Home Breadcrumb caret News Breadcrumb caret Industry Omicron variant raises uncertainty as companies downgrade forecasts The highly transmissible Omicron variant has prompted companies in the manufacturing and resource sectors to downgrade their earnings forecasts amid ongoing uncertainty linked to the COVID-19 pandemic. Cascades Inc., the Quebec-based packaging and tissue company, said Monday it expects fourth-quarter results to fall below its already revised outlook after Omicron-related labour shortages and supply chain […] By Jason Contant | February 1, 2022 | Last updated on October 30, 2024 3 min read iStock.com/DMEPhotography|iStock.com/Traimak_Ivan The highly transmissible Omicron variant has prompted companies in the manufacturing and resource sectors to downgrade their earnings forecasts amid ongoing uncertainty linked to the COVID-19 pandemic. Cascades Inc., the Quebec-based packaging and tissue company, said Monday it expects fourth-quarter results to fall below its already revised outlook after Omicron-related labour shortages and supply chain issues worsened in the latter half of December. The cut at Cascades followed an announcement last week from Teck Resources Ltd. that its fourth-quarter steelmaking coal sales would fall below its already lowered guidance from Dec. 5 following severe flooding in B.C. that washed out key rail and road infrastructure. The Vancouver-based company warned that COVID-19 was also leading to higher costs and could disrupt production. Sick leave along with labour shortages, throttled supply chains and inflation all make for angst-inducing variables over the first half of 2022. “If people are sick due to coronavirus and take extended time off, the company may not be able to mine the volumes that they had expected to,” Anish Chopra, managing director with Portfolio Management Corp., said of resource outfits. “Even if you have the people, can they do their work, if you don’t have the parts?” he asked of manufacturers. “And if you can get the parts, are you paying reasonable prices?” iStock.com/Traimak_Ivan Swathes of the technology and transport sectors may have cause for concern as well. “During this period of stricter lockdowns, people stayed at home. They did their work, and they needed the technology in order to do that,” Chopra noted. “But now as people go back to work, go back to the office, that trend – it just won’t be the same. You just don’t have that big forecast or spend.” Airlines continue to be battered by low demand prompted by the spread of Omicron, lockdown restrictions and government advisories against international travel. Air Canada and Transat A.T., the two biggest publicly traded Canadian carriers, cancelled more than 17,800 February flights between early November and last Friday, or 48 per cent of their scheduled trips for the month, according to figures from airline data firm Cirium. However Mona Mahajan, senior investment strategist for Edward Jones, pointed to an increased likelihood of “a reopening 2.0” heading into spring and summer. Demand largely depends on whether a more deadly or contagious variant emerges, she said. “But if Omicron starts to show signs of fading and the demand picture remains strong, we think some of the cyclical parts of the transport market can do well.” Bombardier Inc. continues to benefit from business aviation tailwinds, as the private jet maker takes advantage of higher demand and a low number of used aircraft for sale globally. Rising production and strong demand for manufactured and consumer goods generally along with an expected easing of pandemic restrictions should work to the advantage of industrial and transport companies in 2022, says analyst Kevin Chiang of CIBC World Markets. “That being said, we expect a more challenging start to the year as supply chain issues, inflation concerns and Omicron weigh on sentiment and results.” Cascades said it now expects fourth-quarter adjusted operating income before depreciation and amortization to come in at $62 million – 29 per cent below its prediction from six weeks earlier. On Dec. 22, the company warned that the figure would be about $20 million below the third-quarter comparable result of $107 million. Cascades said the COVID-19 variant has compounded existing constraints on labour and transportation, especially in its containerboard and tissue segments. The shortages have led to higher costs and unplanned downtime, the company said, on top of inflationary costs in logistics and energy. Its Canadian operations were hit especially hard after the relentless rainfall in B.C. late last year. Feature image by iStock.com/DMEPhotography Jason Contant Save Stroke 1 Print Group 8 Share LI logo