New products vital for recovery in Canada's computer and electronic product manufacturing industry
OTTAWA--Profits in Canada's computer and electronic product manufacturing industry slipped to a nine-year low in 2012. In 2013, the industry is counting on a revival in Blackberry's fortunes for a rebound in its bottom line, according to the Winter 2013 outlook for the industry, part of the Canadian Industrial Profile.
"The largest company in the Canadian industry, Blackberry, has gone through a major restructuring and its future depends heavily on the success of its new generation of smartphones," said Michael Burt, Director, Industrial Economic Trends. "Early sales and response for the new Blackberry puts the industry on track to achieve our 2013 forecast. In the longer term, the performance of Blackberry will shape the industry as a whole."
The computer and electronic product manufacturing industry suffered through a difficult 2012. Sales dropped sharply in the middle of 2011 and have yet to recover. Production declined by seven per cent last year. Industry employment fell by more than 8,000, on top of the 15,000 jobs lost in 2011.
These conditions showed up in the industry's bottom line, in which profits fell from more than $2 billion in 2011 to just $264 million in 2012. In 2013, production and prices are forecast to increase modestly, while costs are expected to decline. As a result, industry profits are forecast to triple to $846 million.
Published by The Conference Board of Canada and the Business Development Bank of Canada, the Canadian Industrial Profile-Winter 2013 provides an annual outlook for five Canadian industries: Chemicals, Computer and Electronic Product Manufacturing, Non-Metallic Mineral Products, Pharmaceutical Products, and Plastic and Rubber Products.
"Despite only modest economic growth at home and in the U.S., companies in all sectors are choosing to invest in innovative ways to add new products and services to their offerings. They've recognized that the best way to stay afloat in this current economic environment it to look for new opportunities and tap into new markets," said Pierre Cléroux, Vice President and Chief Economist, Business Development Bank of Canada.
The industry is benefiting from an aging population and higher consumer expenditures on drugs - pharmaceuticals have become the second-largest component of health care expenditures in Canada. But there has been almost no price growth in the industry, due to provincial government demands for generic drugs and volume discounts, price controls on patented medications, and the end of patents on some blockbuster drugs. Industry profits have fluctuated substantially in the past few years, and are expected to climb 73 per cent this year to $665 million because of a decline in costs.
A weak price outlook means that industry profits are forecast to fall for the second consecutive year in 2013 to $4 billion. On the bright side, U.S. demand is rising, and the emerging economies—especially China with its large population and industrial base—represent new growth opportunities.
Non-Metallic Mineral Products Industry
Most products in this industry are a form of building material, so construction activity in Canada and the United States is crucial to the outlook. Spending on "institutional and government" construction has fallen for seven quarters in a row, and Canadian housing starts are easing. As a result, the industry is reducing employment and capital investment. U.S. demand, however, will help to boost production slightly and maintain industry profits at about $1.3 billion this year.
Plastic and Rubber Products
Industry profits surged by 63 per cent in 2012, thanks in part to lower crude oil and natural gas prices - key materials for plastic and rubber products. In addition to growth in U.S. demand, manufacturers are getting a boost from emerging markets. Profits are expected to rise by another 32 per cent in 2013 to more than $900 million, and employment is expected to increase for the first time since the recession.
The Canadian Industrial Profile Service is part of The Conference Board of Canada's Industrial Economic Trends research. In all, outlooks for 23 industries are completed each year. The publications are available at www.e-library.ca. BDC clients who wish to receive a copy of the profiles free of charge can contact their BDC account manager.
Canada's business development bank, BDC, puts entrepreneurs first. With almost 2,000 employees and more than 100 business centres across the country, BDC offers financing, subordinate financing, venture capital and consulting services to more than 28,000 small and medium-sized companies.