Canada’s biggest companies see profits decline

OTTAWA (Nov. 15, 1999) — Companies with annual revenues of $75 million or more saw profit margins narrow in 1998, but remained more profitable than their smaller counterparts, Statistics Canada reported today.

Big firms in non-financial industries earned an average return on assets of 6.6%in 1998, down from 7.2% in 1997. It was the first decline in profits since 1991.

The decline was blamed on slower economic growth, as well as lower commodity prices, especially oil prices.

At the same time, medium-sized firms — with revenues between $5 million and $75 million — produced an average return of 4%, down from 4.3% the year before. Small firms earned 5.6%, up from 4.2% in 1997. Small firms tend to focus mainly on domestic markets and may be more insulated from the foreign market factors affecting larger firms, the agency said.

Big manufacturers outpaced most other major sectors, with profits of 9.3%. Logging was the most profitable of the goods-producing industries, averaging a 14.3% annual rate of return between 1996 and 1998.

The transportation, storage, communications, and utilities sector also turned in a solid performance, with an 8.8% return on capital employed in 1998 and an annual average of 9.0% over the past three years. Mining trailed all major sectors with returns of just 3.1% last year and an average of 5.1% over the three-year period.