OTTAWA - September 8, 2005 - While Canada's overall export growth has slowed in 2005, Export Development Canada (EDC) has so far recorded 20 per cent growth in its business volumes in opportunity-rich developing markets. EDC's total business volume in the first half of 2005 reached $25.7 billion, slightly below the 2004 figure of $26.1 billion, reflecting the challenges of higher energy costs and a stronger dollar felt by Canada's exporters.
In the first half of 2005, EDC supported $6.4 billion in trade in developing markets, compared to $5.3 billion in 2004. The key areas of that export growth were Central and Eastern Europe and India, increasing by 21 per cent to $443 million from $367 million and 52 per cent to $196 million from $129 million in 2004, respectively. EDC established permanent representation in Poland in 2002 and in India earlier this year.
This year to date, more than 5,700 Canadian companies used EDC services and products in successfully completing exports and investments in 160 markets.
"In the first half of 2005, Canadian exporters have had to meet the challenge of a stronger Canadian dollar and highly competitive conditions in world markets," said Rob Wright, President and CEO of EDC. "EDC is responding to these conditions, working closely with its customers and partners to develop innovative services and products to meet their needs."
The leading developing markets where Canadian exporters used EDC insurance or financial services were Mexico at $1.1 billion, China at $910 million, Central and Eastern Europe at $443 million, Brazil at $372 million and India at $196 million. Overall, EDC's leading market remained the U.S., although export volumes decreased from $14.9 billion in the first half of 2004 to $13.9 billion in the same period in 2005. This decrease largely reflects lower than expected trade in the aerospace sector.
Of the total EDC export-related business volume, Western Canada accounted for the largest share with $8.9 billion, an increase of 12 per cent over 2004. Across Canada, Ontario accounted for $8.1 billion (decreasing 13 per cent over 2004), Quebec accounted for $7.2 billion (decreasing 13 per cent over 2004), and Atlantic Canada accounting for $689 million (increasing 85 per cent over 2004).
As was the case in 2004, improving credit conditions and unexpected prepayments on existing loans resulted in lower loan provision requirements. In addition, EDC purchased credit risk protection for a portion of its aerospace portfolio, which further reduced loan provision requirements. EDC also recorded an increased unrealized fair value adjustment on derivatives in 2005. This positive impact upon EDC's net income is a continued result of accounting rule changes introduced in 2004. The unrealized fair value adjustment represents the change in the fair value of derivative financial instruments that have not yet matured.
As a result, in the first half of 2005, net income rose to $761 million from $295 million for the same period in 2004, a difference of $466 million. Of this amount, $336 million is due to the above mentioned reduced provisioning requirements. An additional $159 million is due to the increase in the unrealized fair value adjustment, partially offset by other small changes totaling $29 million.
"Operationally, we are committed to re-deploying this additional financial capacity to work for Canadian exporters and investors," continued Mr. Wright. "Over the second half of 2005, we are in a position to take on greater levels of risk and increase our financing program where Canadian companies need it."
Other key results include:
-- EDC's assets increased by 3 per cent to $22.3 billion from June 30, 2004, largely due to an increase in marketable securities;
-- There was a reduction in provisions set aside for possible credit losses of $336 million in the first half of 2005 compared to the same period in 2004. This brings the total allowance for loan-related losses and insurance claims to $3.4 billion, compared to $4.4 billion a year ago;
-- Total paid-in capital, retained earnings, and allowances at June 30, 2005 was $7.7 billion, compared to $7.0 billion a year ago;
-- Impaired loans as a percentage of gross loans receivable increased to 9.9 per cent at June 30, 2005, compared to 8.5 per cent a year ago;
-- The number of insurance claims paid was 721, a 25 per cent decrease from the first six months of 2004. The dollar value of those claims was $23 million compared to $38 million for the same period in 2004; and
-- Administrative expenses for the first six months of 2005 decreased by 1.0 per cent to $87 million from $88 million for the same period in 2004. Non-interest related expenses as a percentage of net revenue were 20.2 per cent compared to 18.9 per cent for the first six months of 2004.
EDC is a Crown corporation that provides trade finance and risk management services for up to 7,000 Canadian exporters and investors. In 2004, EDC supported $54.9 billion in export sales or investments in 177 markets worldwide. EDC is a recognized leader in providing essential commercial financial solutions to Canadian companies of all sizes, and their customers, helping them succeed in the global marketplace.
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Media contact: Phil TaylorEDC Public Affairs (613) 598-2904ptaylor@edc.ca
