Companies blame rainy weather for dampened profits

Above-average rainfall causes some businesses to miss out on sales potential

A rainier-than-usual year in parts of Canada is messing with more than just vacation plans — it’s also being blamed for putting a damper on profits.

Over the past 90 days, Environment Canada said rainfall in Eastern Ontario has been about 75 per cent to 100 per cent above average, while the Greater Toronto Area has seen 25 per cent to 40 per cent more rain.

One company that has been affected is Cara Operations Ltd., which reported second quarter adjusted net earnings of $26.4 million on Monday, up 3.5 per cent from the same quarter last year.

The Vaughan, Ont.-based restaurant company — which has more than half of its locations in rainsoaked Ontario, including patio-friendly brands like the Landing chain — said the increase was in part connected to the added contributions of the St-Hubert rotisserie chicken brand and the Original Joe’s chain it acquired in the second half of last year. However, the firm also said in its filings that the results were “partially offset by weaker performance in certain Cara corporate restaurants as a result of poor weather impacting our patio season,” among other factors.

During a conference call Tuesday, Cara chief executive Bill Gregson took note of the rainy spring, but said the company hadn’t tried to quantify the impact of the weather on restaurant traffic. He said some of the results had been tied to same restaurant sales, which decreased 0.3 per cent for the quarter, yet would have increased by 0.3 per cent if not for the “negative impact “of the Easter weekend.

“The last six weeks have been fine for patio season,” added Gregson.

A research note on Tuesday from National Bank Financial said Cara’s reported operating earnings before interest, taxes, depreciation, and amortization of $41.6 million had undershot National’s $49.2-million estimate, labelling it “a big miss.”

Cara’s operating EBITDA still increased $8.8 million for the second quarter compared to 2016, although the operating EBITDA margin on system sales was 6.3 per cent, down from 7.3 per cent last year.

National reduced its target price on Cara shares to $30 from $34, but maintained an outperform rating on the stock.

A damp year has also affected the construction industry, with inclement weather weighing on outdoor projects.

In second-quarter financial results released last week, Toronto-based Aecon Group Inc. said rainfall had been a drag on its road-building business. The company reported revenue from its infrastructure segment of $235 million in Q2 — a $35-million drop from the second quarter of 2016 — despite a $14-million bump from social infrastructure.

“Offsetting this increase was lower revenue in transportation operations ($46 million) due to lower road-building volume in Ontario which was impacted by unusually wet weather in the quarter,” said Aecon.

The rain made for a tough construction climate, but a Raymond James research note last Friday said Aecon had weathered it “well.”

“Although consolidated revenue of $686 (million) fell a greater-than-expected 18 per cent on poor weather conditions, profitability held up, underscoring the power of Aecon’s diverse business model,” wrote analyst Frederic Bastien.

Raymond James kept its outperform rating and $19 target price on Aecon shares, pointing to the company’s “solid 2017 results and recently landed material energyrelated contracts,” as well as the “billions of dollars” in the transportation and power sectors that are set to be spent in Ontario. The province’s Liberal government has vowed to spend $160 billion over 12 years on public infrastructure, and is embarking on multibilliondollar refurbishments of Ontario’s nuclear power plants, an undertaking Aecon is involved in.

Vancouver-based CanWel Building Materials Group Ltd. reported an increase in forestry sales of 7.3 per cent, or $772,000, in its second-quarter financials. The firm suggested those sales could have been stronger, if not for troublesome weather that makes it difficult to reach some of its sites.

“Sales for the (forestry) segment were negatively affected by adverse weather conditions at the beginning of the second quarter of 2017 and did not recover to seasonal expectations until the mid-point of the quarter,” said CanWel in its second quarter filings.

The $11.3 million in forestry sales were a much smaller contributor to the company’s bottom line, as building materials revenue was $309 million in the second quarter. CanWel reported an overall 10.3-per-cent increase in its second-quarter revenues last week, to $320 million.