MP Market Review – May 05, 2023

Source: (FNV-N) Q1-2023 News Release

Loblaws (L-T) released its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets opened.

“In the face of ongoing inflation, we are working hard to deliver the value and choice Canadians are looking for. I’m pleased that customers are responding positively to the breadth of our offerings including our diverse store formats, market leading prices, private label brands, and loyalty offers.”

– Chairman and Chief Executive Officer, Galen Weston

Highlights:

• Revenue was $12,995 million, an increase of $733 million, or 6.0%.
• Retail segment sales were $12,735 million, an increase of $690 million, or 5.7%.
  • Food Retail (Loblaw) same-stores sales increased by 3.1%, including the negative impact of 1.1% related to the timing of New Year’s Day.
  • Drug Retail (Shoppers Drug Mart) same-store sales increased by 7.4%, with front store same-store sales growth of 10.3% and pharmacy same-store sales growth of 4.7%.
• E-commerce sales decreased by 1.1%, lapping elevated online sales due to lockdowns last year.
• Operating income was $769 million, an increase of $31 million, or 4.2%.
• Adjusted EBITDA(2) was $1,448 million, an increase of $105 million, or 7.8%.
• Retail segment adjusted gross profit percentage(2) was 31.3%, an increase of 20 basis points.
• Net earnings available to common shareholders of the Company were $418 million, a decrease of $19 million or 4.3%. Diluted net earnings per common share were $1.29, a decrease of $0.01, or 0.8%. The decrease was primarily driven by a prior year gain related to a favourable Court ruling.
• Adjusted net earnings available to common shareholders of the Company (2) were $505 million, an increase of $46 million, or 10.0%.
• Adjusted diluted net earnings per common share(2) were $1.55, an increase of $0.19 or 14.0%.
• Repurchased for cancellation 3.3 million common shares at a cost of $383 million and invested $208 million in capital expenditures, net of proceeds from property disposals. Free cash flow(2) used in the Retail segment was $81 million.
• Twelfth consecutive annual increase to the quarterly common share dividend from $0.405 per common share to $0.446 per common share, an increase of 10%.
• The Company just announced the release of its 2022 Environmental, Social and Governance (“ESG”) Report.

Outlook:

Loblaw will continue to execute on retail excellence while advancing its growth initiatives in 2023. The Company’s businesses remain well placed to service the everyday needs of Canadians. However, the Company cannot predict the precise impacts of global economic uncertainties, including the inflationary environment, on its 2023 financial results.

For the full-year 2023, the Company continues to expect:

• its Retail business to grow earnings faster than sales;
• adjusted net earnings per common share growth in the low double digits;
• to increase investments in our store network and distribution centres by investing a net amount of $1.6 billion in capital expenditures, which reflects gross capital investments of approximately $2.1 billion offset by approximately $500 million of proceeds from real estate dispositions; and
• to return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.

Source: (L-T) Q1-2023 Quarterly Review

Fortis (FTS-T) released its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets opened.

“Our strong first quarter results reflect the diversified nature of our business and the continued delivery of our low-risk capital plan. With capital expenditures of $1.0 billion in the quarter, we are on track to invest $4.3 billion in our systems this year.

Our funding plan remains intact, and the sale of the Aitken Creek Natural Gas Storage Facility further strengthens our balance sheet and supports financing of our regulated utility investments. We remain confident in our growth strategy as we continue to provide value to shareholders while executing on the transition to a cleaner energy future and delivering safe, reliable and affordable service to our customers.”

– President and Chief Executive Officer, David Hutchens

Highlights:

• First quarter net earnings of $437 million, or $0.90 per common share, up from $350 million, or $0.74 per common share in 2022
• Adjusted net earnings per common share of $0.91, up from $0.78 in the first quarter of 2022
• Capital expenditures of $1.0 billion in the first quarter; $4.3 billion annual capital plan on track
• Significant regulatory applications at Tucson Electric Power and FortisBC continue to progress
• Announced the sale of the Corporation’s ownership interest in the Aitken Creek Natural Gas Storage Facility in British Columbia

Outlook:

Fortis continues to enhance shareholder value through the execution of its capital plan, the balance and strength of its diversified portfolio of regulated utility businesses, and growth opportunities within and proximate to its service territories. While energy price volatility, global supply chain constraints and persistent inflation are issues of potential concern that continue to evolve, the Corporation does not currently expect there to be a material impact on its operations or financial results in 2023.

Fortis is executing on the transition to a cleaner energy future and is on track to achieve its corporate-wide targets to reduce greenhouse gas emissions (“GHG”) by 50% by 2030 and 75% by 2035. Upon achieving these targets, 99% of the Corporation’s assets will support energy delivery and renewable, carbon-free generation. The Corporation’s additional 2050 net-zero direct GHG emissions target reinforces Fortis’ commitment to further decarbonize over the long-term, while preserving customer reliability and affordability.

The Corporation’s $22.3 billion five-year capital plan is expected to increase midyear rate base from $34.1  billion in 2022 to $46.1 billion by 2027, translating into a five-year compound annual growth rate of 6.2%.

Beyond the five-year capital plan, additional opportunities to expand and extend growth include: further expansion of the electric transmission grid in the U.S. to facilitate the interconnection of cleaner energy, including infrastructure investments associated with the Inflation Reduction Act of 2022 and the MISO LRTP; climate adaptation and grid resiliency investments; renewable gas solutions and liquefied natural gas infrastructure in British Columbia; and the acceleration of cleaner energy infrastructure investments across our jurisdictions.

Fortis expects its long-term growth in rate base will drive earnings that support dividend growth guidance of 4-6% annually through 2027.

Source: (FTS-T) Q1-2023 Quarterly Review

Brookfield Infrastructure Partners (BIP-N) released its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets opened.

“We are pleased to report a strong start to 2023 for Brookfield Infrastructure, with future growth secured from several successful capital deployment initiatives. Our diversified portfolio of high-quality infrastructure assets are well positioned to deliver resilient results during all market conditions.”

– Chief Executive Officer, Sam Pollock

Highlights:

• FFO of $554 million or $0.72 per unit in the first quarter represents an increase of 12% over the prior year – Organic growth of 9% captures elevated inflation, volume growth across our transport segment, and earnings associated with capital commissioned over the last 12 months – Incremental contribution from our asset rotation program including the privatization of HomeServe on January 4, 2023
• Distribution of $0.3825 per unit represents an increase of 6% compared to the prior year
• Payout ratio for the quarter of 68% falls within our long-term 60-70% target range
• Net income benefited from the contributions associated with recent acquisitions and organic growth across our base business, offset by mark-tomarket losses on commodity contracts and one-time transaction costs associated with the acquisition of HomeServe and the European telecom tower portfolio, which are expensed on acquisition
• Total assets increased compared to December 31, 2022 as a result of the acquisition of HomeServe and the European telecom tower portfolio, organic growth initiatives, and the impact of foreign exchange

Outlook:

We believe that the long-term positive outlook for the infrastructure sector, in conjunction with our full cycle investment strategy, will allow us to continue to create significant value for our investors. Our strategy is grounded in a deep understanding of the infrastructure sector and the various market forces that drive it. We have made significant progress during the quarter, adding valuable pieces to our long-term growth plans, with two important investments: the agreement to acquire Data4 and the planned Triton privatization. Both investments are expected to generate strong cash flow for our unitholders. We also believe that our ability to look through near-term headlines and overreactions to invest in high quality businesses that have long-term growth potential will differentiate us during this current market cycle.

Our priorities for the balance of the year will be the integration of our recently secured investments and the execution of our current capital recycling program. We are also focused on continuing to deliver excellent financial results, which are expected to benefit from the full run-rate contribution of our new Heartland Petrochemical Complex, commissioning of new projects from our capital backlog and the closing of the Data4 and Triton acquisitions.

Source: (BIP-N) Q1-2023 Quarterly Review

Bell Canada (BCE-T) released its first-quarter fiscal 2023 results on Thursday, May 4, 2023, before markets opened.

“Bell has delivered a solid start to the year with results that were on plan and that reflect our consistently strong execution.

Overall, our performance in wireless and Internet helped to drive strong 3.5% consolidated revenue growth, offsetting the impacts of an advertising slowdown within our Bell Media segment. Our mobile phone postpaid net subscriber activations were up 26.5%, with 5.4% higher wireless service revenue. We also added nearly 48,000 new FTTH customers in Q1, up 24% over last year, with consumer Internet revenue up 10%.

 In line with our broadband network buildout plan, we invested close to $1.1 billion in capital expenditures in Q1 and remain on pace to expand our fibre footprint by 650,000 locations and cover 85% of the population with our 5G service by the end of 2023. While we’re currently experiencing an uncertain economic environment amid headwinds, inflationary cost pressures and regulatory uncertainty, we remain committed to our corporate purpose to advance how 2/17 Canadians connect with each other and the world. As we look ahead to the remainder of 2023, we are confident in our ability to continue delivering results with consistent, strong execution.”

– President and Chief Executive Officer, Mirko Bibic

Highlights:

• BCE operating revenue increased 3.5% over Q1 2022 to $6,054 million. This was the result of 0.9% higher service revenue of $5,222 million and a 23.6% increase in product revenue to $832 million, driven by growth at Bell Communication and Technology Services (Bell CTS), partly offset by a year-over-year decline at Bell Media.
• Net earnings decreased 15.6% to $788 million and net earnings attributable to common shareholders totalled $725 million, or $0.79 per share, down 17.3% and 17.7% respectively. The year-over-year declines were due to increased interest expense, higher depreciation and amortization expense, lower adjusted EBITDA, higher severance, acquisition and other costs and higher asset impairment charges related to office spaces we ceased using as part of our real estate optimization strategy due to Bell’s hybrid work policy. These factors were partly offset by lower income taxes and higher other income which included gains from the sale of land related to our real estate optimization strategy. Adjusted net earnings were down 4.8% to $772 million, resulting in a 4.5% decrease in adjusted EPS to $0.85.
• Adjusted EBITDA was down 1.8% to $2,538 million, reflecting a 36.5% decrease at Bell Media, partly offset by a 1.3% increase at Bell CTS. BCE’s consolidated adjusted EBITDA margin13 declined 2.3 percentage points to 41.9% from 44.2% in Q1 2022, due to lower year-over-year media revenue attributable mainly to a favourable one-time retroactive adjustment to subscriber revenue in Q1 2022 related to a contract with a Canadian TV distributor, higher low-margin product sales, as well as operating cost pressures related to inflation, strategic initiatives, higher TV content costs and the normalization of our cost structure to pre-COVID levels.
• BCE capital expenditures were $1,086 million, up 13.2% from $959 million last year, corresponding to a capital intensity 14 of 17.9%, compared to 16.4% in Q1 2022. The year over-year increase in capital spending was due mainly to significant ongoing investment in expanding Bell’s pure fibre network, including connecting more homes and businesses to Bell Internet services.
• BCE cash flows from operating activities were $1,247 million, down 27.3% from Q1 2022, reflecting lower cash from working capital attributable to the timing of supplier payments, higher interest paid, increased cash taxes due mainly to the timing of instalment payments and lower adjusted EBITDA, partly offset by lower contributions to post-employment benefit plans.
• Free cash flow decreased 88.1% to $85 million from $716 million in Q1 2022, due to lower cash flows from operating activities excluding acquisition and other costs paid, and higher capital expenditures.

Outlook: