Tough times call for ...

Market swoons on retreat from gold

A Toronto Stock Exchange market wrap from Aug. 16, when gold and other resource stocks plunged in tandem with worldwide commodity prices.

By Jamie Sturgeon, Financial Post

While gold remained the medal of choice at the Beijing Games yesterday, investors poured out of the precious metal, leading it to its biggest weekly decline in a quarter-century and contributing to another sell-off of the S&P/ TSX composite index.

As investors continued to rally to the U. S. dollar on concerns that worldwide economic activity is ebbing, gold for August delivery ended the day at US$786.00 an ounce, down US$22.20, or 2.7% for the session. The five-day loss of 8.3% is the worst one-week drop in the commodity since Feb. 25, 1983.

In lockstep with the commodity's decline, Barrick Gold Corp. fell $1.71, or 4.8%, to $33.94 while Goldcorp Inc. slid $1.77, or 5.4%, as the S&P/TSX gold subindex fell 4.8%.

The exodus from gold and other resource stocks plunged the main index to its lowest level since March. The S&P/TSX composite fell 262.21 points, or 2%, to close at 13,096.70.

"Gold got bid up because people were moving out of the U. S. dollar and as they're beginning to move back in, they're taking their money out of commodities, and gold specifically," said Keith Summers, chief investment officer for Toronto-based Stonegate Private Counsel LP.

The U. S. greenback continued to rise against pretty much every global currency and its 11-day winning streak against the British pound is the first time that has happened in at least 37 years, according to Bloomberg News. The greenback has gained 6% against the Canadian dollar since July 18.

Negative economic data concerning economies across the globe have begun to surface, while conditions in the United States may be reaching a bottom, said John Stephenson, senior vice-president at First Asset Investment Management.

"People are saying that things aren't so bad -- the U. S. is improving," Mr. Stephenson said. "The world is weak overall but the U. S. was the first to start turning down economically and it will be the first to start turning up."

The big pop in the greenback sparked steep declines in other commodity prices as well. Silver performed the worst yesterday, falling 10% to US$12.84, bringing its loss over the past month to 33%.

The slump in commodity prices took its toll on Canadian resource equities, as both energy and material stocks were hammered. Oil giant En-Cana Corp. fell $3.06, or 4.2%, to $70.04 a share as the energy sector fell to its lowest level since early April.

The broad materials sector, where mining and metals stocks reside, has now lost a quarter of its value since the beginning of July.

"The whole commodity play is over right now," said port-folio manager Terry Shaunessy, of Calgary-based Shaunessy Investment Counsel.

That includes oil, which slipped below US$113 a barrel yesterday in New York trading. Crude prices are set for a retreat to between US$75 to US$80 a barrel as global demand slows and speculator dollars flow from the commodity, Mr. Shaunessy said.

"It's a broad change of sentiment that commodities aren't a one-way ticket up," Stonegate's Mr. Summers said. "They hit a peak and they started to retreat and as more and more investors who got into commodities start to see that you could actually lose money buying these things, they've pushed prices down even further. This is probably a longer-term thing."

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Molson Coors writes off Canadian brands

Telecom and beer. Those are my only two areas of interest if anyone reading this thing doesn't glance beyond the last four posts.

Suffice to say, that's not true -- I've got a small business feature on a Toronto-based cigar company being published on Monday.

The following is after Molson Coors Brewing Co. wiped our beloved Canadian brands off their books on Aug. 6.

Jamie Sturgeon, Financial Post

Molson beer, once described as the one symbol of iconic Canadiana that the nation "could arguably slap a label on and sell around the globe," was further reduced to a footnote in the worldwide beer market yesterday after Molson Coors Brewing Co. wrote off the entire brand value of Molson in the United States.

Molson Coors Brewing Co. reported a US$51-million second-quarter charge as the beer brands' value was erased from the books after a prolonged period of declining sales combined with soaring freight and packaging costs, the company said.

The move is an accounting measure and does not have any direct impact on current operations for Molson brands, including Canadian, Canadian Light, Export and Golden, in the United States, according to company spokesman Paul De Laplante. But it is perhaps a symbolic one.

"The Molson brands in the United States are not as strong as they once were," said Edward Jones analyst Brian Yarbrough yesterday.

Molson paired with Denver-based Coors in 2005, after a series of missteps abroad. It was seen at the time as the loss of a Canadian icon, but many still speculated the U. S. parent could now grow the brand south of the border.

It hasn't.

Since the merger, U. S. sales of Molson brands have deteriorated to well under 10% of the combined company's U. S. portfolio.

"The brands have really been faltering," said Eric Shepard, the executive editor of U. S. industry publication, Beer Marketer's Insight. "It's one of the very few weak links, and certainly the performance of the Molson brands in the U. S. have just not done well."

By-the-barrel sales volume of Molson brands was 600,000 in 2007, according to Mr. Shepard, off from 825,000 in 2002. A steep decline from Molson's heyday in the mid-1990s when the then-independent brewer sold upward of 1.9 million barrels annually in the world's biggest beer market.

In comparison, Labatt, now owned by Belgium-based brewer InBev, has sold 1.6 barrels under its Blue and Blue Light brands in each of the past two years. Labatt "hasn't been able to grow but it has been able to hold volume," Mr. Shepard said.

"I guess [Molson Coors] felt it was time to alter the value of the brands."

The company reported a decline in second-quarter profit of 56% related to the brand writedown as well as another US$52-million in charges related to its MillersCoors venture.

Overall, Molson Coors' net sales rose 4.8% to US$1.76-billion, as the company sold 11.6 million barrels of beer, a 0.9% increase.

In 2002, Molson tepidly made a last-gasp attempt to join the global game and preserve its independence by buying Brazil's Cervejarias Kaiser. But "it didn't dare to introduce its own trademark brand into the world's fourth-largest beer market," wrote journalist Andrea Man-del-Campbell in 2007's "Why Mexican's Don't Drink Molson.'' Now it seems it's in retreat in the world's biggest.

"It's the one symbol of iconic Canadiana we could arguably slap a label on and sell around the globe," she wrote then.

"And yet we don't."

jasturgeon@nationalpost.com

iPhone mania sweeps country

Another newser from the iPhone launch.

Jamie Sturgeon, Financial Post

TORONTO - Rogers Wireless Inc. literally rolled out the red carpet for the next-generation iPhone 3G yesterday, as Apple Inc.'s latest wonder device was launched in Canada as well as more than 20 other countries around the world.

In Toronto, a throng of about 200 customers -- dozens of whom had been camped there since Thursday evening -- wrapped itself around the corner at a downtown Rogers outlet as new and old subscribers jostled to be the first in this city to get their hands on the coveted piece of technological and marketing wizardry.

Surrounded by media, Jordon Brown, a 16-year-old high school student, stood first on the red carpet laid before the store's entrance.

"I've been waiting for this phone for a long time now," said Mr. Brown, who had been at the store near Yonge and Dundas Square since 4 p. m. Thursday. "Standing outside for one day is nothing." Such was the case at storefronts of cellphone outlets across the country yesterday, where supplies of the wireless phone and media player were easily outstripped by demand.

By mid-morning heavily-stocked Rogers Plus stores in Halifax and Ottawa had run out. The two Rogers Plus outlets in Montreal soon followed suit.

"It's definitely going to sell out across the country -- and we had a lot of inventory," John Boynton, Rogers chief marketing officer, said shortly after the doors opened in Toronto.

Rogers said it girded more than 1,000 retail outlets and authorized dealers with supplies of the 3G, which boasts between three and five times faster Internet service as well as access to new, third-party software applications.

However, some stores, such as Rogers Video Plus in Aurora, Ont., 45 minutes north of Toronto, had but half a dozen for sale.

"People were arriving and were told there was only six," said Web developer Brandon Hill, 32, who was third in a line of about 15 people. "When I got in there, someone said there was eight, but as far as I know there was just six."

Unsatisfied demand wasn't the only problem to plague the telecom and wireless giant yesterday. The crush of new subscribers temporarily crashed Rogers' system in the morning and resulted in slower activation service in some areas throughout the day.

Rogers, Apple's only authorized provider in Canada, wouldn't say how many 3Gs, which retail for $199 for an 8-gigabyte model or $299 for 16GB, had been delivered to it. Worldwide, though, the Cupertino, Calif.-based company projects sales to exceed 10 million by the end of the year.

An RBC Capital Markets report yesterday said initially short inventory as well as some consumer backlash from higher-than-expected plan prices could be a concern.

"Limited stock may frustrate buyers," RBC analyst Mike Abramsky wrote in a note to clients, but added, "carriers, not Apple, are likely to face ire on service plans or activation."

jasturgeon@nationalpost.com

News: Rogers' rise fails to excite market

Newser from July 30, on Rogers. Your basic earnings story; profits were up but market sentiment was down on lower-than-expected sales figures in the telecom giant's wireless division.

By Jamie Sturgeon, Financial Post

A double-digit rise in second-quarter revenue reported by Rogers Communications Inc. yesterday did little to dispel the perception the telecom giant faces a difficult road ahead.

Total revenue for Toronto-based Rogers climbed 11% to $2.8-billion from $2.5-billion in the year-earlier quarter. The company posted a profit of $301-million, or 47¢ a share, in the three months ended June 30, compared with a loss of $56-million (9¢) in the year-earlier quarter.

The company gained 92,000 new subscribers to its all-important wireless business in the quarter, while average revenue per user (ARPU) rose 4% to $75.48 a month.

Yet both figures were below market expectations, sending Rogers shares down almost 7% to $34.96 on the Toronto Stock Exchange.

"The market is reacting pretty negatively," said UBS analyst Jeffrey Fan. "The results were a bit mixed. The financial results were in line or slightly better than what we were expecting, but the subscriber results were not."

Rogers' stock price has slid more than 16% this year, due to the looming spectre of squeezed margins, due to increased competition from existing and launching wireless rivals.

"Things are getting tougher," said analyst Davi Ghose of Genuity Capital. New plans and marketing strategies from rivals such as Telus Corp., Bell Mobility and Virgin Mobile "clearly took some market share" in the quarter.

The loss of subscribers could be a taste of what is to come for Rogers, Mr. Ghose said, as a pair of new rivals in Shaw Communications Inc. and Globalive Communications Corp. are ready to hit the national market after winning a fair share of licenses in Ottawa's recently concluded wireless spectrum auction.

"The competitive pressure is only going to get worse over the next 18 months," Mr. Ghose said.

Adding to the market's concerns was a lack of raised revenue estimates for the third-quarter yesterday, despite Rogers' exclusive launch of Apple Inc.'s vaunted iPhone 3G on July 11, according to UBS's Mr. Fan.

"They talked about some of the costs, but they didn't raise their subscriber estimates or their revenue estimates," Mr. Fan said. Yet he added that it is likely too early to estimate sales going forward, and expected to see "the iPhone have a pretty meaningful impact" next quarter.

In its other businesses, Rogers added 41,000 new home-phone customers, as well as 23,000 digital cable subscribers. Internet customers grew by just 13,000, hit in part by sluggish economic conditions, the company said.

Still, even as the market reacted unfavourably to the results yesterday, colourful chief executive and company founder Ted Rogers rebuked doubters.

"Whether it's radio, cable or wireless, Rogers has seen the number of competitors ebb and flow over the years," he said in a conference call. "We've not only survived, but thrived. We will continue to do so. That is the DNA of Rogers."

jasturgeon@nationalpost.com