Export-driven British Columbia companies press on with investments despite economic uncertainties created by threat of Greek loan default; industry analyst says Canfor, West Fraser not being 'aggressive' about growth

Lorena Madrigal

VANCOUVER, B.C. , November 3, 2011 (The Vancouver Sun) – The growing threat of a Greek loan default on top of U.S. economic weakness is making export-driven British Columbia companies nervous, but not to the point that they are pulling back from commitments to capital expenditures.

That's the consensus of business and industry experts contacted Tuesday.

Companies have been living with uncertainty and volatility in the markets for several months and are going ahead with already-announced capital expenditures.

However, many of the companies that Paul Quinn, forestry analyst at RBC Capital Markets, follows would be embarking on major expansions or acquisitions if times were better.

"Definitely, people are more nervous," Quinn said in an interview.

"Markets and investors are nervous right now and they have been nervous for a few months. August was terrible and it's been a roller-coaster since then."

In B.C., companies Quinn follows are concerned about the deepening European crisis but more focused on the threat of a double-dip recession in the U.S. and the slowdown in Chinese growth.

Quinn said both Canfor and West Fraser Timber have accelerated capital expenditure plans, which they are following through on, but growth plans, which Canfor needs to do to secure timber sources outside the mountain pine beetle-infested forests of B.C., are on the back-burner.

"I wouldn't say they are holding back capital, but they are not being as aggressive as they could be," he said of forest companies in general.

"It doesn't seem like anybody is coming up with any great merger plans, at least on the Canadian side."

At the Mining Association of B.C., president Karina Brino said she has seen no sign of companies pulling back from commitments.

"I haven't seen decisions being reversed or things being put on hold. On projects that we know are going forward, we continue to see them progressing. Companies are releasing their drilling results and findings from the past season," she said in an interview.

"Certainly from the association, we watch with tremendous anticipation to see how things unfold. My assumption would be that companies are doing the same thing.

"I would suspect that everyone is proceeding with caution and waiting to see how things are going. So far, we have been in a pretty solid position. We still seem to be surviving the storm."

Jock Finlayson, senior vice-president at the B.C. Business Council, said the Greek crisis is going to cause weaker growth in the global economy for the rest of this year and into 2012.

"The two largest economies in the world - the eurozone No. 1, the U.S. No. 2 - are limping badly. The U.S. is limping, the eurozone is in disarray. That can only spell a weaker outlook for global economic growth, which will obviously have implications for Canada and certainly for British Columbia," Finlayson said in an interview.

"It's another reason to be very cautious about the economic growth outlook for B.C. as we move into 2012 and beyond. The external world is not looking very favourable at the moment."

He said forecasts from the Bank of Canada and major Canadian banks for Canadian growth are all being trimmed back for 2012.

The Bank of Canada's growth forecast for 2012 has been downgraded to 1.9 per cent from 2.6 per cent.

Up until now, business investment has been strengthening in Canada and the Bank of Canada has been counting on that investment continuing.

"The concern I would have now is whether we are going to see that investment continue in the unsettled environment we are in globally. I think a lot of companies will reassess whether they want to go ahead with investments. I can still see them do capital expenditures but slowing down the pace."

He said the slowing of Chinese growth is not a concern yet but it is another source of weakness in the global economy.

"Again, bad news for an exporting jurisdiction like Canada, particularly Western Canada."

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