Export Development Canada (EDC) has announced that its combined financing and insurance volumes reached a record C$66.1bn in 2006, a 15% cent increase over 2005. EDC also facilitated a record C$15.2bn in trade with emerging markets and C$6bn in Canadian direct investment abroad in 2006, increases of 14% and 50%, respectively, over 2005.
“Canadian exporters had a challenging year in 2006, dealing with a higher Canadian dollar and energy costs while seeking to grow and invest in riskier emerging markets,” says president and CEO Eric Siegel. “We saw a significant increase in 2006 of companies taking on a more globalised business approach, and their finance and insurance needs drove EDC to record results. EDC’s strong balance sheet allowed us to take on greater risk on their behalf, when and where they needed us the most.”
Brazil, Russia, India, China and Mexico continue to be the priority markets for Canadian companies because of their growth rates, importance to global supply chains and alignment with Canadian strengths.
EDC business volumes in these markets totalled more than C$6.8bn in 2006, up 26% from US$5.4bn in 2005, with notable growth in Mexico at US$2.6bn (2005 – US$1.6bn), India at US$730mn (2005 – US$375mn) and Russia at US$750mn (2005 – US$502mn).
“EDC’s new representations in China and Russia have allowed us to deepen our relationships with local buyers and borrowers, the key customers of Canadian exporters and investors,” continues Siegel. “We first established representation abroad 10 years ago. Today we have a permanent presence in ten key cities in high growth emerging markets, and we are working closely with the government of Canada’s trade commissioner service to help Canadian companies establish the connections they need to grow their business abroad.”
EDC performs a key role in the government of Canada’s global commerce strategy. In 2006 EDC participated in nearly 13% of Canada’s total exports in goods, services and investments, with that total climbing to 30% in Canada’s trade with emerging markets.
The transactions facilitated by EDC in 2006 are estimated to have generated US$44.6bn of Canada’s GDP or 3.9% of the total. This export and investment activity was also associated with sustaining more than 546,000 jobs, representing approximately 3.3% of national employment. More than 85% of EDC’s customers are small and medium-sized enterprises.
EDC’s net income in 2006 was US$1.22bn compared to US$1.29bn in 2005. The key components affecting net income were a release of provisions and an increase in net financing and investment income. In 2006, EDC released provisions in the amount of US$376mn, due primarily to continued improvements in the credit environment and successful airline restructurings. Net financing and investment income increased mainly due to an increase in debt relief income and a reduction in impaired loans.
EDC’s operating income increased by 7.1% to US$880mn in 2006, aided by the receipt of US$261mn in debt relief income in 2006 compared to US$64mn received in the same period last year. Debt relief occurs when the government of Canada forgives sovereign debts to highly indebted developing countries for debts incurred in prior years. EDC is then reimbursed for an amount equal to the debt relief granted by the government of Canada.
EDC’s business activities were strong across most regions of Canada. Regionally, western Canada led the country, accounting for 35.3% of EDC’s total business volume followed by Ontario (32.9%), Quebec (27.4%), and Atlantic provinces (2.1%).
“In 2007 our job at EDC will be not only to deliver on what Canada’s exporters and investors need today, but to anticipate what they will need to succeed tomorrow,” continues Siegel. “Our strong financial position will allow us to continue to show greater flexibility especially in higher risk emerging markets.”
Other key results include:
- EDC’s assets increased by 16% to C$22.8bn from December 31, 2005.
- The total allowance for loan-related losses and insurance claims was C$2.4bn at December 31, 2006.
- Total paid-in capital, retained earnings and allowances at December 31, 2006 were C$8.4bn.
- Impaired loans as a percentage of gross loans receivable decreased from 18.4% at the end of 2005 to 8.2% at December 31, 2006, reflecting the reclassification of impaired loans to performing status primarily within the aerospace industry.
- EDC received 27 aircraft from the defunct Independence Air, 15 aircraft from Northwest Airlines, four from Delta Air Lines and one from Comair. The 15 aircraft from Northwest Airlines have been returned to Northwest as part of the restructuring agreement with EDC. EDC has successfully placed 28 aircraft with new operators and there are pending sales agreements for the remaining four.
- The number of insurance claims paid was 1,290, a 2.1% decrease from 2005. The dollar value of those claims was C$61mn compared to C$44mn in 2005.