MRO Magazine

Foreign-controlled company profits soar in manufacturing

Ottawa, ON -- The share of foreign control in the Canadian corporate economy remained stable in 2004, despite stron...


Ottawa, ON — The share of foreign control in the Canadian corporate economy remained stable in 2004, despite strong growth in both assets and revenues of foreign-controlled corporations, Statistics Canada reported in June 2006.

Foreign-controlled corporations accounted for 21.9% of assets held in Canada, and 30.0% of operating revenues. Despite the odd fluctuation, these shares have remained fairly stable ever since the post-recessionary period of the mid-1990s. (In contrast, the manufacturing industry has over 50% of its assets under foreign control.)

Assets of foreign-controlled corporations rose a healthy 8.3% to $1.1 trillion in 2004, while those of Canadian-controlled corporations jumped 8.9% to $3.9 trillion. This follows more moderate growth rates of 5.7% for Canadian-controlled corporations, and 1.5% for foreign-controlled corporations in 2003.

Foreign-controlled revenues increased 6.7% in 2004 to just shy of the $800-billion mark, nearly double the level of a decade earlier. The global boom in mergers and acquisitions activity during the 1990s contributed to this rapid increase.

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Of the nearly 1.3 million corporations doing business in Canada in 2004, all but about 8,000 were Canadian-controlled. In other words, less than 1% were foreign-controlled, a proportion that has changed little over time.

However, foreign-controlled corporations tend to be much larger. In 2004, their operating revenues averaged $96 million, compared with less than $2 million for their Canadian-controlled counterparts.

RECORD PROFITS FOR FOREIGN-CONTROLLED FIRMS

Foreign-controlled profits soared to a record $68 billion in 2004, up a staggering 21.7% from the previous year. Domestic-controlled profits also rose, although at a more moderate rate of 11.8%. Much of these gains, in both cases, came on the strength of the manufacturing sector, where profits rose 36.2%.

This was the second straight year that corporate profits were on the rise. Furthermore, in 2004, they hit an all-time high of $217 billion, eclipsing the old mark of $192 billion set in 2000.

Between 2002 and 2004, foreign-controlled corporations led the way with a 38.6% surge in profits, compared with a 22.4% gain for Canadian-controlled corporations.

MANUFACTURING ON THE REBOUND; OIL AND GAS ASSETS UP

Manufacturing rebounded in 2004 from a weak performance the year before when the economy was hit by events such as forest fires and a power outage.

Operating revenues for manufacturers rose by $43.1 billion in 2004. Half that growth came from foreign-controlled corporations.

Manufacturing enjoyed a surge in profits, with foreign-controlled profits rising by $5.7 billion and those of Canadian-controlled corporations up by $6.2 billion. This is an industry which has 50.3% of its assets under foreign control.

Oil and gas was second only to manufacturing in terms of share of assets under foreign control. Foreign-controlled corporations accounted for 44.9% in 2004, and Canadian-controlled corporations 55.1%. Escalating oil prices and large investments in non-conventional oil sources have combined to boost Canada’s energy sector, placing it among the world leaders.

In 2004, oil and gas assets rose by $34 billion, the equivalent of 13.5%, with the bulk of the increase occurring in the Canadian-controlled portfolio.

UNITED STATES STILL BY FAR THE BIGGEST FOREIGN PLAYER

Among foreign-controlled corporations operating in Canada, the United States continued to be the dominant force by a wide margin. American-controlled firms held 61.0% of foreign-based assets and generated 62.6% of foreign-based revenues.

Well back of the United States were the United Kingdom, which accounted for 12.0% of foreign-based assets and 7.0% of foreign-based revenues, and Germany, with 6.5% of foreign-based assets and 6.9% of foreign-based revenues.

Despite this dominance, the United States has seen a decline in its share of revenues, particularly in the financial sector, in recent years.

In 2004, US-controlled corporations accounted for 45.0% of foreign-controlled revenues generated in the financial sector, a steep drop from 56.3% in 2002. On the plus side, corporations under British control and Dutch control recorded a gain in their shares.