SGF announces a profit for the third straight year
SGF earned $57 million of net income and made investments totalling
Montréal, April 2, 2008 – Société générale de financement du Québec (SGF) maintained its profitability in 2007 with a 3.0% return on equity, for $57 million of net income. SGF also invested $233 million in new projects.
$233 million in 2007 despite the difficult context
“I’m pleased that we succeeded in maintaining our profitability, despite the difficult conditions in many sectors of the economy,” stated Pierre Shedleur, President and General Manager of SGF. “We were able to maintain stringent management and investment criteria, to ensure SGF remained profitable while pursuing its investment mission,” Mr. Shedleur added.
Positive results despite the risks inherent in SGF’s operations
Despite the difficult business climate in many sectors of the economy, SGF earned $57 million of net income in 2007.
In line with its mission of taking part in projects that contribute to Québec’s economic development, SGF is exposed to significant risks that it must cope with. SGF’s portfolio consists of equity investments in companies, which involves a high degree of risk. Most of the companies in SGF’s portfolio are exposed to global business conditions, including fluctuations in foreign exchange rates and prices of raw materials and substitute products. An unfavourable variation in any of these factors can have a major impact on the value of its portfolio companies.
More than 80% of SGF’s portfolio consists of manufacturing companies that have been hit hard by surging oil prices and the strong Canadian dollar, as well as the economic slowdown in the United States.
SGF therefore had to cope with the difficulties experienced by companies in these sectors during the year. Moreover, with respect to its cash management, SGF had to record a writedown of $19.9 million, representing 15% of the $132 million of non-bank asset-backed commercial paper (ABCP) that it holds.
SGF succeeded in maintaining an overall positive return, partially as a result of investment gains, profits earned by its subsidiaries and portfolio companies, and the positive effects of restructuring carried out in previous years.
SGF’s main investments in 2007
SGF invested $233 million in 2007, in accordance with the three strategic orientations of its development plan.
For example, SGF acquired 490,000 common shares of Logibec Groupe Informatique Ltd. (Toronto Stock Exchange: LGI) at a cost of $9.6 million as part of a private placement of 1,204,700 new shares issued by the company at a price of $19.50. Logibec, whose head office is in Montréal, is one of the 10 largest Canadian companies specializing in the development, marketing, implementation and support of information systems for the health and social services sector. With the transaction, SGF took part in Logibec’s strategy of growth through acquisitions.
Another major undertaking was a $37.5-million investment in Induspac Group. Induspac, founded in 1977 by Paul Gaulin, is a high-performance company with its head office in Montréal. Since its inception, it has developed specialized, high-value-added packaging solutions for the aeronautics, automotive, medical technology, telecommunications and electronics industries. Its expertise enables it to provide end-to-end management of major international corporations’ packaging portfolios. SGF’s investment will assist Induspac with its plan to expand its operations in Canada, Mexico and the United States as well as to expand into the high-growth markets of Eastern Europe. The company employs 1,500 people at 29 operational sites.
During the year, SGF also assisted the agrifood sector, with a $5-million investment in Boucherie Jean-Guy Soucy Inc., a family company that processes meat for the supermarket and food-services industries. Since its founding in 1976 and the establishment of its first plant in the L’Acadie district of Saint-Jean-sur-Richelieu, Soucy has been known for its very high standards of quality and flexible response to customer needs. This ability to adapt has earned it recognition from large retail banners and restaurant chains as a reliable supplier of processed meat products.
SGF’s investment has enabled Soucy, among other things, to finance the construction of a new meat-processing plant in Saint-Jean-sur-Richelieu and to acquire two production lines for the slicing of delicatessen meats and two lines for the manufacture of precooked products. In this way, SGF is supporting the growth plan adopted by Soucy, while enabling the company to develop new markets.
SGF also increased its presence in the film industry with two major investments.
In a sustained effort to attract international film production to Québec, SGF partnered with Lionsgate Entertainment on a US$400-million project extending over the next four years. SGF will finance up to 35% of the production cost of each feature film and television series made in Québec under the agreement, which involves a total investment of US$140 million over four years. The portion invested by Lionsgate represents US$260 million. The agreement covers various feature films and television series that Lionsgate will shoot entirely in Québec.
By making a $100-million investment, SGF also obtained a 38.5% stake and 51% of the voting rights of Alliance Films Inc., Canada‘s largest independent film distributor. As a result of this investment, the head office and decision-making centre of Alliance Films is relocating from Toronto to Montréal. Certain senior managers as well as a large number of the company’s finance employees and its Home Video division will move to Montréal. With this investment, SGF is helping Montréal consolidate its role as one of Canada’s major film centres and position itself advantageously in the North American and European industries, given the increasing importance of Alliance Film’s European operations.
“We helped create more than 9,580 direct and indirect jobs in 2007 by investing in projects totalling $870 million,” Mr. Shedleur stated. “I’m pleased to report that, in line with its mission, SGF is contributing in this way to Québec’s economic development, job creation and gross domestic product.”
Société générale de financement du Québec (sgfqc.com), an industrial and financial holding company, has a mission to carry out economic development projects, with emphasis on the industrial sector, in co-operation with partners and on standard profitability conditions, in accordance with the economic development policy of the Québec government.
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