Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
The Canadian Marketplace Joseph R. LaLeggia Immediate Past Chair, Canadian Finance & Leasing Association President, IRWIN COMMERCIAL FINANCE Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 1 The Canadian Finance & Leasing Association • Equivalent to ELFA in the U.S. • The association represents both equipment and vehicle leasing (fleet + consumer) industry in Canada • 250+ members • Many members are Canadian affiliates of American parents • Industry dominated by top 20 companies which own or manage 95% of total assets Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 2 Key Funding Partner for Canadian Business • After the traditional lenders (banks and credit unions), CFLA members are the largest provider of debt financing • About 60% of the industry’s customers are small and medium-sized businesses • 10 to 1 rule to the U.S. www.canadianleasing.ca Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 3 Assets Owned & Managed in Canada • Owned & managed assets grew 11% in 2006 to C$106.6 billion • Equipment and commercial vehicles accounted for 46% of the total CFLA Member Company Assets Owned & Managed in 2006: C$106.6 billion Commercial Equipment 40% Retail Vehicles 54% Commercial Vehicles 6% Source: 2007 CFLA Survey of Industry Activity Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 4 New Business Volumes New Business Volumes 22% 100 20% 95 18% 90 16% 85 14% 80 12% 75 2002 2003 2004 2005 Investment (C$ billions) Penetration Rate (%) • Business spending on machinery and equipment was C$93.8 billion in 2006 • Market penetration: between 21%-23% of this spending is financed by CFLA members 2006 Leasing Market Penetration Rate (left) Business Spending on Machinery & Equipment (right) Source: 2007 CFLA Survey of Industry Activity; Statistics Canada Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 5 Market Drivers • • • • • Economic Growth Interest Rates Capital Costs & Availability Demand for Equipment and Capital Health of the Industry and Competitive Pressures Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 6 Canada: An Economic Success Story • Canada is experiencing its second longest period of economic expansion in history • Business investment is expanding for a fifth consecutive year • Canada is on the strongest fiscal footing of any G7 nation with federal and provincial government budget surpluses and a falling debt burden • Core inflation remains within a set range of 1% to 3% Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 7 Leasing Market Trends • Fourth year of rising new business leasing volumes 25% 22 20% 20 15% 18 10% 16 5% 14 0% 12 -5% 10 2002 2003 % Change (left) 2004 2005 2006 New Business Volume (right) Source: 2007 CFLA Survey of Industry Activity Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 8 Annual Volume (C$ billions) • Intensely competitive business environment with too much money chasing too few deals Annual % Change – 16% growth in 2006 – 16% average annual compound growth since 2002 New Business Volumes Positive Economic Outlook 8% -2% 6% -4% 4% -6% 2% 2007:1 0% 2005:1 10% 2003:1 2% 2001:1 12% 1999:1 4% 1997:1 14% 1995:1 6% 1993:1 16% 1991:1 8% Real GDP Growth (left) Before Tax Corporate Profit Share of GDP (right) Source: Statistics Canada Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 9 Profit Share of GDP (%) GDP Growth & Profits Both Strong % Change at Annual Rates • Real GDP is expected to grow 2.7% this year and 2.3% next year • Corporate profits are at record levels Cost of Funds Will Rise – But Not by Much Treasury Bill Rates 6 5 4 3 2 1 Canada, 3 month yields 2007:1 2006:1 2005:1 2004:1 2003:1 2002:1 0 2001:1 • Interest rates in Canada are expected to rise again soon – but not by much • While yields on government securities have not moved much, the subprime crisis continues to restrict liquidity in the market for asset-backed commercial paper US, 90 day yields Source: Bank of Canada; Macroeconomic Advisers, LLC Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 10 Business Machinery & Equipment Spending & Capital Costs -5% -10% -10% 2007:1 -5% 2006:1 0% 2005:1 0% 2004:1 5% 2003:1 5% 2002:1 10% 2001:1 10% 2000:1 • Despite solid economic growth, strong profits and falling capital costs, growth in business spending on machinery & equipment has been tepid • It is expected to rise just 1.2% this year and 4.3% next year % Change from Previous Year …But Business Spending on Machinery and Equipment has Disappointed Business Spending on Machinery & Equipment After Tax Cost of a Unit of Machinery Source: Statistics Canada; The Centre for Spatial Economics Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 11 The CAD’s Rise is Reducing Canada’s International Competitiveness Canada-US Exchange Rate (US cents per Canadian dollar) 100 90 80 70 2006:1 2004:1 2002:1 2000:1 1998:1 1996:1 1994:1 1992:1 60 1990:1 • In January 2002, the CAD was worth 62.5 US cents; today it is worth over $1 US • This rise has reduced our international competitiveness, but too little new business investment is taking place to improve our productivity Source: Bank of Canada Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 12 Competitive Pressures Mounting 22% 100 20% 95 18% 90 16% 85 14% 80 12% 75 2002 2003 2004 2005 2006 Leasing Market Penetration Rate (left) Business Spending on Machinery & Equipment (right) Source: 2007 CFLA Survey of Industry Activity; Statistics Canada Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 13 Investment (C$ billions) New Business Volumes Penetration Rate (%) • In a buyer’s market, has pricing been rational? • Reduced liquidity could spur a new round of mergers and acquisitions Impact of Globalization in Canada • Globalization has many dimensions Business Growth – Canada welcomes investment by leading foreign firms but produces few of its own global leaders Business Standards – Canada “follows the leader” • Canada tends to be “one of the arms of globalization. It’s rarely the body” Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 14 The Future of Leasing and Finance • The future of leasing & finance is linked to the economy – Canadian economic fundamentals are basically positive • The health of the US economy is a major driver of the Canadian economy – Risks to the US economy frequently become risks to the Canadian economy as well Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 15 Canada: The Reader’s Digest Version • Canada-US trade partnership – Each others #1 customer – US$2 billion of goods cross the border each day • Innovative technology & manufacturing – Automotive & aerospace production – Blackberry • Canada: Natural Resources Superpower – – – – – – 2nd largest proven oil reserves 3rd in natural gas production 1st in hydro electric power generation 3rd largest producer of aluminum & diamonds 1st largest exporter of forest products 3rd largest supply of renewable fresh water Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 16 Current Issues • • • • • • Vicarious Liability Tax depreciation for M&E Accounting Standards (Harmonize & small bus.) Sales tax – new reporting Electronic waste disposal taxes – who collects Credit/liquidity crunch Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 17 Thank you Questions? For more information: Canadian Finance & Leasing Association www.canadianleasing.ca Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007 18