OTTAWA, March 2, 2005 -- Export Development Canada extended a record $54.9 billion in trade finance and risk management services in 2004, a 5.8 per cent increase over 2003 levels. This increase resulted from a strong year for global trade which saw the first growth in Canadian exports in three years. EDC also facilitated a record $11.6 billion in exports and investments in developing markets, a 10.5 per cent increase from 2003. Overall EDC participated in 12.2 per cent of Canada's exports in goods and services. That participation rate climbed to 35.9 per cent of Canadian exports in goods and services to developing markets. EDC assisted transactions in 177 countries and territories, 146 of them in developing markets. "Canada's prosperity and Canadian jobs depend on the continuing success of our exporters and investors," said Acting President Gilles Ross. "In 2005 we will offer an even wider range of services and solutions to support the Government's trade agenda and help our clients succeed internationally." EDC assisted 6,962 Canadian exporters and investors, a slight decline resulting from decreased activity with the smallest sized exporters whose exports have been most affected by a stronger Canadian dollar. Despite that decline, some 90 per cent of EDC clients were still small- and medium-sized enterprises and they used EDC services in a larger number of transactions. In 2004, that customer segment accounted for a record $11.8 billion in EDC business, a dramatic 13.5 per cent increase from 2003. In 2004, EDC's operating income actually declined by 6.1 per cent from 2003 to $885 million (a reduction of $57 million) as a result of a stronger Canadian dollar and lower financing volumes signed in the past two years due to difficulties experienced in the telecom and aerospace fields. In turn, lower financing volumes require less provisioning, thereby translating into higher net income. The economic recovery of 2004 greatly improved credit quality, which had a major impact on the provisions EDC makes for potential losses on its loans to foreign borrowers. EDC's provisioning policy has a methodology that calculates what amounts are required to cover possible losses. Provisions reflect changing economic conditions, typically decreasing in times of economic growth and increasing in economic downturns. In recent years, EDC had taken large loan loss provisions as credit quality among its borrowers declined. "In 2004, credit climate improved much faster than any of us anticipated and, as was the case for many Canadian banks, this has triggered a significant reduction of provision requirements for us," said Mr. Ross. "Those provisions formerly set aside to cover potential credit losses are now a component of shareholder's equity. The reduced provisions result from a strengthening of credit quality in Canadian export markets and these provisions now become available to support new Canadian export trade." EDC's net income increased by $998 million due to reductions in provisions for credit losses compared to 2003. Accounting rule changes introduced in 2004 on the reporting of derivative financial instruments at fair value with unrealized gains and losses on the income statement have also had a $143 million positive impact on EDC's net income. As a result of both these factors, EDC's net income in 2004 was $1.242 billion compared to $158 million in 2003. Reductions in provisions and the changes in reporting of unrealized fair value gains are accrual items that do not represent increases in available cash. ($ in millions) 2004 2003 Change Operating Income $885 $942 $(57) Reversal of / (Provision for) Credit Losses $214 $(784) $998 Unrealized Fair Value Adjustment $143 $ - $143 Net Income $1,242 $158 $1,084In 2005, EDC will focus on expanding its service offering and grow its financing program to meet the needs of Canadian exporters in developing markets. This will include supporting the Government's objectives to increase Canada's trade in developing markets by taking on greater levels of risks in those key markets, as well as to assist sectors of strategic importance to Canada. EDC will work with Canadian firms establishing global supply chains through direct investment abroad, assist in the expansion of Canadian export capacity, and encourage SME exports. Two other measures of EDC's economic impact are contribution to Gross Domestic Product (GDP) and person-years of employment. In 2004, EDC estimates that the business it facilitated generated nearly $34.7 billion in GDP, an increase of 6.8 per cent from the previous year. That contribution sustained an estimated 438,000 person-years of employment. Other key results include : - EDC's assets decreased to $20.8 billion from December 31, 2003, largely as a result of the appreciation of the Canadian dollar as most of those assets are denominated in U.S. dollars; - There was a reduction in provisions set aside for possible credit losses of $998 million in 2004, bringing the total allowance for loan-related losses and insurance claims to $3.6 billion; - Total paid-in capital, retained earnings, and allowances at December 31, 2004 was $7.1 billion; - Impaired loans as a percentage of gross loans receivable increased slightly to 11.1 per cent at December 31, 2004 compared to 8.7 per cent a year ago; - The number of insurance claims paid was 1,609, an 18.9 per cent decrease from 2003. The dollar value of those claims was $64 million compared to $76 million in 2003; - In aerospace, EDC extended $2.5 billion in trade finance and risk management services to finance or insure sales by 34 companies in 2004, in comparison to $2.9 billion in 2003. As most aerospace financing is extended and repaid in U.S. dollars, the appreciation of the Canadian dollar accounts for approximately $100 million of this change, while $300 million represents the actual volume decreases; - EDC's aerospace gross loans receivable and loan guarantees totaled $6.2 billion at year end in comparison to $6.5 billion in 2003. Of this amount, 89 per cent was classified as performing and scheduled principal repayments were $519 million; - Administrative expenses increased by 2.9 per cent to $178 million from $173 million in 2003, or 18.5 per cent of net revenue compared to 17.1 per cent in 2003; and - Costs incurred in 2004 for business travel and promotion by the Board of Directors (excluding expenses of the President) totaled $161,175, in comparison to $287,217 in 2003. For the President and Acting President, expenses for business travel, promotion and conference fees were $59,339 compared to $91,022 in 2003; - The number of employees at December 31, 2004 was 997, a small decrease from 1,003 in 2003. EDC provides trade finance and risk management services to Canadian exporters and investors in up to 200 markets. Founded in 1944, EDC is a Crown corporation that operates on commercial principles. EDC has offices in 12 cities across Canada and overseas representation in seven cities in key developing markets. Reporting to Parliament through the Minister of International Trade, EDC has won the Auditor General's Award for Excellence in Annual Reporting by Crown Corporations seven times, and consecutively for the past three years. It has also been recognized by Maclean's as one of Canada's top 100 employers in each of the past four years. -30- Media Contacts:Glen NicholsExport Development CanadaTel. 613-598-2876E-mail: glnichols@edc.ca
