Elected last month as Canada’s prime minister, Justin Trudeau has an agenda that includes a strong investment in infrastructure. However, while this emphasis may bolster the backlogs of industry firms hit by a contraction in mining and natural-resources projects, the work won’t be as profitable, analysts warn.
The stocks of a number of sector firms jumped after the Oct. 19 election, which gave the Liberal Party a majority in the Canadian parliament. “Certainly, the liberals coming to power is the best possible outcome,” said Maxim Sytchev, managing director of Dundee Capital Markets, Toronto. “It is the party committed to spending the largest amount on infrastructure over the next 10 years.” That investment includes transport, environmental and “social”infrastructure, such as affordable housing.
For example, Yuri Lynk, industry-sector analyst for Canaccord Genuity, Montreal, said Alberta’s budget includes spending $34 billion—compared to the previous government’s slated $29.5 billion—on provincial infrastructure projects by 2018. The new government also plans to boost infrastructure spending by 21% by 2017, with smaller increases later, he adds.
Bird Construction, Mississauga, Ontario, is among the industry firms set to benefit. The government’s expected spending plan comes as Bird expands its government and institutional work to diversify as activity shrinks in the profitable oil-and-gas sector. In a research note, Sytchev said sector work dropped to 25% of Bird’s total portfolio this year from 40% in 2014.
With Canada’s economy slowing amid drooping Chinese demand for raw resources, Bird has expanded its array of institutional projects, including a new event center in Moncton, New Brunswick, approved by the city council in August. Bird also is active in western Canadian social infrastructure projects, says Lynk “but we have worries about its capacity to take on new institutional work, given the … amount of P3 work recently secured.” Canadian design build firms SNC-Lavalin, WSP Group, Aecon Group and Stewart Olson, among others, are set to benefit, analysts say.
This article was updated Dec. 15 to correctly identify the new majority party in Canada, the Liberal Party.