Canadian companies expected to slash more jobs as reporting season starts

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Canadian companies expected to slash more jobs as reporting season starts
Sun Feb 8, 11:15 AM
David Friend, The Canadian Press Email Story IM Story Printable View
By David Friend, The Canadian Press

TORONTO - More Canadian companies are expected to dole out pink slips this week as earnings season heats up and weaker results could cause corporate Canada to pare costs to deal with a worsening recession.

Dismal earnings reports often run hand-in-hand with job cuts, and economists say times will be rough for some domestic companies, as their partners and customers in the United States suffer.

South of the border the layoffs have been drastic and deep in recent weeks, when U.S. giants such as heavy equipment maker Caterpillar Inc., software firm Microsoft Corp., aluminum company Alcoa Inc. and chip maker Intel used their first-quarter reports to reveal tens of thousands of job cuts.

The prediction is that many Canadian companies will either post significant profit drops or widen their losses for the final months of 2008 - and workers will be on the chopping block because of it.

Job losses are expected to rip through the first half of the year, carrying over from a January employment report from Statistics Canada that saw the Canadian economy shed 129,000 jobs and the jobless rate soar to 7.2 per cent, its highest level in more than four years.

Many economists predict that layoffs in the manufacturing, forestry, construction and auto sectors could push the unemployment to more than nine per cent by the end of the year.

"We've been seeing a slowing economy for a good part of the past year, but we've only seen big layoff announcements in the last couple of months," said Adrienne Warren, senior economist at Scotia Capital.

"I think we'll see those step up over the next six months as well."

On the earnings schedule this week are key companies like Calgary-based fertilizer producer Agrium Inc. (TSX: AGU.TO), and Caterpillar dealer Toromont Industries Ltd. (TSX: TIH.TO). Both could become victims of downturns across their own industries.

Other big companies reporting include energy giants EnCana (TSX: ECA.TO), Enbridge and Precision Drilling (TSX: PD.TO), beer maker Molson Coors, pilot trainer CAE Inc. (TSX: CAE.TO) and discount airline WestJet (TSX: WJA.TO).

Agrium Inc. (TSX: AGU.TO) has already laid off 380 workers, but has also said it will write down the value of its operations by US$115 million in its fourth-quarter report and shut down production at its Fort Saskatchewan nitrogen facility.

Toromont Industries Ltd. (TSX: TIH.TO) could also take a hit from a downturn at Caterpillar Inc. (NYSE: CAT), which is cutting 20,000 jobs, or about 18 per cent of its workforce on weaker sales.

Finning International Inc. (TSX: FTT.TO) has already laid off 700 people, about five per cent of its workforce, but so far Toromont hasn't announced any staff reductions, nor did it return calls for comment.

The clouds over Canadian employment have been darkening for some time, but a dismal jobs report last Friday showed that the pace is picking up at an alarming rate.

Canadian monthly job losses for January plunged faster than they have in more than 30 years - with 129,000 more people facing the unemployment line.

Warren said that Canadian companies were slower to react to the global economic slowdown than U.S. companies and are only starting to turn to layoffs now to cut costs and get their balance sheets in better shape to cope with an expected further slump in business..

"When things slow down businesses are reluctant to get rid of workers that they've invested training in. They'll hold on, maybe cut their hours," she said.

"While we see the economy maybe improving more towards the end of the year, I think the employment pickup will wait until 2010."

TD Bank economist Derek Burleton expects that Canada could face 325,000 job losses in 2009. His domestic outlook was considered to be one of the more pessimistic before the latest jobs report.

Burleton says that despite the drastic tumble, he's sticking to his predictions for now.

"We're not rushing to change our forecast. Certainly if we get another big drop in employment in February numbers we will review it," he said in an interview.

"Our working assumption remains that the first quarter is going to mark the worst in terms of the rate of decline, economic activity and jobs."

However, he also cautioned that economists could be blindsided by further cuts coming from companies that don't appear to be in danger, but have decided to "jump on the bandwagon" of job cuts.

"Even though many companies remain profitable they still feel the pressure. Let's put it this way, if all of their competitors are doing it, then that ramps up the pressure even more," he said.

"It does raise the risk that job losses could be worse than what we're forecasting, but we're basing (our estimates) on what we feel are reasonable economic fundamentals heading into this crisis."

The latest job losses report sent shockwaves through federal and provincial governments already reeling from troubles in various sectors.

On Friday, Finance Minister Jim Flaherty painted a grim picture of the domestic economy during a new conference in Toronto.

"The United States economy has not hit bottom, the U.S. housing situation continues to deteriorate, so Canadians ought to expect that this is going to be a difficult year," Finance Minister Jim Flaherty said during a Friday news conference in Toronto.

"Canadians also expect the government to be responsive, we've been responsive, we've brought forward the measures, now I need the opposition in the House to let us get this done for the benefit of Canadians."

The Conservative government has proposed a $39.9-billion economic stimulus package in its most recent budget in an effort to encourage a quick recovery.

The plan dwarfs a massive US$819-billion stimulus package for the United States that could be signed into law within days.

Ontario Premier Dalton McGuinty said Friday that job losses could to increase further in the coming months, and could prove "deeply troubling" to the province's economy which has already been wracked by a slipping manufacturing sector.

Job recruitment company Workopolis says it's also feeling the pains of the economic downturn.

The number of job postings in January fell about 25 per cent over the same period last year, said company president Patrick Sullivan

"Our expectation is that there will be continued layoffs in February," he said. "The long term prognosis for employment is very positive, but the short term is clearly darker."


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