Canadian Mining Journal

Feature

Wall Street and Canada



Many Canadians are still divided as to whether we’ve experienced a true recession or a statistical anomaly thanks to a GDP contraction that belies the nuanced and complex components of the Canadian economy.

One’s view of the data is doubtless influenced by which part of the country you call home. For many on Wall Street, Canada is a monolithic commodity-driven mass, perched on the edge of a fiscal precipice.

Since the start of 2015, when spiraling oil prices began to lower Canadian growth forecasts, my meeting with American investors and analysts have frequently began with questions about our country’s economic prospects. The focus quickly moves to how we anticipate the economy will affect our Canadian-based operations which, to be clear, are not in the energy sector, as we are an industrial-providing service throughout the country.

For many unlisted companies, particularly those with a significant revenue base here, it’s been a similar story; the theme of the Canadian exposure has dominated discussions with both the U.S. buy-and-sell sides all year.

For everyone in that spot, here are a few suggestions for conducting cross-border investor relations in the environment; tip for talking with Wall Street about Canada.

1            Put the Canadian economy in context

The vast and diverse sweep of our country’s geography is mirrored in the range of its economic performance. Move from east to west and the drivers of growth vary greatly. And, as has been observed in the past, when fortunes flag in one province, they often boom in another; the seesaw effect that keeps our country’s fiscal stability in a state of fine balance.

Remind U.S. investor of Canada’s breadth and that the majority of economists do not expect the country to dip into a broad-based recession again. Yes, the provinces hit by the oil shock, Alberta, Newfoundland and Labrador, likely meet the criteria. But other provinces, particularly Ontario with its manufacturing and export base, will benefit from lower energy prices and a weaker Canadian dollar.

It’s also worth mentioning to American investors that their economy has a material impact on Canada’s outlook, with the U.S. being our largest trading partner. There is still a clear correlation between the two North American economies, even if it is not as strong as it once was with greater trade diversification and comes with a lag factor.

2            Quantify the impact of your exposure.

To the extent it is possible, and desirable, within a company’s disclosure framework, it should consider quantifying its exposure to an economic contraction in Western Canada. This helps frame the downside scenario and limit baseless speculation in a company’s stock.

For companies with currency exposure, consider providing a sensitivity analysis to every penny change in the foreign exchange rate to revenues, earnings and other key financial measures.

For companies with direct exposure to areas of weakness, such as the oil and gas sectors, it is even more important to provide U.S. investors and analysts with perspective.

As Canadians, we are familiar with the cyclicality of commodity- based markets and this experience is worth sharing with U.S.

investors and analysts. Explain the characteristics of your company that will help it withstand the down cycle, whether it’s a strong balance sheet, relatively low cost base, or management expertise.

3            Stay visible and connected.

As with any crisis communication, it is critical to stay out in front of the story rather than hide from it. An open and transparent approach to the subject of the Canadian economy and a company’s Canadian operating outlook can help build a productive, long-term relationship with U.S. shareholders.

Lay the groundwork for the discussion so that when Wall Street’s glance turns north, it’s with a less apprehensive and more of an appraising eye.


*Chaya Cooperberg is vice-president of investor relations and corporate communications at Progressive Waste Solutions, Vaughan, Ontario


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