The province's top-performing companies are poised for further growth this year and beyond thanks to new opportunities and stabilizing economic conditions around the world.
Two-thirds of companies on Business in Vancouver's list of the top 100 most-profitable companies in B.C. posted net profit growth between 2011 and 2012. That's helped keep combined profits of B.C.'s top-performing companies at $13.4 billion in 2012, just under the $13.5 billion earned by these companies in 2011.
But while 2012 was a good year for most, many continue to post record gains so far in 2013.
Vancouver-based Avigilon (TSX:AVO), for example, which develops high-definition surveillance systems, last week reported a 259% increase in net earnings for the nine-month period ending September 30. Profits rose to $14.8 million from $4.1 million from an 81% increase in global sales to $122.4 million from $67.6 million.
The company's sales have grown in all of its key markets, more than doubling in Canada, the U.S. and the Middle East between 2012's third quarter and the same period in 2013. An increasing number of major surveillance system installations and deepening market penetration with more sales people have been driving the company's rapid growth. Avigilon CEO Alexander Fernandes said during the company's third-quarter conference call, "We are reaping the benefits of our 2012 growth investments."
Last week, Burnaby-headquartered industrial auctioneer Ritchie Bros. Auctioneers (TSX:RBA) reported a 101% increase in net earnings to US$16.4 million in its third quarter ending September 30 from US$8.1 million in the same period in 2012. The gains came primarily from larger commissions earned from the total value of equipment sold in the period. Year-to-date, the company reported a 5.3% increase in net profits to US$60.5 million from US$57.4 million.
Ritchie Bros. CEO Peter Blake told BIV that improving economic conditions in the U.S. are driving much of the company's performance. Approximately 85% of its revenue originates in Canada, the U.S. and Europe.
The company's financial results have steadily improved since 2010 when it faced a sharp decline in activity in the U.S. stemming from the Great Recession sparked by the global financial crisis. Rising U.S. construction activity is boosting auction transactions for the company.
"We are seeing more activity in the U.S., which is encouraging for us. We are seeing more [heavy equipment] production in the U.S., which is also encouraging," said Blake. "So that lines up to a more familiar marketplace than one you saw in 2009, 2010."
In the midst of the U.S. recovery, however, the company has continued to expand. Earlier this year, the company launched Equipment One, an online marketplace where buyers and sellers have more control than in an unreserved auction. While in its infancy, the system is a strategic move to tap about half of the $200 billion global auction market that doesn't operate in an unreserved market.
In April, the company expanded into the world's largest construction market, holding its first auction in China in April. A second auction will be held in November at its leased auction site located in the Beijing Tianzhu Free Trade Zone.
It's taken Ritchie Bros. nearly a decade to start its operations in China. The company spent much of the past nine years patiently building relationships and establishing the groundwork to build an industrial equipment auction market in the People's Republic.
"We're going about it in a very methodical way," said Blake. "The sales are small; that's OK. We're converting buyer and seller behaviour there; we are creating a transparent and open marketplace, which is something they are not quite used to. But we've gained a lot of respect and a lot of strong relationships by doing it in a very culturally sensitive way."
For Telus Corp. (TSX:T), the third most profitable company in B.C. last year, achieving steady growth from its investments in technology and services has continued to provide solid financial results. The telecom giant has posted double-digit percentage growth in revenue and net profits between 2008 and 2012.
While the Canadian telecom industry has faced the possibility of a major competitor entering and disrupting the market, growth at Telus has continued thus far this year. According to the release of its most recent financials, the company's net earnings rose 6.7% to $1 billion for the first nine months of 2013 from $941 million in the same period last year.
Telus CFO John Gossling told BIV that continued growth in the company's customer base and increasing demand for Internet data use has continued to drive financial performance, despite the longer-term trend of falling prices for telecom services in Canada. Last year the company invested just under $2 billion in its wireless and wireline businesses, and it plans to spend a similar amount this year.
"We are making big investments under the umbrella of [a] customer-first [focus] to provide the speed and capacity customers are looking for," he said. "There is so much demand, and that's driving a lot of growth."
Prospects brightening for B.C. precious metal producers
B.C.'s gold, silver and other precious metals producers are likely to benefit from more stable commodity prices over the next year as they get their cost structures in order.
Most precious metal producers on BIV's top 100 list of the most profitable companies in B.C., have faced declining revenue and profits this year with the drop in commodity prices that has hit the industry.
After gold prices hit $1,921.15 per ounce in September 2011, various forecasts now have gold prices r anging between $1,200 and $1,300 per ounce over the next 12 months.
David West, an analyst at Salman Partners, has a long-term forecast for gold to remain between $1,300 and $1,350 per ounce over the next few years.
The gold price has likely reached a plateau for now. But West said that could change, depending on whether inflation in the U.S. rises as quickly as some analysts expect when the pace of U.S. economy growth accelerates. A strengthening economy will require reduction of extraordinary monetary policies enacted by the U.S. Federal Reserve.
"If you see significant inflation in the long term, then our gold price may be on the low side in terms of our long-term forecast," said West.
But a stable gold price provides some certainty for precious metal companies, which have been streamlining operations and cutting costs to the new realities of lower commodity prices. Many producers have been curtailing exploration and development activities over the past few months to boost profit margins in line with the current price environment.
But West is optimistic that the situation will be different a year from now. "Right now, generally, the headline for a lot of companies is 'We are continuing to lower costs.' A year from now, if you're seeing a $1,300 gold price still, chances are you aren't going to see those headlines. It will take some time for companies to adjust, but I don't think it will take that long."
