Tax cuts Trump the benefit of canadian companies

Photo: Ryan Remiorz, The canadian Press
The brewer Molson Coors, whose registered office is divided between Denver, Colorado and Montreal, is part of canadian companies who could greatly benefit from the lower tax rate in the United States.

Some canadian companies that conduct a significant part of their turnover in the United States could greatly benefit from the strong decrease of the corporate income tax rate in the United States, say industry experts.


New Flyer and Boyd Group Income Fund, of which more than 80 % of sales are made south of the border, should be among those who will benefit most, said the firm, AltaCorp Capital in a report released this week.


According to analyst Chris Murray, in the sector of engineering and construction, Stantec and WSP Global are expected to enjoy the” favourable impact ” of the tax changes and expenditure to come in the american sector of infrastructure.


“We expect that the entry into force of new tax rules to serve as a catalyst for an acceleration of acquisition activity, since a number of vendors see it as an opportunity to get rid of some of their activities to take advantage of the changes, which will encourage the strategies of growth by acquisition,” he wrote in the report.


The tax changes adopted by the u.s. Congress, endorsed by president Donald Trump before Christmas, have reduced the business tax rate to 21 % since Monday, compared to 35 % previously.


Molson, Saputo, CN…


The brewer Molson Coors, whose registered office is divided between Denver, Colorado, and Montreal, did not want to specify how these changes will affect prior to the unveiling of its next quarterly financial results on 14 February. However, 70 % of the company’s revenues come from the United States, said his spokesman Colin Wheeler.


Brittany Weissman, of the firm Edward Jones, expects Molson Coors benefits from the changes, even if it will lose some of the tax benefits associated with its acquisition of Miller Coors to several billion dollars.


“It seems to be on track to be a net benefit, taking into account any […], but it is still too early to say to what extent “, she explained in an interview.


Ms. Weissman also believes that the producer of cheeses, Saputo will benefit from the changes, because nearly half of its activities are located in the United States.


However, she added, the manufacturer’s montreal clothing Gildan already enjoys the benefits of a very low tax rate since he is domiciled in Barbados.


Several canadian companies, including the pharmaceutical Valeant and the Company, the national railway of Canada, say studying the tax changes in the United States.


“We are currently assessing the impact of the reform and its potential impact on society, both in the short-term and long-term,” said a spokesperson for Valeant, Lainie Keller in an email.


Already lower than it seems


In a report published before the adoption of the tax reform, u.s., RBC capital Markets, had estimated that significant tax cuts could lead to changes in the lists of winners and losers.


“We believe that they could have profound positive impacts on the performance of the TSX, given its inclination cyclical,” wrote Matthew Barasch on September 26.


However, he warned, most companies are us and canadian activity south of the border already pay an effective tax rate lower than that provided for by law, which could mitigate the prospects of gains.


“Even if a comparison of the tax rates provided for by the law [including all taxes States and cities] suggests that the tax rates are much higher in the U.s. than in other countries, a comparison between the effective tax rate paints a very different picture. “


Banks and Couche-Tard


PricewaterhouseCoopers, for its part, noted that the impact of tax law on businesses canadian-owned property could be important.


“The various provisions can be beneficial or harmful. Thus, it is important to pay careful attention to the impacts specific to its operations so that the value can be preserved where possible “, wrote the firm to its clients even after the adoption of the law.


Mr. Barasch has pointed out that some canadian sectors, such as those of the producers of oil and natural gas, telecommunications, grocers and retailers such as Dollarama, are not expected to be affected, while others, such as those of canadian banks and insurers, will see their profits climb.


Most real estate firms should not be directly affected because of their income trust structure, but those for whom this is not the case, as FirstService and Colliers International Group, with a significant footprint in the United States, should benefit significantly.


It is difficult to quantify the impact of the tax reform for the convenience store operator Alimentation Couche-Tard, has however said Mr. Barasch, even though nearly 70 % of its revenue comes from the United States.