Highlights¹

Fourth Quarter 2002 and annual 2002 (preliminary)

Corporate profits increased 5.1% to $41.9 billion in the fourth quarter of 2002, following a 1.0% gain in the third quarter. However, profit growth over the latter half of the year was well below the 10.6% and 13.2% growth rates posted in the first two quarters of 2002.

Bolstered by the manufacturing and retail sectors, annual 2002 profits rose to $156.3 billion, 5.8% above the $147.8 billion earned in 2001. Corporate profits had peaked in 2000 at $173.0 billion, benefiting from high energy profits and the booming electronics and telecommunications industry at that time.

Annual profits on the rise

Robust year for manufacturers

Manufacturers of motor vehicles and parts saw profits improve by 36.5%, with hefty incentive programs and low interest rates sustaining sales growth throughout most of the year. Strong US demand drove up exports of automotive products.

Manufacturers of primary metals cited stronger shipments and firming prices as factors in the more than tripling of annual profits to $2.0 billion. Profits of chemical producers advanced 18.9% to $6.6 billion in 2002. Other notable profit gains were reported by manufacturers of non-metallic minerals, machinery and equipment and clothing. Computer and electronics manufacturers remained mired in a prolonged slump, but nonetheless reduced operating losses to $0.5 billion from losses of $1.2 billion in 2001.

On a negative note, wood and paper producers’ operating profits fell to $3.4 billion, 30.9% below 2001 levels. Profits were squeezed by the imposition of export tariffs by the United States in May. Demand for lumber was strong, sustained by the vibrant North American housing market. However, lumber prices softened due to oversupply, as some Canadian producers cranked up production following the imposition of the export tariffs. The Monthly Survey of Manufacturing recently reported that overall shipments of wood products in 2002 increased by 7.1%.

Petroleum and coal producers earned $5.0 billion in operating profits in 2002, down 10.4% from the $5.6 billion earned in 2001. Despite climbing steadily throughout the year, petroleum prices did not reach the highs attained early in 2001.

Retail profits much improved in 2002

Retail motor vehicle dealers took advantage of low interest rates, strong employment and generous incentive programs, as operating revenue increased by 6.1% to a record $82.5 billion. Operating profits reached $1.8 billion, 30.2% ahead of 2001. The December release of New Motor Vehicle Sales reported that an all-time high number of new motor vehicles were sold in 2002.

General merchandise stores benefited from strong consumer demand to post a 57.4% leap in annual operating profits. Furniture stores’ profits rose 73.0% to $0.9 billion, spurred by the robust housing market.

Transportation bounced back

Lower commodity prices early in the year trimmed annual oil and gas profits

Depository credit intermediaries hampered by loan loss provisions

Quarterly profits up again

The non-financial industries boosted profits by 6.1% in the fourth quarter, while the financial industries turned in a more modest 1.0% quarterly rise.

Improved quarterly profits for manufacturers… but growth rate slowed

Petroleum and coal producers took advantage of rising energy prices to post a 26.4% jump in operating profits to $1.7 billion in the fourth quarter. Continued uncertainty in the Middle East and supply disruptions in Venezuela contributed to the higher prices. Domestic sales of refined petroleum products were up in the quarter.

Wood and paper manufacturers earned $0.9 billion in fourth quarter operating profits, up 27.1% from the third quarter. While prices for most products remained generally weak, efficiency gains and cost-cutting initiatives helped bottom line results. Despite slowing somewhat in the quarter, demand from the construction sector remained strong. Wood and paper industry profits peaked in the first quarter of 2000 at $2.4 billion, and had been on a downward trend since.

Motor vehicle and parts manufacturers earned $1.4 billion in fourth quarter operating profits, down from the $2.0 billion reported in the third quarter, but more than double the profits earned in the final quarter of 2001. Operating revenue dropped 4.8% to $35.1 billion. Exports of automotive products slowed over the quarter, as US demand showed signs of softening.

Computer and electronics manufacturers returned to profitability for the first time in 2002, earning $0.1 billion in the fourth quarter following losses in each of the first three quarters. Nonetheless, fourth quarter profits paled in comparison with the high of $1.2 billion earned in the third quarter of 2000. Operating revenue increased 7.3% to $8.4 billion, but weak demand continued to plague the computer and telecommunications equipment sector. Operating revenue peaked at $13.0 billion in the fourth quarter of 2000.

Higher prices lifted oil and gas profits in fourth quarter

Other quarterly results

In the financial group of industries, higher insurance company profits were somewhat offset by lower profits of the depository credit intermediaries.

Profitability ratios

For the fourth quarter of 2002, the operating profit margin rose to 7.2% from 7.0% in the third quarter. Meanwhile, the return on shareholders’ equity jumped a full percentage point, rising to 9.5% from 8.5% in the previous quarter, lifted by higher operating profits and capital gains.

Table 1
Financial statistics for enterprises

¹These quarterly financial statistics cover the activities of all corporations in Canada, excluding government controlled and not-for-profit corporations

All references to industry totals exclude the industries: management of companies and enterprises as well as other funds and financial vehicles.

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