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Canada Second Quarter Financial Statistics Report (Text)

The following is the text of Canada’s financial statistics report for the second quarter released by Statistics Canada.

Canadian corporations earned $71.9 billion in operating profits in the second quarter, down 4.9% from the previous quarter. This decrease follows two consecutive quarterly increases.

Canadian corporations earned $71.9 billion in operating profits in the second quarter, down 4.9% from the previous quarter. This decrease follows two consecutive quarterly increases. Operating profits decreased in 15 of 22 industries. The manufacturing and oil and gas industries led the decline, followed by the insurance industry.

In the non-financial sector, operating profits declined 5.0% to $52.2 billion in the second quarter, following a 5.1% decrease the previous quarter. Much of this decrease came from the manufacturing and the oil and gas industries. In contrast, the information and cultural industries and the mining industry each registered a slight growth in profits.

In the financial sector, operating profits decreased 4.6% to $19.7 billion, following a 20.1% gain in the first quarter. Most of the decline in the second quarter came from the insurance industry.

On a year-over-year basis, operating profits for Canadian corporations were 1.5% higher in the second quarter than in the second quarter of 2011. Profits declined 0.9% in the non- financial sector, while they rose 8.6% in the financial sector.

Non-financial sector

Operating profits in manufacturing declined 9.8% to $12.2 billion in the second quarter.

Overall, 8 of the 13 manufacturing industries reported decreases, led by primary metal manufacturers and petroleum and coal products manufacturers. These declines were tempered by increased profits for motor vehicle and parts manufacturers and air, rail and ship products manufacturers.

Profits for primary metal manufacturers fell 51.8% to $760.5 million between the first and second quarters. The decline was mainly a result of weakening base metal prices, increased competition from steel imports and the European slowdown.

Profits for petroleum and coal products manufacturers declined 18.1% to $3.3 billion. The main factors were a drop in the price of coal, lower production volumes as a result of refinery shutdowns as well as lower crude petroleum exports.

Profits for motor vehicle and parts manufacturers rose 30.6% to $965.1 million, as the industry continued to recover from supply chain disruptions caused by the 2011 earthquake and tsunami in Japan.

Profits for air, rail and ship products manufacturers more than doubled to $541.4 million.

In the oil and gas industry, profits fell 31.0% to $2.7 billion. This industry experienced lower oil prices in the second quarter and an increased price gap between Canadian crude and the North American benchmark for crude, West Texas Intermediate.

Profits for information and cultural industries rose 6.6% to $5.1 billion. Profits in telecommunications accounted for most of this increase, rising 8.5% to $3.7 billion.

Mining profits increased 8.1% to $2.1 billion on the strength of increased production volumes that occurred despite lower commodity prices.

Retailers’ profits edged down 0.8% to $4.0 billion, while wholesalers’ profits declined 1.1% to $5.5 billion.

Financial sector

Most of the decline in the financial sector came from the insurance industry, where profits fell 30.0% to $2.7 billion.

The decrease in the second quarter was led by life insurers, whose profits declined 60.5% to $773.3 million in the wake of higher actuarial liabilities adjustments.

Profits for depository credit intermediaries increased 1.5% to $9.9 billion.

Note to readers Quarterly financial statistics are compiled using financial information provided by enterprises that derive this data from their financial statements. Starting on January 1, 2011, Canadian publicly accountable enterprises are required to replace Canadian Generally Accepted Accounting Principles (CGAAP) with International Financial Reporting Standards (IFRS) when preparing their financial statements for fiscal years starting on or after January 1, 2011. Canadian private enterprises are required to replace CGAAP by Accounting Standards for Private Enterprises or IFRS. The adoption of new accounting standards by some enterprises since the beginning of 2011 may affect comparability with prior periods.

Quarterly profit numbers referred to in this release are seasonally adjusted and are in current dollars. The quarterly financial estimates for the first quarter of 2012 have been revised. For more information on seasonal adjustment, see Seasonal adjustment and identifying economic trends.

Quarterly financial statistics for enterprises are based upon a sample survey and represent the activities of all corporations in Canada, except those that are government controlled or not- for-profit. An enterprise can be a single corporation or a family of corporations under common ownership and/or control, for which consolidated financial statements are produced.

Profits referred to in this analysis are operating profits earned from normal business activities. For non-financial industries, operating profits exclude interest and dividend revenue and capital gains/losses whereas, for financial industries, these are included, along with interest paid on deposits.

Operating profits differ from net profits, which represent the after-tax profits earned by corporations.

Aggregate balance sheet and income statement data for Canadian corporations are now available through CANSIM. They are available at the national level for 22 industry groupings.

The second quarter 2012 issue of the Quarterly Financial Statistics for Enterprises (61-008-X, free) will be available soon.

Financial statistics for enterprises for the third quarter will be released on November 27.

To contact the reporter on this story: Ilan Kolet in Ottawa at ikolet@bloomberg.net

To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net

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