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Canada Corporate Earnings Drop 8% in Second Quarter

By Paul Vieira

OTTAWA--Pretax profits at Canadian companies fell in the second quarter, Statistics Canada said Tuesday, to its lowest level in roughly five years.

All major sectors sustained a hit from measures by authorities to contain the spread of Covid-19.

Overall, seasonally-adjusted pretax profit dropped 8% from the previous quarter to 52.27 billion Canadian dollars ($39.58 billion), Statistics Canada said. Operating revenue declined 11.6% to $939.78 billion.

Data covering Canadian economic growth for the April-to-June period is due out on Friday, and expectations are for a record annualized plunge of 40%.

The Bank of Canada's most-recent quarterly business outlook survey, released in July, found a key indicator of business sentiment dropped close to the trough that was experienced during the 2008-09 global financial crisis. Many of the firms contacted for the survey said weak demand is reducing capacity pressures and price-growth expectations, while forward-looking sales indicators have collapsed.

That survey was taken between mid-May and early June. Since then, a variety of economic indicators suggest an economic recovery is well underway. The labor market has recovered over half the jobs lost in March and April stemming from the pandemic. Further, retail sales in June returned to levels recorded in February, and manufacturing sales in July are expected to rise closer to prepandemic levels.

Statistics Canada's earnings report indicates pretax profit among nonfinancial companies fell 20% to C$24.59 billion, with deep losses sustained in the transport sector, and businesses covered under the hospitality, accomodation and entertainment banner.

Pretax profit for Canada's financial-services industry rose 6.2% to C$27.68 billion. The data indicated income before taxes among banks and other lenders fell 42% due to large loan-loss provisions and a decline in revenue. That was offset by gains among securities dealers and insurers.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

August 25, 2020 09:40 ET (13:40 GMT)

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