OTTAWA, Feb. 25 /CNW Telbec/ - Canada's pharmaceutical products industry stands out for its strong growth during the 2008-09 recession. This sets it apart from other industries covered in the Winter 2010 edition of The Conference Board of Canada's Canadian Industrial Profile Service - chemicals, plastic and rubber products, non-metallic mineral products, and computer and electronic products, which will take at least a couple of years to return to pre-recession production, revenue and profit levels.
"Several factors are assuring continued strong demand for pharmaceutical products. The population is aging and much of what people spend on health care cannot be considered discretionary purchases," said Michael Burt, Associate Director, Industrial Economic Trends. "The other industries covered in this outlook were heavily affected by the recession, as demand plummeted. Although the economy is growing again, the relatively modest rebound will delay the return to pre-recession performance in these four industries."
The Canadian Industrial Profile, produced by The Conference Board of Canada in collaboration with the Business Development Bank of Canada (BDC), provides a five year economic outlook for key industries.
"During more challenging times, BDC is able to step in either with increased financing or with consulting services to help entrepreneurs overcome current challenges or seize promising opportunities", said Jérôme Nycz, Vice President, Strategy and Enterprise Risk Management. "Through several previous recessions, including the most recent one, we have seen many businesses grow, despite a reduction of activity in their sector. When a business financial situation is healthy before entering a recession, and if it's professionally managed, chances are it will go through this difficult period and be stronger when the economy recovers".
Pricing, production and profits all declined in 2009, as every segment of the industry was negatively affected by the recession. Profits are expected to decline again in 2010, dropping to $1.9 billion. However, the construction and automotive industries are major users of chemical inputs, so their rebound will also eventually benefit chemical manufacturers.
Computer and Electronic Products
With demand down in Canada and the United States, profits plunged by 36 per cent in 2009, forcing the industry to cut employment from 109,400 to 91,500 in just one year. The industry continues to struggle with weakened pricing power as new technologies cause rapid product obsolescence. As result, profits will fall again in 2010 to less than $1 billion, before beginning to rise again in 2011.
Non-Metallic Mineral Products Industry
This domestic-oriented industry avoided the worst of the U.S. housing market meltdown. Still, weaker domestic construction activity caused output to fall by 15 per cent and profits dropped by 29 per cent in 2009. Although production is expected to begin recovery this year, as construction activity picks up, it will be 2011 before profits begin to improve.
Thanks to an aging population, the H1N1 pandemic and the non-discretionary nature of many medical expenditures, the pharmaceuticals industry continued to expand through the recession. Profits are forecast dip in 2010, falling to $773 million. However, the industry is expected to experience healthy growth in the coming years, with the possible expansion of health care coverage in the U.S. providing additional upside potential.
Plastics and Rubber Products
The recession exacerbated problems for manufacturers of plastic packaging, plastic auto parts and tires, whose production declined for the fourth year in a row in 2009. After a 60 per cent profit decline in 2008, the industry's bottom line stabilized in 2009, and profits are expected to exceed $500 million in 2010. As low-cost countries expand market share and the Canadian dollar remains strong, international trade for this industry continues to deteriorate.
The Canadian Industrial Profile is part of the Conference Board of Canada's Industrial Economic Trends research. In all, outlooks for 23 industries are completed each year. The publications are available at www.e-library.ca. BDC clients who wish to receive a copy of the profiles free of charge can contact their BDC account manager.
BDC is Canada's business development bank. From more than 100 offices across the country, BDC promotes entrepreneurship by providing highly tailored financing, venture capital and consulting services to entrepreneurs. For more information, visit www.bdc.ca.
SOURCE Conference Board of Canada
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