(Repeats to additional subscribers with no changes to text)
By Euan Rocha and Fergal Smith
TORONTO, Jan 25 (Reuters) - The oil price rout and related
Canadian dollar slide that is ravaging the country's economy is
starting to take its toll on corporate profits, from rail and
retail to seemingly unrelated sectors like telecoms.
"The direct impact from the energy sector alone is going to
be significant," said Macquarie analyst David Doyle. "But the
indirect impact will be large as well, and in many ways cascade
across almost all sectors."
Thomson Reuters SmartEstimates data project that earnings
per share for constituents of the Toronto Stock Exchange's
S&P/TSX composite index .GSPTSE are likely to decline on
average by 28.3 percent in 2016 from a year ago, mainly due to
the drag from energy and mining companies.
"It's a huge negative impact on earnings," said John
Stephenson, head of Stephenson & Co Capital Management, who
predicts the fallout will be felt across the board, from banks
to real estate firms.
As 2016's first round of quarterly earnings begin to trickle
in, some of the impact is already visible. Cable TV and internet
firm Shaw Communications SJRb.TO said this month the shutdown
of work camps in Fort McMurray - the oil boomtown in northern
Alberta - had led to the loss of a large number of internet
subscribers.
Companies in other industries are also feeling the pain.
"We have seen in the last three quarters of 2015 economic
headwinds across all business segments except for a couple of
bright spots in forest products and Canadian grain," said Keith
Creel, the president of Canadian Pacific Railway CP.TO on a
conference call on Thursday.
The railroad plans to trim 7 percent of its workforce this
year. Although it benefited from a 35-percent decline in fuel
costs in the fourth quarter, its revenue fell 4 percent as crude
shipment volumes dropped sharply, along with those of coal,
potash and other minerals caught up in the commodity price rout.
CURRENCY SQUEEZE
Even as manufacturing, mining and energy companies in Canada
see relative production costs slide due to a weaker Canadian
dollar, the costs of imports from food products to finished
goods have soared, squeezing margins for retailers and
restaurant chains.
Clothing retailer Reitmans Canada RETa.TO said on Jan. 14
it was cutting 10 percent of its head office employees to tackle
a challenging retail environment and to offset pressure from the
weak Canadian dollar.
The knock-on effect of sinking oil prices is also expected
to take a bigger bite out of Canadian bank profits in 2016, as
more corporate loans sour, capital raising dries up, and job
losses take a toll on banks' consumer operations.
"Analysts have lowered the bar on earnings expectations, but
perhaps they haven't lowered it far enough," said Elvis Picardo,
head of research at Global Securities. "It's quite likely we may
see a number of earnings disappointments this quarter."