profit had tripled from last
year's C$124 million to C$378 million, mostly due to a C$176 million
reduction in future income tax expenses and a foreign exchange debt
advantage of C$58 million. Net income for the quarter was C$2.36 per
diluted share.
* Earnings season continued to roll with several American giants
reporting today. McDonald's Corp., crediting strong breakfast and European
sales, posted a 57% increase in earnings for its second quarter. Industrial
conglomerate 3M dropped as its second-quarter 17% jump in profits to US$882
million was not enough to offset the fact that it came in at the low end of
its own forecast. UPS and Colgate also posted results.
* Elsewhere in Canada, steelmaker Ipsco announced a rise to US$156.4
million in profits from US$126.9 million last year.
* Top grocery chain Loblaw Companies posted a drop in second-quarter
profits of 8.1% to C$194 million due to price cuts.
* Switching gears to the U.S. economy, the National Association of
Realtors says that the U.S. housing market is now a price-flattened
"buyer's market'', as sales of existing homes decreased in June by 1.3%
from May, falling to a rate of 6.62 million units per year. Separately,
consumer confidence went up in July, according to the Conference Board, to
106.5 from 105.4 in June.
-- Carolyn.Crapo@contractor.Thomson.com; Thomson Financial Corporate
Services
This is Thomson Financial Corporate Services Canadian Commentary, which
is updated twice daily. The information herein is believed to be true and
accurate, we take no responsibility for inaccurate information and reserve
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SOURCE Thomson Financial Corporate Group
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