The track record for B.C.’s largest public companies continues to improve despite short-term uncertainty over the direction of the economy.
Increasing efficiency, expansion into new markets and a recovery in local and global demand for B.C. goods and services have boded well for many of the companies on this year’s Business in Vancouver list of the biggest public companies in B.C.
Total revenue of the companies that made the top 100 rose a remarkable 11.1% to $64.1 billion from $57.7 billion in 2009, topping the previous record amount of revenue generated by B.C.’s top 100 in 2008 of $61.2 billion.
But a sign of increasing corporate strength lies in total profitability. While revenue remained high in 2008, profitability at the time sank to $2.3 billion, the lowest level since 2003.
This year’s companies raked in a 57% increase in total profit to $5.8 billion, up from $3.7 billion in 2009.
The global commodity boom contributed greatly to the results of this year’s top 100 list. A third of the province’s largest public companies are in the mining sector and, collectively, posted a 29.4% increase in revenue and nearly doubled the sector’s combined profit.
Total revenue for the 33 mining companies on the list rose to $22.9 billion from $17.7, billion with profits rising to $4.5 billion, up from $2.3 billion in 2009.
Among the most profitable mining firms in dollar terms were Teck Resources Ltd. (TSX:TCK.B), which recorded nearly $2 billion in profit from $9.3 billion in revenue last year. Goldcorp Inc. (TSX:G), which produced a record 2.5 million ounces of gold in 2010, also posted huge profits, primarily from the sale of various assets last year.
Other companies like Silver Standard Resources, New Gold Inc. and Taseko Mines Ltd. also grew profitability substantially, posting triple-digit percentage profit growth year over year.
Perhaps the best news out of 2010 was the much-awaited turnaround of B.C.’s forestry sector. The 12 public forestry companies on the list collectively posted their first increase in revenue in more than four years. Total revenue rose 23% to $12.1 billion, up from $9.8 billion in 2009.
For a sector that continues to improve efficiencies and make inroads into emerging markets like China, the sun is slowly starting to rise again on a key export for the province, which remains an important contributor to the economic well-being of B.C.
Fortunately, growth is continuing into 2011.
Of the top 50 companies on this year’s list, more than three-quarters have posted first-quarter revenue growth with average growth of 17.6%. Almost two-thirds have posted increases in net profit for the first three months of their fiscal years.
Again, the mining industry, especially in the precious metals category, continues to shine. Those with the highest increases in first-quarter revenue included Silver Wheaton Corp. (TSX:SLW), which posted an 84% increase in revenue to $158.2 million, up from $85.9 million.
With gold’s price continuing to hover in record territory, both Goldcorp and New Gold have profited. Both companies posted nearly 70% increase in revenue in the first quarter, with Goldcorp posting a 163% increase in profit and New Gold recording an 85% profit rise.
Forestry also continues to see top-line revenue growth. Western Forest Products and Interfor both posted roughly 30% increase in revenue in the first three months of the year, while Canfor also posted an 8% increase in revenue for the period.
With continued volatility in the equity markets and the global economy in general, companies may be setting their sights increasingly to grow through acquisition.
Among the key changes to this year’s top 100 list is the consolidation in various industries in the past year. Some of the largest companies that were acquired included Seacliff Construction, Red Back Mining, FarallonMining, Gold Wheaton Corp. and Fronteer Gold.
While mergers and acquisition (M&A) activity was very strong last year, the mood remains bullish for more big deals.
Andrew Rippy, managing director at Pacific Crest Securities, noted at a recent conference in Vancouver that “he M&A market is fairly healthy. We follow technology and many companies are cash-rich with little debt. Buyers are aggressive in pursuing opportunities where there is growth.”
The availability of credit for M&A deals continues to improve, according to Alan Hibben, managing director of mergers and acquisitions for RBC Capital Markets. However, companies may continue to find it a challenge to find synergistic deals to help boost future growth.
“We have overwhelming demand from [companies and private equity firms] looking for ways to change the growth curve, but we are finding quite reluctant sellers out there. Coming out of the downturn, there should be more sellers, but there are not.”