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B.C.’s Big 3 lumber giants still making bank

Lumber giants making bank

B.C.’s big three forestry giants had lumber and other wood product sales of $6.5 billion in the second quarter of 2022, and net income of $1.4 billion, according to second quarter financials.

While second quarter earnings were down compared to Q1, due to lower lumber prices, demand and prices for lumber were still strong in the second quarter.

B.C.’s biggest forestry company, West Fraser Timber (TSX, NYSE:WFG), reported sales of $2.9 billion in the second quarter, and earnings of $762 million, which was down from $1 billion in earnings in the first quarter.

Canfor Corp. (TSX:CFP) reported Q2 sales of $2.2 billion and net income of $373 million.

Interfor Corp. (TSX:IFP) reported sales of $1.4 billion and net income of $270 million.

West Fraser rewarded shareholders with a major share buyback worth $1.5 billion.

“West Fraser generated strong financial results again in the second quarter of 2022, supporting the return of more than $1.5 billion of capital to shareholders through share repurchases and our quarterly dividend,” said West Fraser CEO Ray Ferris.

In the first few months of 2022, North American lumber prices hit record highs of $1,700 per thousand board feet, according to Trading Economics.

Western spruce-pine-fir lumber was selling at around $1,300 per thousand board feet earlier this year, according to Natural Resources Canada. Those prices are now down to about $680 per thousand board feet – still well above the long-term average of about US$300 per board feet ($385 Canadian.)

Interfor notes in its financials that of the 1 billion board feet of lumber it produced in Q2, about one-quarter was from its new Eastern Canadian operations – 211 million board feet. Its American sawmills accounted for 630 million board feet.

“Production in the B.C. region decreased to 174 million board feet from 196 million board feet in Q1’22, in part due to the sale of the Acorn sawmill during the quarter,” Interfor notes.

With the sale of its Acorn mill in Delta to an affiliate of San Industries Ltd., Interfor is now reviewing its coastal timber holdings.

“Interfor is currently undertaking a strategic review of its remaining Coastal B.C. operations, which consist solely of timber harvesting and sales related to its 1.67 million cubic meters of annual harvesting rights,” the company said.

Despite fears of a cooling North American economy, Canfor says in its Q2 financials that it expects lumber fundamentals to remain strong into the third quarter.

“Looking ahead, global lumber market fundamentals are anticipated to be relatively solid through the third quarter of 2022," the company says. "New home construction activity in North America is projected to weaken in the wake of high mortgage rates and decreasing housing affordability, particularly for first-time homebuyers, while activity in the repair and remodeling sector is estimated to be steady.”

In its Q2 financials, Canfor reported paying $96 million in American softwood lumber duties for the first half of 2022. Interfor reports paying $82 million in American duties in the first half of 2020; West Fraser reports paying $43 million.
 



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FAA clears Boeing to resume deliveries of 787 Dreamliner

FAA clears Boeing plane

Federal regulators said Monday they are satisfied with changes Boeing has made in the production of its 787 Dreamliner passenger jet, clearing the way for the company to resume deliveries to airline customers “in the coming days.”

The Federal Aviation Administration announcement confirmed reports late last month and came days after the agency's acting chief met with safety inspectors who oversee Boeing.

The FAA said acting Administrator Billy Nolen wanted to hear about steps Boeing has taken to fix manufacturing problems and ensure independence for Boeing employees who work with regulators.

Production of the big, two-aisle 787 has been marred by several problems including gaps between panels of the carbon-composite skin, and use of unapproved titanium parts from a supplier in Italy. Those issues prevented Boeing from delivering any of the planes for most of the last two years, and about 120 have been parked while Boeing tried to fix the production process.

The FAA said it will inspect each plane before it is approved for delivery.

“We expect deliveries to resume in the coming days,” the FAA said.

Shares of Boeing Co., which is based in Arlington, Virginia, were up 1.8% in afternoon trading Monday.



Nutrien names Ken Seitz president, CEO amid sweeping changes in agriculture markets

Nutrien names new CEO

Saskatoon-based fertilizer giant Nutrien Ltd. has named Ken Seitz president and CEO following a months-long global talent search.

The company says Seitz, who has served as interim CEO since January and previously headed up its potash operation, brings 25 years of experience in agriculture and mining to the role.

Nutrien says it has achieved record results under Seitz's leadership amid sweeping changes in agricultural markets and unprecedented global food security challenges.

Russ Girling, chairman of Nutrien's board of directors, says the company's record performance during some of the most turbulent times in the sector underscore the strength of Seitz’s leadership.

Seitz, who grew up on a dairy farm in Saskatchewan, says he's "honoured and humbled" to work alongside growers during challenging times.

He says Nutrien is well positioned to help meet the global goals of food security and climate action.



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Barrick Gold reports US$488 million second quarter profit

Barrick profits jump

Barrick Gold Corp. reported a second-quarter profit of US$488 million, up nearly 19 per cent from US$411 million in the same quarter last year.

The gold miner, which keeps its books in U.S. dollars, says the profit amounted to 27 cents per diluted share for the quarter ended June 30 compared with 23 cents per share a year ago.

Revenue for the quarter totalled US$2.86 billion, down from US$2.89 billion in the second quarter last year.

Gold production in the quarter was 1,043,000 ounces, up from 1,041,000 in the same quarter of 2021, while its average realized gold price rose to US$1,861 an ounce compared with US$1,820 a year ago.

On an adjusted basis, Barrick says it earned 24 cents per share, down from 29 cents per share a year ago.

President and chief executive Mark Bristow says the company has continued to take steps to increase its sustainability.

“There are challenging times ahead, but Barrick faces them with strong and agile leadership, a robust balance sheet, solid Life of Mine plans, a reliable cash flow and a strategy focused on sustainability and value creation," he said in a statement.



Unifor members to elect new national president in Toronto this week

Unifor to pick new leader

Unifor members from across Canada are gathering in Toronto this week to elect the union's next leader, several months after former national president Jerry Dias stepped down.

Monday will kick off the start of the union's fourth constitutional convention where elections for Dias' successor, the next secretary-treasurer and regional directors will take place throughout the week.

Delegates will also vote on key priorities and initiatives.

Earlier this year, Dias was charged with violating the code of ethics and democratic practices of the union's constitution.

Dias had long been the face of Unifor.

He led the union since 2013 and was reelected in 2016 and 2019.

He had a reputation for being tough-talking, scrappy and willing to push everyone from top companies to politicians to act in workers' best interests, and was a key figure during the negotiation of the United States-Mexico-Canada Agreement. He also successfully encouraged General Motors Canada to reopen a plant in Oshawa, Ont., invest up to $1.3 billion and hire up to 1,700 workers after it planned to close the facility.

Unifor has more than 315,000 members.



Five things to watch for in the Canadian business world in the coming week

This week in business

Five things to watch for in the Canadian business world in the coming week:

Resources sector update

Miner Barrick Gold Corp. reports its second-quarter earnings this week, followed by Lundin Mining Corp. on Tuesday. Barrick released an update last month indicating it is on track to achieve its production targets for the year even as copper prices pulled back. Lundin is likely to face questions after a sinkhole was detected at a Chilean mining site last week.

State of commercial real estate

Several REITs are scheduled to release second-quarter financial results, with RioCan real estate investment trust set for Tuesday. Public health restrictions on shops and restaurants made the pandemic a difficult time for the sector, but RioCan CEO Jonathan Gitlin said in June that he's now seeing much less ambiguity in the retail sector.

Food inflation and grocers

Expect to learn more about how food inflation is affecting the bottom line for Canadian grocery stores when Metro Inc. releases its third-quarter results on Wednesday. Metro competitor Loblaw said last month that its customers were less eager to spend on its Joe Fresh clothing line and other non-food products.

Entertainment budgets

Cineplex Inc. is scheduled to report its second-quarter results and discussion with analysts on Thursday. The cinema and entertainment company saw a significant revenue climb in the first three months of the year compared with 2021, when many movie theatres were closed or operating at reduced capacity.

Investors keep eye on Brookfield

Investors will be keeping a close eye as Brookfield Asset Management Inc. reports its latest quarterly earnings before the bell on Thursday. In May, while releasing its Q1 results, the company announced it would be spinning off its asset management business into a separate publicly listed company.



Air Canada denying passenger compensation claims for staff shortages, citing safety

Denying compensation

Less than four hours before departure, Ryan Farrell was surprised to learn his flight from Yellowknife to Calgary had been cancelled.

Air Canada cited "crew constraints" and rebooked him on a plane leaving 48 hours after the June 17 flight's original takeoff time.

Farrell was even more surprised six weeks later, when he learned his request for compensation had been denied on the basis of the staff shortage.

“Since your Air Canada flight was delayed/cancelled due to crew constraints resulting from the impact of the COVID-19 pandemic on our operations, the compensation you are requesting does not apply because the delay/cancellation was caused by a safety-related issue,” reads the email from customer relations dated July 29.

The rejection “feels like a slap in the face," Farrell said.

"If they don't have replacement crew to substitute in, then the flight (was) cancelled because they failed to assemble a crew, not because any other factor would have made it inherently unsafe to run the flight,” he said in an email.

“I think the airlines are trying to exploit a general emotional connection that people make between ‘COVID-19’ and ‘safety,’ when in reality if you put their logic to the test it doesn't stand up.”

Air Canada’s response to Farrell's complaint was no outlier. In a Dec. 29 memo, the company instructed employees to classify flight cancellations caused by staff shortages as a "safety" problem, which would exclude travellers from compensation under federal regulations. That policy remains in place.

Canada’s passenger rights charter, the Air Passenger Protection Regulations (APPR), mandates airlines to pay up to $1,000 in compensation for cancellations or significant delays that stem from reasons within the carrier’s control when the notification comes 14 days or less before departure. However, airlines do not have to pay if the change was required for safety purposes.

The Canadian Transportation Agency (CTA), a quasi-judicial federal body, says treating staff shortages as a safety matter violates federal rules.

"If a crew shortage is due to the actions or inactions of the carrier, the disruption will be considered within the carrier’s control for the purposes of the APPR. Therefore, a disruption caused by a crew shortage should not be considered 'required for safety purposes' when it is the carrier who caused the safety issue as a result of its own actions," the agency said in an email.

That stance reinforces a decision made July 8 — three weeks before Farrell learned he'd been denied compensation — when the CTA used nearly identical language in a dispute over a flight at a different air carrier. The regulatory panel's ruling in that case emphasized airlines' obligations around advance planning "to ensure that the carrier has enough staff available to operate the services it offers for sale."

In the December memo, which was issued at the height of the Omicron wave of COVID-19, Air Canada said: "Effective immediately, flight cancellations due to crew are considered as Within Carrier Control — For Safety."

"Customers impacted by these flight cancellations will still be eligible for the standard of treatments such as hotel accommodations, meals etc. but will no longer be eligible for APPR claims/monetary compensation."

The staff directive said the stance would be “temporary.” But Air Canada acknowledged in an email on July 25 that the policy "remains in place given the continued exceptional circumstances brought on by COVID variants."

Gabor Lukacs, president of the Air Passenger Rights advocacy group, said Air Canada isbreaching the passenger rights charterand called on the transport regulator for stronger enforcement.

"They are misclassifying things that are clearly not a safety issue," he said of Canada's largest airline, calling the policy "egregious" and "unlawful."

Consumers can dispute an airline's denial of a claim via a complaint to the CTA. However, the agency's backlog topped 15,300 air travel complaints as of May.

Lukacs also noted that European Union regulations do not exclude safety reasons from situations requiring compensation in the event of cancellations or delays. Payouts are precluded only as a result of "extraordinary circumstances," such as weather or political instability.

"This document, along with the previous declarations and behaviour since the beginning of the pandemic, shows that Air Canada’s priority is clearly to try to limit the costs of the flight cancellations instead of providing good service to its clients," Sylvie De Bellefeuille, a lawyer with Quebec-based advocacy group Option consommateurs, said after reviewing a copy of the directive.

She said Air Canada aims to deter passengers from requesting compensation in the first place. "This tactic does not, in our opinion, demonstrate that the company cares about its customers."

Air Canada disagrees with that characterization.

"Air Canada had and continues to have more employees proportionate to its flying schedule when compared prior to the pandemic," the company said in an emailed statement, indicating it had done everything it could to prepare for operational hiccups.

"Air Canada follows all public health directives as part of its safety culture, and during the Omicron wave last winter that affected some crew availability, we revised our policy to better assist customers in their travels with enhanced levels of customer care for flight cancellations related to crew contending with COVID."

John Gradek, head of McGill University's aviation management program, said the transportation agency is partly responsible for the "debacle" because it established looser rules than those in Europe and the United States.

"Carriers have been making strong efforts to point fingers and claim delays are outside of their control to reduce liability," he said in an email.



Air Canada denying passenger compensation claims for staff shortages, citing safety

Air Canada denies claim

Less than four hours before departure, Ryan Farrell was surprised to learn his flight from Yellowknife to Calgary had been cancelled.

Air Canada cited "crew constraints" and rebooked him on a plane leaving 48 hours after the June 17 flight's original takeoff time.

Farrell was even more surprised six weeks later, when he learned his request for compensation had been denied on the basis of the staff shortage.

“Since your Air Canada flight was delayed/cancelled due to crew constraints resulting from the impact of the COVID-19 pandemic on our operations, the compensation you are requesting does not apply because the delay/cancellation was caused by a safety-related issue,” reads the email from customer relations dated July 29.

The rejection “feels like a slap in the face," Farrell said.

"If they don't have replacement crew to substitute in, then the flight (was) cancelled because they failed to assemble a crew, not because any other factor would have made it inherently unsafe to run the flight,” he said in an email.

“I think the airlines are trying to exploit a general emotional connection that people make between ‘COVID-19’ and ‘safety,’ when in reality if you put their logic to the test it doesn't stand up.”

Air Canada’s response to Farrell's complaint was no outlier. In a Dec. 29 memo, the company instructed employees to classify flight cancellations caused by staff shortages as a "safety" problem, which would exclude travellers from compensation under federal regulations. That policy remains in place.

Canada’s passenger rights charter, the Air Passenger Protection Regulations (APPR), mandates airlines to pay up to $1,000 in compensation for cancellations or significant delays that stem from reasons within the carrier’s control when the notification comes 14 days or less before departure. However, airlines do not have to pay if the change was required for safety purposes.

The Canadian Transportation Agency (CTA), a quasi-judicial federal body, says treating staff shortages as a safety matter violates federal rules.

"If a crew shortage is due to the actions or inactions of the carrier, the disruption will be considered within the carrier’s control for the purposes of the APPR. Therefore, a disruption caused by a crew shortage should not be considered 'required for safety purposes' when it is the carrier who caused the safety issue as a result of its own actions," the agency said in an email.

That stance reinforces a decision made July 8 — three weeks before Farrell learned he'd been denied compensation — when the CTA used nearly identical language in a dispute over a flight at a different air carrier. The regulatory panel's ruling in that case emphasized airlines' obligations around advance planning "to ensure that the carrier has enough staff available to operate the services it offers for sale."

In the December memo, which was issued at the height of the Omicron wave of COVID-19, Air Canada said: "Effective immediately, flight cancellations due to crew are considered as Within Carrier Control — For Safety."

"Customers impacted by these flight cancellations will still be eligible for the standard of treatments such as hotel accommodations, meals etc. but will no longer be eligible for APPR claims/monetary compensation."

The staff directive said the stance would be “temporary.” But Air Canada acknowledged in an email on July 25 that the policy "remains in place given the continued exceptional circumstances brought on by COVID variants."

Gabor Lukacs, president of the Air Passenger Rights advocacy group, said Air Canada is exploiting a loophole in the passenger rights charter to avoid paying compensation, and called on the transport regulator for stronger enforcement.

"They are misclassifying things that are clearly not a safety issue," he said of Canada's largest airline, calling the policy "egregious."

Consumers can dispute an airline's denial of a claim via a compliant to the CTA. However, the agency's backlog topped 15,300 air travel complaints as of May.

Lukacs also noted that European Union regulations do not exclude safety reasons from situations requiring compensation in the event of cancellations or delays. Payouts are precluded only as a result of "extraordinary circumstances," such as weather or political instability.

"This document, along with the previous declarations and behaviour since the beginning of the pandemic, shows that Air Canada’s priority is clearly to try to limit the costs of the flight cancellations instead of providing good service to its clients," Sylvie De Bellefeuille, a lawyer with Quebec-based advocacy group Option consommateurs, said after reviewing a copy of the directive.

She said Air Canada aims to deter passengers from requesting compensation in the first place. "This tactic does not, in our opinion, demonstrate that the company cares about its customers."

Air Canada disagrees with that characterization.

"Air Canada had and continues to have more employees proportionate to its flying schedule when compared prior to the pandemic," the company said in an emailed statement, indicating it had done everything it could to prepare for operational hiccups.

"Air Canada follows all public health directives as part of its safety culture, and during the Omicron wave last winter that affected some crew availability, we revised our policy to better assist customers in their travels with enhanced levels of customer care for flight cancellations related to crew contending with COVID."

John Gradek, head of McGill University's aviation management program, said the transportation agency is partly responsible for the "debacle" because it established looser rules than those in Europe and the United States.

"Carriers have been making strong efforts to point fingers and claim delays are outside of their control to reduce liability," he said in an email.



Vancouver junior miner to pay fine for advertorial

Mining firm fined for ad

A Vancouver-based junior mining company focused on a lithium salar mine project in Chile and a former CEO of the company have agreed to pay $35,000 in penalties for misleading advertising.

According to the British Columbia Securities Commission (BCSC), Bearing Lithium Corp. (TSX-V:BRZ) misled potential investors through an advertorial promoting the company and its lithium project without properly disclosing that Bearing had paid for the promotion.

The company had hired Stock Social Inc. to write an advertorial that was published and posted on newswires, and on Twitter, LinkedIn, Facebook, investFeed and iHub, according to the BCSC.

“The advertorial was written to look and read like objective journalistic content, but did not disclose that it was issued on behalf of Bearing, nor did any of the social media posts make such disclosures," the BCSC says in a press release.

That is a violation of the Securities Act, which requires anyone engaged in investor relations on behalf of a publicly traded company “to clearly and conspicuously disclose when promotional materials are issued by them or on their behalf.”

Bearing admitted it had violated the Securities Act by failing to disclose promotional materials had been issued on Bearing’s behalf. Former Bearing CEO Jeremy Arthur William Poirier admitted his involvement in the misleading promotion.

In a settlement with the BCSC, Bearing agreed to pay $25,000 in fines. Poirier was ordered to pay a $10,000 fine.

Bearing owns a 17% stake in the Maricunga project in Chile, a lithium brine salar. Australia’s Lithium Power International owns 51%. At the end of June, Lithium Power and Bearing announced an agreement in which Lithium Power will acquire 100% of the Maricunga project from Bearing and MSB SpA, a Chilean company that owns 31% of the project.

Chile has the world's largest known lithium reserves. Lithium is a critical component of lithium-ion batteries.
 



'What recession?': US employers add 528,000 jobs in July

'What recession?

U.S. employers added an astonishing 528,000 jobs last month despite flashing warning signs of an economic downturn, easing fears of a recession and handing President Joe Biden some good news heading into the midterm elections.

Unemployment dropped another notch, from 3.6% to 3.5%, matching the more than 50-year low reached just before the pandemic took hold.

The economy has now recovered all 22 million jobs lost in March and April 2020 when COVID-19 slammed the U.S.

The red-hot numbers reported Friday by the Labor Department are certain to intensify the debate over whether the U.S. is in a recession.

“Recession — what recession?’’ wrote Brian Coulton, chief economist at Fitch Ratings, after the report came out. “The U.S. economy is creating new jobs at an annual rate of 6 million — that’s three times faster than what we normally see historically in a good year."

Economists had expected only 250,000 new jobs last month, in a drop-off from June’s revised 398,000. Instead, July proved to be the best month since February.

The strong figures are welcome news for the Biden administration and the Democrats at a time when many voters are worried about the economy.

Inflation is raging at its highest level in more than 40 years, and the economy has contracted for two quarters in a row, which is the common — but informal — definition of a recession and does not take into account a host of other factors economists consider, such as the job picture.

At the White House, Biden credited the job growth to his policies, even as he acknowledged the pain being inflicted by inflation. He emphasized the addition of 642,000 manufacturing jobs during his watch.

“Instead of workers begging employers for work, we’re seeing employers have to compete for American workers," the president said.

Biden has boosted job growth through his $1.9 trillion coronavirus relief package and $1 trillion bipartisan infrastructure law last year. Republican lawmakers and some leading economists, however, say the administration's spending has contributed to high inflation.

The president has received some other good economic news in recent weeks, as gasoline prices have steadily fallen after averaging slightly more than $5 a gallon in June.

On Wall Street, stocks dropped after the employment report came out. While a strong job market is a good thing, it also makes it more likely that the Federal Reserve will continue raising interest rates to cool the economy.

“The strength of the labor market in the face of ... rate-tightening from the Fed already this year clearly shows that the Fed has more work to do,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “Overall, today’s report should put the notion of a near-term recession on the back burner for now.?

The Labor Department also reported that hourly earnings posted a healthy 0.5% gain last month and are up 5.2% over the past year. But that is not enough to keep up with inflation, and many Americans are having to scrimp to pay for groceries, gasoline, even school supplies.

“There’s more work to do, but today’s jobs report shows we are making significant progress for working families,” the president said.

Job growth was especially strong last month in the health care industry and at hotels and restaurants.

The number of Americans saying they had jobs rose by 179,000, while the number saying they were unemployed fell by 242,000. But 61,000 Americans dropped out of the labor force in July, trimming the share of those working or looking for work to 62.1% from 62.2% in June.

New Yorker Karen Smalls, 46, started looking for work three weeks ago as a member of the support staff for social workers.

“I didn’t realize how good the job market is right now,’’ she said shortly after finishing her fifth interview this week. “You look at the news and see all these bad reports ... but the job market is amazing right now.’’

A single mother, she is weighing several offers, looking for one that is close to her home and pays enough to let her take care of her two children.

Two years ago, the pandemic brought economic life to a near standstill as companies shut down and millions of people stayed home or were thrown out of work. The U.S. plunged into a deep, two-month recession.

But massive government aid — and the Fed's decision to slash interest rates and pour money into financial markets — fueled a surprisingly quick recovery. Caught off guard by the strength of the rebound, factories, shops, ports and freight yards were overwhelmed with orders and scrambled to bring back the workers they furloughed when COVID-19 hit.

The result has been shortages of workers and supplies, delayed shipments and high inflation. In June, consumer prices were up 9.1% from a year earlier, the biggest increase since 1981.

The Fed has raised its benchmark short-term interest rate four times this year in a bid to tame inflation, with more increases ahead.

Labor Secretary Marty Walsh conceded that businesses and consumers are worried about inflation but added: “Companies are still growing, and they’re looking for employees. And that’s a good sign.’’

In a report filled with mostly good news, the Labor Department did note that 3.9 million people were working part-time for economic reasons in July, up by 303,000 from June. Department economists said that reflected an increase in the number of people whose hours were cut because of slack business.

Some employers are also reporting signs of slack in the job market.

Aaron Sanandres, CEO and co-founder Untuckit, an online clothing company with nearly 90 stores, has noticed that in the past few weeks that it has been a bit easier filling jobs at the corporate headquarters in New York and part-time roles at the stores.

“We have had a plethora of candidates,” Sanandres said. He also said the labor market has been loosening up for engineers, probably as a result of some layoffs at technology companies.

Simona Mocuta, chief economist at State Street Global Advisors, was among those stunned by the strong hiring numbers when other indicators show an economy losing momentum.

Mocut said it is possible that hiring rose so sharply last month because job candidates, seeing signs of an impending slowdown, are now more willing to accept jobs they would have balked at earlier in the year. Conditions may now be “shifting in employers’ favor,’’ she said.

Whatever the reason for it, the employment data released Friday shows an astonishingly strong and resilient job market.

”Underestimate the U.S. labor market at your own peril,'' said Nick Bunker, head of economic research at the Indeed Hiring Lab. “Yes, output growth might be slowing and the economic outlook has some clouds on the horizon. But employers are still champing at the bit to hire more workers. That demand may fade, but it’s still red-hot right now.''



Canopy Growth sees $2B net loss as Ontario cannabis company takes large writedown

Canopy takes $2B loss

Canopy Growth Corp. executives argued the company is advancing toward profitability, even as it booked a $1.72 billion non-cash writedown that contributed to a net loss of more than $2 billion during its most recent quarter.

"Maybe our aspirations have changed over the last several years, but we believe that we can get ourselves, with the right focus in the right categories, to a profitable business that's not burning cash in the Canadian market," said CEO David Klein, on a call with analysts.

"I don't want anybody to think that we're not spending almost all of our waking hours on...stopping the cash burn in Canada."

His remarks came as the Smiths Falls, Ont. company behind the Tweed, Tokyo Smoke and Doja brands said Friday that its first quarter net loss compared to net earnings of more than $389 million at the same time last year.

The impairment charge for the period ended June 30 was linked to Canopy's pot operations and came as its recreational business-to-business cannabis sales fell 38 per cent since last year because of price compression and increased competition.

"The Canada market has really developed very differently than we had initially expected," Judy Hong, chief financial officer, admitted on a call with analysts.

She named market fragmentation, the strength of the illict market and regulatory hurdles, including a slow move toward federal legalization in the U.S., as the company's biggest challenges.

Such conditions have prodded Canopy into refocusing its product mix on the premium sector, which typically commands higher prices and generates a more loyal consumer basis than value items.

The move toward premium has been coupled with an ongoing cost-cutting plan involving retooling its facilities, reviewing procurement strategies, implementing flexible manufacturing processes and reducing third-party professional and office fees.

As part of the plan, 243 Canopy workers spanning Canada, Europe and the U.S. lost their jobs in April, the latest in a string of layoffs Canopy and its rivals have carried out during the COVID-19 pandemic.

Canopy anticipates its moves will create between $100 and $150 million in savings within a 12-to-18 month range and — like a series of other cannabis companies who have embarked on overhauls recently — help it reach profitability by better aligning supply with demand.

But many barriers stand in the way of this goal.

In the most recent quarter, Canopy's largest U.S. distributor faced financial challenges causing it to pause orders and the company is now having to work to reestablish ordering patterns that were lost, Hong said.

Consumer spending power is also softening as Canada encounters a near 40-year high inflation level mirrored by several other countries. Increased inflation has already moderated European and North American premium vaporizer sales, Hong said.

Supply chain challenges from previous quarters have stuck around too and been an issue for its Storz and Bickel vape brand in particular.

"Our procurement, engineering and manufacturing team are working hard to identify solutions for these challenges, including alternate components and suppliers and we expect this to be manageable," Hong said.

While Canopy works to address these issues, Klein added that it is still keeping an eye on the U.S.

In recent weeks, Senate Majority Leader Chuck Schumer introduced the Cannabis Authorization and Opportunity Act, which could help federally legalize marijuana, though observers aren't hopeful it will be enacted.

"There's no doubt that we put heavy emphasis on the U.S. market, which is evolving... more slowly than we would like," said Klein.

He noted that two thirds of Americans already live in a location that has access to cannabis in some format, "but the federal government still refuses to recognize that reality."

"So putting that aside...we're not waiting," he said. "We continue to see the U.S. is the largest and most important market in the world."

To advance its U.S. strategy, Canopy signed a deal to acquire edibles company Wana Brands, if Canada’s neighbour moves to allow a key pot component.

Canopy has made similar arrangements with TerrAscend Corp. and Acreage Holdings Inc. and deepened its U.S. presence by launching four sparkling cannabidiol waters under the Quatreau name across the border in March 2021, adding to the roster of Martha Stewart, BioSteel and This Works products it already sells in the U.S.

The company's first quarter net loss amounted to a loss of $5.23 per diluted share compared to a loss of 84 cents per share in the second quarter of 2021.

Analysts expected the company to report a net loss of US$111.6 million or 28 cents per share, according to financial data firm Refinitiv.

Net revenue for the period amounted to $110.1 million, down 19 per cent from $136.2 million in the same quarter last year.

Following the release of those figures, Canopy's share price dropped about 40 cents or 11 per cent to $3.29 as the stock market opened. By mid-morning, it was trading at $3.42.



Suncor must stop diagnosing and start executing workplace safety changes: Interim CEO

Stop thinking, start changing

The new interim CEO of Suncor Energy Inc. says the oil and gas giant is ready to stop studying its workplace safety problem and start implementing solutions instead.

Kris Smith, who took the helm of the Canadian oil and gas producer in the wake of the departure of former CEO Mark Little — who stepped down last month one day after the death of a worker at Suncor's Base Mine near Fort McMurray, Alta. — made the comments Friday during what was his first quarterly conference call with analysts since assuming his new role.

"We completed an independent safety assessment last year, and we're clear on what we need to do to improve our safety performance," Smith said. "We do not need more diagnosis, but what we do need to do is execute."

At least 12 workplace deaths have occurred at Suncor sites since 2014, more than all the company's oilsands peers combined.

Earlier this spring, Suncor's safety performance — as well as a spate of recent operational and production problems — caught the attention of U.S.-based activist investor Elliot Investment Management, which publicly laid out its case for change at the Calgary-headquartered company.

Last month, Suncor announced it had reached a deal with Elliot that includes the appointment of three new independent directors to Suncor's board, as well as a review of Suncor's retail chain of Petro-Canada gas stations — a review that could culminate in the sale of that business.

Smith said in spite of his interim status, he doesn't see himself as simply a placeholder until a new permanent CEO is hired. He said he feels an urgency to push ahead with new measures, such as the implementation of new technology at its oilsands sites — including collision awareness and driver safety systems — that should help to improve workplace safety.

But Smith added while technology is an important tool, addressing the company's safety culture on the front lines will be even more important.

"If I go back to the incidents that we have had, it's been how the work has been executed in the field," Smith said. "While technology will be a huge enabler ... it's really about enabling and engaging to ensure that work is happening safely each and every day in the field.

"And so that's really, I think, the area in my view, that needs focus and attention."

Phil Skolnick, a New York-based analyst with Eight Capital, said he agrees that it's long past time for Suncor to take aggressive action on safety and operational performance.

"How many conference calls have we had now where we've heard that safety is the number one priority?" Skolnick said in an interview. "And then there's another unfortunate fatality, or another operational upset."

Skolnick added he found the remarks by Smith and other Suncor executives on Friday's analyst call "vague."

"They weren't able to pinpoint exactly what the problem was. They talked about technology, but this is cultural," he said, adding when a company has a workplace safety problem, there are usually issues at the middle management and direct supervisory level.

"I think there'll probably be more head count changes. Changes, not reductions. I think there are probably some people who are not in the right place," Skolnick said.

On Thursday, Suncor increased its budget for capital expenditures for the year from $4.7 billion to a new range of $4.9 billion to $5.2 billion. The company attributed the increase to inflationary pressures, as well as increased spending during turnarounds and maintenance to improve safety and reliability.

Skolnick said it will take time and money to improve Suncor's track record, which is part of the reason he recently downgraded his rating on the stock to "sell."

"I think this is just beginning days of seeing the money going up in order to address this," he said.

Suncor has said it will provide more details about its plans to improve safety and operational performance at an investor day in the fall.

The company's board has formed a committee to conduct a global search to find its next CEO. It hopes to have someone in place later this year or early in 2023.

Suncor Inc. reported late Thursday that it earned $3.99 billion in the second quarter of 2022, or $2.84 per common share, more than four and a half times the $868 million it earned in the same period of 2021.

The Calgary-based oil producer and refiner said its adjusted funds from operations hit $5.35 billion in the quarter, the highest in the company's history by 33 per cent, as the war in Ukraine drove crude oil prices sky-high.

Production from the company’s oilsands assets increased to 641,500 barrels per day in the second quarter, up from to 615,700 bpd in the prior-year quarter, due to increased production at its Syncrude and Fort Hills sites.

Refinery crude throughput increased to 389,300 barrels per day and refinery utilization was 84 per cent in the second quarter of 2022, compared to 325,300 barrels per day and 70 per cent in the prior-year quarter.

The company also said Thursday it has reached an agreement for the sale of its Norway assets, pending regulatory approval, for gross proceeds of approximately $410 million. The sale is expected to be completed in the fourth quarter of 2022.

Suncor is also seeking to divest its wind and solar business, with a sale expected to close early in 2023, the company said Friday. It has also begun a sale process for its entire U.K. exploration and production portfolio.

As of mid-day Friday, Suncor shares were trading down 50 cents, or 1.27 per cent, to $38.96 on the Toronto Stock Exchange.



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