The weak dollar meant huge losses for Etsy in 2015. In their November report, it reported a comprehensive loss of $39,646,000. This is a difference of more than 60 per cent from last year, before the company went public.

Etsy boasts sellers and buyers from nearly every country in the world and offices in seven countries, including Canada. An emphasis on a worldwide community of handmade goods, like customized T-shirts, lamps and necklaces, is part of the company philosophy, but according to the last quarterly report, it’s also the reason they’re reporting large losses.

“We believe weaker local currencies in key international markets continued to dampen the demand for U.S. dollar-denominated goods,” it stated. The company deals in U.S. dollars, so any expenses incurred in markets outside the United States are then converted to USD and reflect as a loss. It’s reported more than $15,000,000 in foreign exchange loss.

(To see the entire financial statement in DocumentCloud, please click on the annotated image.)

“They call it a secondary thing. I don’t call it secondary,” said Scott Bedard, a consultant based in Edinburgh.
Canada is one of the countries with a large Etsy market. While the Canadian dollar has been a factor in Etsy’s losses, Etsy Ireland had a currency exchange loss of $15.7 million. With its weak financial situation, the intercompany debt between Ireland the U.S. office is expected to be a continuing problem.

These losses have contributed to a steady decline in Etsy stock prices since they went public in April 2015 and staying below $10 since they released the November quarterly report. The stock is at $7.76 as of Jan. 30.

Etsy had hoped to make up for those losses over the holiday season, a time when they’ve historically sold more than the rest of the year, according to the report. However, it said if low currency continued outside of the U.S.—as it has—there was reason to believe it would “dampen the demand” for American priced goods.

The numbers for the holiday season have not yet been released, and the company declined to comment before the next quarterly report, expected in February.

There’s a lot of competition with online vendors facilitating independent sellers—Amazon Marketplace, Alibaba and eBay have much bigger operations are able to offer cheaper or free shipping, as well as flexible return policies.

In the report, the company stresses that “authenticity” and a sense of community are what helps it connect both with sellers and buyers, so they’re making a choice to buy into more than a single purchase. It also states that the personal relationships between the company and its sellers and buyers are essential to its branding in every country.

Many of Etsy’s more than $44,000,000 in marketing expenses have gone into attracting sellers in the many international markets it serves. It has more sellers than ever, with 1,533,000 active sellers—about 250,000 more than the year before. Since the goods are mostly not being sold in U.S. currency and have to then be converted to U.S. dollars, the investment isn’t doing the company any favours.

“It doesn’t translate into anything, because the goods shouldn’t be sold on Etsy, or they’re not going to be sold on Etsy,” said Bedard.

And as close as each seller and buyer may feel to the company, the reported losses means the global market is putting a strain on the profitability of the business.

Etsy by sabrinanemis on TradingView.com

Source: TradingView.com

By Rupert Nuttle

Canadian Oil Sands Stock by RFN on TradingView.com

Canadian Oil Sands Ltd., which was bought out by a major player in Canada’s energy sector this month, had been losing money and scrambling to offset debts for close to a year, according to analysis of their most recent financial statement.

To begin with, the company lost $488 million in the first nine months of 2015, versus a net income of $435 million in the same period the previous year. In other words, they lost more money in 2015 than they made in 2014. That’s a decline of close to a billion dollars.

To see an annotated version of the financial report click below.

What caused this change of fortune?

Some of the reasons are well-known. The global oil market has not been kind to Canadian crude producers lately. Canadian oil is relatively expensive to extract compared to Middle Eastern producers such as Saudi Arabia and Iran, where low production costs recently drove the per-barrel price of oil down to an unprecedented $30 USD.

On this point alone, Canadian Oil Sands was operating at a loss. Last year, it cost them $40 CAD to produce one barrel of crude, which, even at today’s slightly higher prices, would go to market for about $35. On a bad day, they could lose $10 on every barrel produced.

To try to mitigate these losses, the company slowed production and stopped expansion – a strategy that’s becoming more and more common among Canada’s oil producers, according to Canadian energy market analyst Jean-Thomas Bernard.

But for Canadian Oil Sands, it wasn’t enough. Slowed production means limited cash flow; limited cash flow means less money on the books. Financial reports reveal that their cash flow had dropped to a quarter of 2014 levels in 2015, meaning that if they were to survive they would have to wait for global prices to recover.

This hurry-up-and-wait message was exactly what Canadian Oil Sands CEO Ryan Kubik delivered to investors in early January, faced with a “hostile” takeover bid from Suncor Energy. In a video posted on the company’s website, Kubik promised “a new era of low-cost operations” that would help them weather the market’s deterioration until prices rose again.

In the end, though, independence wasn’t worth the wait.

When Suncor’s $4.3 billion offer for the company expired on Jan. 8, close to half of Canadian Oil Sands investors had already tendered their shares – not the two-thirds needed to secure the deal, but a telling sign that the merger was imminent.

So Suncor extended their offer once again, and on Jan. 18 the companies reached a “friendly” agreement. Suncor raised its bid to $6.6 billion, absorbing close to $2.4 billion in Canadian Oil Sands debt. Key investors finally tendered their shares.

“In the end, the willingness to fight the bid clearly was not strong enough, or was attenuated through a better offer by Suncor,” said André Plourde, an expert in oil sands economics at Carleton University.

With more assets distributed more broadly, Suncor was in a good position to take a larger slice of the oil-sands pie. The agreement with Canadian Oil Sands boosts Suncor’s share in the Fort McMurray project (also known as Syncrude) from 12 per cent to 49 per cent.

At a time when breaking even is a thing of the past, “there is definitely no expansion,” says Bernard. Hence Suncor’s move to purchase an ailing industry partner, instead of building new projects of their own. Bernard believes Suncor’s expanded Syncrude share will benefit all players in the oil patch by centralizing its operations and increasing information-sharing between companies.

Plourde agrees. But, he says, “time will tell whether this will be possible since these are hugely complicated operations.”

Both experts also mentioned that Suncor’s takeover makes Syncrude more responsive to provincial regulations. Since Suncor controls assets in other parts of Alberta, the new arrangement simplifies the industry’s relationship with regulators.

“As the owner of two sets of operations, [Suncor] will be in much better position to negotiate fiscal arrangements with the province,” says Plourde.

With Canadian Oil Sands no longer in the picture, the experts say that Alberta’s oil patch will now be characterized by a tug-of-war between Suncor’s increased share in Syncrude operations and the executive power of Imperial Oil – an Exxon Mobil subsidiary with a 25 per cent share of the project.

Shaw Communications Inc. may have reported higher revenues for the first quarter of 2016, however, the company’s profits for the quarter took a four per cent slide compared to the same period last year.

The telephone, internet and television services company earned $218 million in the three months of the quarter compared to $227 million the year before.

A portion of Shaw Communications Inc’s financial statement annotated in DocumentCloud. (click inside the document to see the entire document and other annotations)

Source: Shaw Communications

But this may not be a problem for the company after all.

“The swing in the income is not very significant,” said Darrell Herauf, an accounting professor at Carleton University. “The net income didn’t reduce by much so I don’t think a shareholder is going to be worried about that decrease in income.”

Herauf added that the company’s celebrated two per cent increase in revenue was consistent with inflation.

Dwayne Winseck, another professor at Carleton University with an expertise in Canada’s telecommunications industry said the reduced revenue could be because Shaw Communications has had to compete more strongly with its business rival, Telus Corporation.

In the reported quarter, Shaw Communications incurred higher costs on income tax and purchase of equipment causing the company’s decline in profits.

There was a $16 million surge in the company’s spending on income tax this quarter compared to the same period in 2015.

“The element of tax that changed there is a complicated one to explain,” Herauf said.

Shaw Communications paid $92 million in income tax in the first quarter of 2016, $2 million more than what they paid in 2015.

“Their income before taxes was a little bit higher this year compared to last year. Therefore, their taxes that they have to pay was a little bit higher this year compared to last year which makes sense. The more that you earn the more that you have to pay,” Herauf said.

But recovery from deferred income tax was the major reason for the company’s lower profits.

This year the company recovered less than half the amount it did in 2015 from deferred income tax. The financial statement says this is as a result of some changes in the provincial tax rates.

Source: Shaw Communications

Shaw Communication’s higher spending of $10 million on equipment in the reported quarter compared to the same period in 2015, was also on the list of expenses that shrunk profits.

In the statement, the company indicated that these increased expenses were partially offset by improved figures from its earnings before taxes and restructuring.

Shareholders with Shaw Communications lost three cents on each unit of share they own. Although a unit of shares generated 43 cents  in the first quarter of 2016, it was a decrease compared to the 46 cents earned in the  comparable period last year.

Stock prices for Shaw Communication over time

Source: TradingView

Herauf said the company’s statement shows that it  is quite stable. Winseck agreed.

“These changes are occurring over too short a period. They are too small to make any huge conclusions,” said Winseck.

He added that the results from Shaw Communications Inc. over a longer period show that it’s quite healthy on the financial side.

A young pharmaceutical company based in Laval, Que. is asking stock holders to be patient while waiting for Federal Drug Agency approval.

Acasti Pharma Inc. has recently released a quarterly financial statement which shows a net loss nearly $2 million. In comparison the company posted a $3 million profit for the previous year, roughly a 170 per cent drop. Acasti’s stock has correspondingly decreased steadily since the turn of the new year.

Acasti Stock Price by DMaj on TradingView.com

According to John Ripplinger, Acasti’s director of investor relations, the company is showing a loss in part due funds raised in the previous year. Last year Acasti sold derivative warrants, a type of share, to increase their funds. Therefore last year’s profit was “not a gain in hard money” as Ripplinger put it, because they are not generating sales revenue.

While the young company had not primarily relied on sales to increase its profits, Acasti’s sales earnings have also decreased by about 80 per cent from last year. Ripplinger said that the decrease in revenue is due to the transfer of one of Acasti’s products to their parent company, Neptune Biotech. A recent press release from Neptune said that they had taken over marketing responsibilities of the drug Onemia. Ripplinger said that this was done primarily so Acasti could focus on a developing their new drug CaPre.

Ripplinger said that Acasit is a small team and is focusing on development rather than generating sales revenue. “Their focus right now is on CaPre.”

Patience seems to be the message to Acasti’s shareholders. Currently the company is waiting on FDA approval of CaPre, before being able to go to market in the United States. A recent Acasti press release said that Acasti has received positive feedback from the FDA, and are looking to proceed to clinical trials.

Kenneth Wong, a business professor from Queen’s University in Kingston, Ont. said that patience is a common practice for pharma companies. Investors in pharmaceutical companies are typically in for the long term, “The life cycle of an investment probably runs ten to 12 years of discovery, a couple of years of clinical trials and then god knows how many years of getting acceptance by prescribing physicians,” he said. “So you have to have pretty patient investors.”

However Acasti’s fortunes may also depend on the success of the new drug. Pharmaceutical business expert, Bohumir Pazderka, also of Queen’s University, said that a new drug will only be successful depending on if it preforms better than similar drugs. “If there’s not much new, there’s not much different” then the new drug may not be competitive on the market he said.

Ripplinger said that the company is not yet able to compare CaPre to other cardiovascular drugs to see if it produces better results. Ripplinger said that while they are allowed to compare CaPre to other FDA approved drugs, they will not be able to compare the benefits until the next stage of the FDA process. “It could be anytime between now and 18 months from now before that would start,” Ripplinger said, reaffirming Acasti’s patiently optimistic stance.

Canadian Pacific profits fall $132 million in fourth quarter
By Gareth Madoc-Jones

CP Rail’s 2015 fourth quarter profits have fallen by $132 million when compared to the same quarter in 2014. This marks a 29.3 per cent slide in net income.

The decreased profits can be attributed to two main factors in CPs fourth quarter report. Commodity shipments across Canada have been reducing resulting in declining revenues. As well, the low Canadian dollar is costing the company tens of millions in additional interest payments for its long-term debt in US dollars.

Over the fourth quarter, revenue from shipping commodities dropped $74 million when compared to the previous quarter. When breaking this loss down into commodity categories, crude oil shipments fell by $25 million, equating to 5,000 fewer carloads over the three-month period.

To view the annotated financial report click below.

Professor Raymond Cox, the finance chair at Thompson Rivers University, says falling oil prices are to blame for the decrease in crude oil shipping revenues. “With the drop in oil prices that’s put a depressing effect on the Alberta economy, putting it into a recession and that’s rippling over into the Canadian economy overall and as such shipping has declined and obviously a sub-component of that is shipping oil,” says Cox.

Other commodity categories also had sizable drops in revenues. Metals, minerals and consumer products fell by $40 million. US grain, coal, potash as well as domestic and international intermodal shipments combined for a further loss of $79 million.

The low Canadian dollar is also eating into CPs profits. The most recent quarterly report shows $100 million in losses from paying off long-term debt in US dollars. “Having just been informed that CP Rail has a high amount of US dollar denominated debt, then obviously their interest payments in US dollars are more expensive now that the loonie’s gone down,” says Cox.

Canadian Pacific Railway, TSX stock price in US dollars by GarethMJ on TradingView.com

What’s also worth noting is CPs stock price on the Toronto Stock Exchange. In April 2015, the stock peaked at $198 US a share. Over the course of the next nine-months the stock fell by 51 per cent to a low of $97 US in mid-January 2016. Cox says this dip is not only attributed to the low loonie and falling oil prices, but also to two failed attempts to purchase the American railroad Norfolk Southern Corp. for an estimated $30 billion.

“So far they’ve been rebuffed by the company and they have raised their offer price,” says Cox, adding, “Even if they succeed they have the winners curse where they overpay for the stock and that would have a short run negative impact on CP Rail stock price.”

Norfolk Southern isn’t giving any indication a deal with CP Rail is close. In fact, they have said CPs proposals have not only been unsolicited, they’ve been grossly inadequate.

CPs stock has rebounded in the past week and a half. It’s now trading at around $120 US a share. This rise in stock price follows the decision by CP to cut 1000 jobs this year. The cuts were announced on Jan. 21, the same day CP released its fourth quarter results. “Despite challenging economic conditions and lower commodity prices, we continue to focus on what we can control – lowering costs, creating efficiencies,” said Harrison in the quarterly report.

Even though CPs profits have been shrinking they still managed to post fourth quarter earnings of $319 million and $1.35 billion for the entire 2015 year. While some might believe these bottom line numbers are impressive, CPs CEO has demonstrated by the job cuts the company is willing to take significant action in an attempt to reverse the trend in falling profits in 2016.

Pengrowth Energy Corporation, a mid-sized Canadian oil and gas producing company, is swimming in a toxic sea of losses. The only thing remedy, a return to higher world oil prices.

Oil is a non-renewable resource. When it is used up, it’s gone. Consumption of fossil fuels is at the heart of climate change. If we do not curtail our use of fossil fuels, we risk permanently damaging the world’s climate.

Despite dire warnings like these and despite constant examination by the financial industry, an apparently unforeseen global glut of oil supply arrived about eighteen months ago. And, oil prices dropped. Precipitously. Not surprisingly, the profitability of Canadian oil production companies dropped too.

In September 2014 Pengrowth was getting almost $105 per barrel of oil. At that price, in three month from July to September, 2014 the company made a profit of just over $133 million. Life was grand. But, those halcyon days are gone. At least for now.

By September 2015 Pengrowth was getting just $61 per barrel of oil. At this new price – 42 percent lower than the previous year – July to September, 2015 the company lost almost $340 million. Gulp. This is the number that pops off the page of the 2015 third quarter financial report. That is a profit/loss swing of almost half a billion dollars.

If this loss rate of $340 million per quarter were to continue, Pengrowth would lose over $1 billion per year – the total amount of credit they have available.

Pengrowth’s results for the last three months of 2015 have not been released but things may get even worse. The price of oil has declined to $47 per barrel as of January 29, 2016. Now 59 percent lower than the glory that was September 2014. Uh oh.

Success in business is pretty simple. If revenue exceeds costs you are a success. If costs exceed revenue, losses pile up and you eventually go bankrupt. Pengrowth urgently needs to increase revenues and decrease costs.

CIBC business analyst Jeremy Kaliel notes that Pengrowth has increased short term revenue by selling assets. The company sold assets in 2015 that brought in $263 million. Further deals already made will see another $37 million by March, 2016.

In a news release on January 21, 2016 Pengrowth President and Chief Executive Officer, Derek Evans, notes that the company intends to sell more assets worth another $300 million sometime in 2016. There is nothing in the news release to indicate if this plan will be brought to fruition. There are, apparently, no deals currently signed, just good intentions.

Costs are being reduced, too. Pengrowth reduced its quarterly dividend to $0.01 per share for the last quarter of 2015 and then eliminated the dividend altogether to start 2016. There is no money allocated towards new drilling in 2016. Production at existing wells is reduced. Head office staff has shrunk by 26 percent. Pengrowth is bailing water. Fast.

“For an investor with a five-year horizon, oil may be a good play,” says Fraser Sutherland, Vice-President, CIBC Wood Gundy. In other words, if you can wait five years, oil price should rebound and oil production company share prices will roar back earning investors a tidy profit. Or so the theory goes.

“Based on a consensus of oil research firms, it is expected that West Texas Intermediate Crude will sell for approximately $70 a barrel in 2018,” says Sutherland. This falls between the very profitable price of $105 seen in 2014 and the devastating price of $61 seen in September 2015. It is also the number which most pundits pick as the price needed to see an efficient Canadian oil industry return to profitability.

We are left with two questions: (1) Will the $70 per barrel prediction for 2018 come true? (2) Can Pengrowth stay afloat until then?

As is often the case with global business, unforeseen circumstances – war, terrorism, revolution – can have a remarkable effect on things like the price of oil, both good and bad. Jobs, savings, and, indeed, whole provincial economies may turn on this question.

Pengrowth Energy Corporation Stock Price by DaveScharf on TradingView.com

If only they could print customers…

Amid rising costs and declining profits, 3D Systems has announced it will put an end to its once revered consumer printing division. Effective midnight tonight, the global leader in 3D-print technology will no longer operate its online hub providing customers with design ideas, do-it-yourself kits and other retail items. The company has also announced it will end production of its consumer-targeted, desktop printer – the Cube.

In a benign and perhaps overly optimistic statement released late last month, 3D System’s interim-CEO and chief legal officer Andrew Johnson, said the company intends to shift its focus away from consumer products, and toward a more business oriented strategy. “We believe that the most meaningful opportunities today are in professional and industrial settings, from the product design shop to the operating room to the factory floor.”

3D Systems Stock Price by bhill9 on TradingView.com

What Johnson’s pillowy-soft statement fails to mention, however, is that the company has continually struggled to attract new customers – to put it mildly – and will likely continue to do so far into the foreseeable future.

According to its most recent financial reports, 3D Systems recorded a stunning US$32.4 million loss in the third quarter of 2015. This compares to a US$3.1 million net profit in the third quarter of 2014, and a US$17.6 million net profit in the third quarter a year earlier. Overall, profits at 3D Systems are down by an astounding 285 per cent over the past two years; while the company’s operating costs have risen by an equally impressive one and a half times – or roughly US$20 million a month.

In technical terms, the company is losing money faster than a 3D-printer can print it!

(Joking: 3D-printers are slow. That’s part of the problem.)

Misjudging the marketplace

Innovation specialist and head of entrepreneurship at the University of Ottawa, Luc Lalonde, believes companies such as 3D Systems may have overestimated public appetite for a machine that essentially does very little for the average consumer.

“They were probably just hopeful,” said Lalonde. “That somehow this would be just like personal computers were back in the 1980s. Where people were willing to put down two, or three or even four thousand dollars for a really crappy personal computer.”

But 3D-printers are nothing like personal computers, added Lalonde.

Sure, if you’re an expert in 3D-design, or stay up nights learning to use AutoCAD (whatever that is) then 3D-printing might be for you. But for us average folk, the technology offers next to nothing in terms of practical applications; and at US$999, the Cube was simply too costly.

“I just look around my own friends, and there’s no desire,” said Lalonde. “Why would you get a 3D printer?”

And many people aren’t.

Before the decision was made to cut consumer printing, inventories of unsold products at 3D Systems had risen to an all-time high of US$73 million – nearly double what it had been two years earlier.

Enter Geordi Laforge

Although the technology involved in 3D-printing is by no means comparable to that of Star Trek – where one could literally reproduce anything they so desired – 3D-printing does possess a particular, fantasy-like, attractiveness.

Source: www.youtube.com

For scientists, manufacturers and medical researchers, this means possibilities never before imagined – like printing ultra-strong materials, designing 3D-legs for dogs, or producing a real, fully-functioning, human heart.

For others, like Michael McLaren, a student of mechanical engineering at Carleton University, 3D-printing is a learning opportunity. A chance to develop skills and knowledge for the twenty-first century.

Even if that means designing a 3D-printed bicycle that collapses underneath your own weight.

Shopify Stock Prices by alexmazur005 on TradingView.com

Source: TradingView

Shopify, Ottawa’s start-up surprise, hasn’t seen profits for several years, and lost over $4-million in their last quarter, according to their most recent financial statement.

Even though these numbers might be troubling for some shareholders, Nour El-Kadri, professor of Strategic Management at the Univeristy of Ottawa’s Telfer School of Management, believes that Shopify’s losses might be hints of its “big future” and an “ambitious agenda”.

Although its revenue shot up by almost 70 per cent in the last quarter, the company’s general and administrative costs – that is office space, computers, tech architecture and salaries – has more than doubled in its last quarter.

Basically, Shopify is spending more than it’s earning.

“They’re not doing this out of nowhere, they’re doing it with the idea of improved productivity,” says El-Kadri. He mentioned that Shopify’s habit to invest in its employees by providing creative workspaces, catered lunches, and other perks as a tactic of instilling “a family environment.” This sense of staff inclusivity has proven to work for other companies in the past such as Google and Facebook.

Shopify first started off as a snowboard selling company in 2004, based out of downtown Ottawa, but in 2006 Shopify began offering its easy to use online stores to service small to medium sized companies. The company has grown, with more than 200,000 online stores, and raised more than 100 million dollars when it opened its stocks to the public in May 2015.

Since it became public, Shopify’s stock prices have plummeted, but mainly because so many people are buying Shopify’s stocks. In 2015, its number of shares has almost doubled  from the previous year, making Shopify a hot commodity in the ecommerce world.

James Bowen, another professor in the Telfer School of Management, and an expert on growth of start-up companies, jumped on the Shopify bandwagon and bought shares last year. Bowen says that the company is thinking, well, like a start up, and taking measured risks for future growth.

“If you want creative and innovative thinking that attracts good people, you need to create a corporate culture and environment,” says Bowen. Old and bureaucratic ways only hinder a company like Shopify that works in the fast paced environment of the exponentially growing industry of online businesses. According to Bowen, for Shopify to continue owning this market, it will have to keep up an environment where its people “can let their brains go at full speed”.

The company has also focused less of their attention on research and development, which for a high tech company might seem counter-intuitive. According to Bowen, Shopify’s base platform is already the best in the business, and therefore it’s more important for it to focus on monopolizing their market by improving existing features, instead of trying to reinvent Shopify’s well working wheel.

“Expansion beyond the norm” is what El-Kadri sees in Shopify’s aspirations. It seems as if they’re following through by partnering up with the some of the biggest names on the web.

In a press release following their last financial statement, Shopify stated that they were now partnered up with companies like Amazon, Facebook, and Twitter, who according to their new CEO Tobi Lütke, will “contribute to our long-term growth.”

El-Kadri did mention one minor area of concern.

“It looks like they’re not paying much attention or doing due diligence into their expenses,” said the business professor, who likened these habits to companies who flourished in the high tech boom.

“It’s only when they’re hit that they will start to look into those expenses and they will be cutting them down,” added El-Kadri.

Does he see that hit coming anytime soon?

“No,” said El-Kadir. “Shopify is on sound ground.”