Supply chain woes reflected in corporate results

by Christopher Reynolds THE CANADIAN PRESS & Inside Logistics Staff

SNC-Lavalin Group Inc. felt the fallout of the COVID-19 pandemic last quarter, as sick workers and supply chain woes stalled projects in a development that could pile on millions more dollars in losses.

After three straight quarters of profits, the engineering firm swung to a loss of almost $53 million in the quarter ended Dec. 31, surprising analysts, who called the financial results “weak” and “messy.”

“With the Omicron variant … we were seeing absenteeism of up to 50 percent on some of the jobs. And we saw a significant spike in productivity loss,” CEO Ian Edwards told analysts Thursday.

On top of a labour shortage, supply chain disruptions and rising prices prompted delays and cost overruns.

“For example on [Ottawa’s Trillium light rail extension], at most of the stations the concrete and steel is finished, but we’re waiting on glass,” Edwards said.

“That’s components from China post-pandemic. And then all these things add to delay … And as you can see, inflation has been pretty significant.”

Auto manufacturing

Likewise, car part manufacturer Martinrea International Inc. missed earnings expectations as it swung to a near $10-million loss in the fourth quarter on continuing challenges from a global semiconductor shortage.

The Toronto-based auto parts manufacturer says it lost $9.65 million or 12 cents per share, compared with a profit of $45 million or 56 cents per share a year earlier.

Revenues for the three months ended Dec. 31 slipped 1.6 per cent to $1.05 billion from $1.07 billion in the final quarter of 2020.

The company says the fourth-quarter results are better than the third quarter and are expected to be “notably better” in the first quarter with higher volumes and a more stable production environment.

“While we are not out of the woods yet, and uncertainty remains, we expect our results will continue to improve throughout the year, as supply issues are resolved, and our cadence of launch activity normalizes,” stated CEO Pat D’Eramo in a news release.

The company says it has successfully concluded negotiations with some customers to recover a portion of inflationary costs and is continuing talks with others.

Executive chairman Rob Wildeboer added that it continues to believe it can achieve 2023 targets because demand for vehicles remains robust while inventories are near all-time lows.

“We believe this sets the stage for a multi-year period of strong industry volume growth once supply chain conditions improve.”

Gloomy outlook

These two major corporations are not alone. A new survey by the Canadian Chamber of Commerce found that 72 percent of businesses said supply chain challenges have worsened over the last three months. And 91.4 percent expect supply chain problems to remain the same or deteriorate further into the spring.

They believe the top three reasons supply chain challenges have worsened are delays in deliveries, higher input prices and supply shortages.

Cost increases – including inputs, labour, capital, energy and raw materials – are the biggest obstacle for businesses over the next three months. Sixty percent of companies say they will likely pass on the rising cost of doing business to customers over the next 12 months. Canadians should expect to see rising prices for accommodation and food services, wholesale trade, manufacturing, and construction.