Good morning.
Here’s your executive summary of some of the most newsworthy, fascinating or amusing stories from today’s Financial Post.
1. Saudi Arabia bombs rebels in Yemen; oil prices soar
The price of international crude spiked 4.6 percent yesterday to US$59 upon speculation that a brewing civil war in Yemen could choke the global oil trade and spill over into neighbouring Saudi Arabia. The conflict is ostensibly between the Sunni government and Shiite rebels, with the Saudis now dropping bombs in support of the crumbling regime. But it is considered by some to be more than that: a proxy war between Sunni-controlled Saudi Arabia and Shiite-controlled Iran. For their part, the rebels say they are only out for themselves.
Setting aside the possibility of unrest boiling over into Saudi Arabia, what is at stake as far as crude prices is concerned is Bab-el-Bandeb, a waterway off the coast of Yemen connecting the Mediterranean Sea to the Indian Ocean. It is the fourth-largest shipping route in the world by volume, moving oil from Saudi Arabia to Europe and from Europe and North Africa to Asia. The worry is that the shortcut will be compromised by the conflict — perhaps becoming a haven for pirates of the Red Sea — and tankers will have to circumvent the entirety of Africa, slowing transport and increasing costs.
2. Bell urges shareholders to reject a gender diversity mandate
Bell urged investors yesterday to reject a shareholder group’s resolution to force the telecom to have five women on its 13-person board of directors in half a decade. The Montreal-based firm suggested that the mandate could mean the election of less qualified directors in the name of diversity, and instead vowed to have three female directors by 2017, up one woman from today.
The spat comes on the heels of new provincial policies wherein a company must either adopt a gender diversity policy for board membership or provide a written explanation for not having one. This approach, called “comply or explain,” is distinct from “gender quotas,” which have been implemented successfully in Norway, Finland, France and elsewhere.
Rogers has four women on its 15-person board, though three are members of the Rogers family, and Telus has three women on its 15-person board, though it has pledged to add another woman by 2017. In broader corporate Canada, less than one in five directors of large companies are women, a lower share than is observed in the United States.
3. Calgary office towers empty out as cheap oil takes its toll
CBRE Canada said yesterday that 1.3 million square feet of office space has gone back on the market in Calgary since oil dipped below US$50 in January. That’s the equivalent of two major office towers, bringing the vacancy rate in Canada’s energy hub to 11.8 percent, up 2.7 percent from a year ago. Rental prices have begun to fall as well, down $2.64 per square foot since the first quarter of 2014.
The effect of cheap oil on downtown office markets across Canada is more muted, with prices falling just $0.08 per square foot and vacancies rising just 40 basis points to 8.9 percent — or around 10 basis points to 8.6 percent if Calgary is taken out of the equation. That’s not to say that sluggish movement in the sector can necessarily be explained away by a cyclical, oil-inspired downturn. According to the CBRE, the Canadian office market is confronted with a longer-term, systemic challenge as more businesses opt to secure revenue growth through pairing back expenses rather than through expansion.
4. Greeks pull 23.8 billion euros out of banks as showdown looms
Greece’s central bank said yesterday that 23.8 billion euros have been yanked from the nation’s troubled financial sector over the past three months, accounting for 15 percent of the total deposit base, as the Tsipras regime and its creditors face off over austerity policy. Greek workers and businesses are likely hedging that the showdown will end in an exit from the euro currency club and a revival of the drachma. If that were to happen, money deposited in banks might be converted at parity and then quickly depreciate against the euro, at which point having a hoard of hard euros on hand would be wise.
The problem, of course, is that a widespread run on the banks in anticipation of a currency collapse serves to further destabilize Greece’s already wobbly financial system. And this is not merely a theoretical problem, either: Greek banks have been taking out short-term loans from the European Central Bank, called “emergency assistance liquidity,” since February in a bid to keep flush with cash to stay afloat.
The Greek government has until Monday to convince its creditors to bail it out again. If unsuccessful, the country could run out of cash within a few weeks.
5. Tim Hortons is in good shape and ready for growth: new owners
Restaurant Brands International said yesterday that Tim Hortons, which it acquired last year, is in much better shape than Burger King was when it was purchased by its parent company, Brazil-based 3G Capital, in 2010. Unlike the U.S. burger chain, which was suffering from slumping sales and lawsuits from struggling franchisees before 3G stepped in and tripled profit margins, the coffee chain’s existing menu, marketing strategy, relationship with franchisees and overall customer experience all earned a thumbs up.
Restaurant Brands also signalled that the 350 workers laid off at the corporate offices of Tim Hortons earlier this year largely did the trick as far as cost-cutting is concerned, and that the focus will now be on growth at home and especially abroad. There are currently around 3,600 Tim Hortons locations across Canada, or one Tims for every 10,000 Canadians.
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