OTTAWA, September 11, 2006 Export Development Canada (EDC) announced today its mid-year financial results, noting that its total business volume in the first half of 2006 reached CAD $28.7 billion (all figures CAD), a significant 10 per cent increase over 2005.
"We have leveraged our strong balance sheet to undertake more business during a very challenging economic period, when Canadian exporters and investors need us the most," said Eric Siegel, Chief Operating Officer of EDC. "The robust growth we have seen in small business transactions and in emerging markets is a direct result of our increased willingness to take on more risk."
In the first half of 2006, EDC facilitated $7.6 billion in trade with developing markets, a 19 per cent increase over the same period last year. More than 5,870 customers used EDC's products or services to grow their export business through June 30, 2006, a 3 per cent increase from 2005. Business volume among small business increased by 39 per cent to $9.5 billion. EDC applied its products and services in 170 countries in the first half of 2006.
Across Canada, exporters and investors in Western Canada accounted for $10.1 billion of EDC's total business volume (up by 13.5 per cent), followed by Ontario at $9.4 billion (up by 16 per cent), Quebec at $7.7 billion (up by 7 per cent) and Atlantic Canada at $658 million (down by 4 per cent).
"Our increase in business volume suggests that Canadian exporters are finding ways to compete despite the moderating global economy, but that slowdown requires that we set aside more of our income to offset the associated risk," continued Mr. Siegel.
For the first six months of 2006 EDC's operating income was $523 million ($417 million for the same period in 2005). The increase includes $261 million in debt relief, which reimbursed EDC for sovereign debts to highly indebted nations forgiven by the Government of Canada. Excluding debt relief, operating income actually declined by 33 per cent from the same period in 2005 as a result of higher funding costs, the strengthening of the Canadian dollar and a reduction in loan income owing to impairments in the aerospace portfolio. Interest income is not recognized on these loans while they are impaired. This impact is expected to be temporary, as EDC expects them to return to performing status within the next year.
Other key results include:
Net income for the first half of 2006 was $305 million compared to $761 million for the same period in 2005. This change reflects increased provision requirements as well as an unrealized fair value adjustment loss. Increased business volume in 2006 resulted in a provision charge of $34 million. In 2005, there was a release of provisions totaling $247 million as a result of a reduction in loan assets, improved credit conditions and the purchase of risk mitigation insurance.
The unrealized fair value adjustment for the first six months of 2006 was a loss of $184 million compared to a gain of $97 million for the same period in 2005. The impact of the unrealized fair value adjustment upon EDC's net income is a result of the implementation of Accounting Guideline 13, which was a new accounting standard introduced in 2004 under Canadian Generally Accepted Accounting Principles. The guideline requires an unrealized fair value adjustment to be recorded on the income statement, representing the change in the fair value of derivative financial instruments that have not yet matured.
Administrative expenses for the first six months of 2006 increased by 12 per cent to $97 million from $87 million for the same period in 2005 mainly due to an increase in pension costs, as well as one-time costs for internal restructuring. Non-interest related expenses as a percentage of net revenue were 28.4 per cent compared to 20.2 per cent for the first six months of 2005.
The total allowance for loan-related losses and insurance claims at June 30, 2006 was $2.7 billion;
Total paid-in capital, retained earnings, and allowances at June 30, 2006 were $7.8 billion;
Impaired loans as a percentage of gross loans receivable increased to 14.5 per cent at June 30, 2006, compared to 9.9 per cent a year ago reflecting additional impairment that occurred in the last half of 2005 primarily in the aerospace portfolio; and
The number of insurance claims paid was 669, a 7 per cent decrease from the first six months of 2005. The dollar value of those claims was $27 million compared to $23 million for the same period in 2005.
EDC is Canada's export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC's knowledge and partnerships are used by 7,000 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining and is a recognized leader in financial reporting, economic analysis and human resource management.
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Media contact: Phil TaylorPublic AffairsExport Development Canada (613) 598-2904ptaylor@edc.ca
