At first glance, the top names in our annual Top 1000 ranking of Canada's largest corporations by profit don't change much from year to year: BCE Inc. at No. 1, followed by the big banks and stalwarts such as Thomson Corp., Canadian Pacific Ltd. and Bombardier Inc. Maybe a few more oil and gas companies, depending on whether petroleum prices are up or down. This year, you have to flip all the way to No. 1,000 on the list to find the most dramatic story: the spectacular flameout of Nortel Networks Corp.
Old Economy value investors may find the familiarity comforting, a sign that established giants that generate real earnings still rule after last year's dot-com bust. That's partly true. But a closer look at almost any one of the old behemoths near the top reveals sweeping changes, and the still-powerful force of technology.
Take BCE. At the beginning of 2000, it was poised to spin off Nortel Networks, its hottest holding. BCE CEO Jean Monty announced he was buying CTV Inc. and the rest of Teleglobe Inc. He would soon assume control of The Globe and Mail from Thomson Corp., all part of his vision of transforming a stodgy utility holding company into a leading-edge broadcast and on-line powerhouse. Thomson, in turn, has since been able to sell off all but two of its newspapers to concentrate on electronic data collection and delivery. Some Bay Street portfolio managers such as Duncan Stewart sniffed that BCE was "selling their best [assets]and buying inferior ones." Whatever challenges BCE faces, Monty's company remains at No. 1. Meanwhile, in a surprise move, Nortel Networks CEO John Roth has announced he will step down next April.
There is unfolding drama within banking and insurance as well. The banks are far different institutions than they were in 1984, when R.O.B. Magazine began compiling this ranking. They are now devoting much of their energies to the Bay Street investment dealers that they swallowed in the late 1980s, and their growing operations in the United States and beyond. Of course, foreign banks and dealers, led by HSBC and Merrill Lynch, are prying their way into the Canadian market. And life insurers are pumping themselves up to compete with the banks head-on as Ottawa removes more barriers between the two old pillars of the financial sector. The major mutual life insurers have all gone public over the last two years, and Manulife Financial Corp. finishes at No. 11, down just two positions from last year. Sun Life Financial Services of Canada Inc. enters our chart at No. 29.
The banks are also grappling with new technology. The Toronto Dominion Bank slips from No. 2 to No. 13. Its profit declined to $1 billion in 2000, from $3 billion in 1999, a big drop even factoring out a $1.1-billion gain on the sale of part of TD Waterhouse Group Inc. that year. And TD's future profits could be pinched by troubled telecom-sector loans. It has the largest exposure among the big Canadian banks.
Oil and gas companies pepper the top spots in our ranking as they continue to rack up record profits. Imperial Oil Ltd. moves up solidly from No. 20 to No. 9. TransCanada PipeLines Ltd. shoots up from No. 215 to No. 21 after shedding more than $3 billion worth of assets and refocusing itself following former CEO George Watson's ill-fated expansion drive and a merger with Nova Corp. in the late 1990s.
How long can the good times keep rolling in the oil patch? OPEC continues to maintain price discipline, and U.S. President George W. Bush is looking north for desperately needed new sources of supply. Or will The Economist, which claimed in March, 1999, that the world was drowning in oil reserves and the price could drop to $5 (U.S.) per barrel, finally prove to be prescient?
Based on past performances, it looks like most of the leaders among this year's Top 1000 will still be near the top next year. As investors know all too well, Nortel Networks has a lot of work to do to claw its way back from No. 1,000. 5 Top 1000 newcomers
2000 RANKING COMPANY
29 Sun Life Financial Services of Canada Inc.
74 HSBC Bank Canada
83 Corus Entertainment Inc.
242 Glyko Biomedical Ltd.
251 Player Petroleum Corp. 5 that have left
1999 RANKING COMPANY
8 Seagram Co. Ltd. Acquired by Vivendi SA
244 Cinar Corp. Trading in shares suspended
345 Nelvana Ltd. Acquired by Corus Entertainment
844 Versus Technologies Inc. Acquired by E*Trade
986 Canadian Airlines Int. Ltd. Acquired by Air Canada
biggest profit gains
RANK...BIGGEST PROFIT GAINS 1 Tikal Resources(De00) 34,061
2 First Quantum Minerals(No00) 7,554
3 IPEC Ltd.(De00) 4,787
4 Cavell Energy(De00) 4,749
5 TransCanada PipeLines(De00) 4,289
lowest returns
RANK...LOWEST RETURN ON COMMON EQUITY 1 MIST Inc.(Se00) -91,700
2 BlueStar Battery Systems(Se00) -1,445
3 Travelbyus.com Ltd.(Se00) -747
4 Telesystem Intl. Wireless(De00) -739
5 LBL Skysystems(Ma00) -611
6 Eagle Precision Technologies(Fe00) -495
7 CryoCath Technologies(Se00) -456
8 Laidlaw Inc.(Au00) -294
9 UltraVision Corp.(Ma00) -272
10 Global Light Telecomm.(De00) -249 biggest profit declines
RANK BIGGEST PROFIT DECLINES % CHANGE
1 Banff Resources(Ju00) -34,660
2 Teleglobe Inc.(De00) -16,271
3 Nurun Inc.(De00) -11,464
4 AT&T Canada(De00) -9,798
5 Travelbyus.com Ltd.(Se00) -7,573 highest returns
RANK HIGHEST RETURN ON COMMON EQUITY %
1 Consolidated Canadian Express(De00) 13,587
2 Hollinger Inc.(Dec00) 538
3 Hurricane Hydrocarbons(De00) 318
4 Player Petroleum(De00) 100
5 Denbury Resources(De00) 99
6 T S Telecom(Ma00) 98
7 Ogy Petroleums(De00) 87
8 North American Palladium(De00) 86
9 Dynex Power(De00) 83
10 Olympia Energy(De00) 78