Lavonne Zdunich, Keyera Corp
It is like a game of survivor out there these days. Commodity prices have plummeted to levels we have not seen in years, if not decades, the Canadian dollar has fallen about 25%, and access to capital is becoming more challenging.
While Canada’s economy has experienced growth and diversification over time through world-class advances in healthcare, financial services, information technology and the arts, our economic roots remain firmly planted in the oil and gas, mining and forestry sectors. The natural resource sector accounts for approximately 20% of GDP and 10% of Canadian jobs (approximately 1.7 million).
Unfortunately, when commodity prices languish and cause these industries to suffer for an extended period of time, the repercussions are felt from coast to coast. Today business is no longer performed in a specific industry or geographic location, but rather on a global stage. Therefore we must be aware of what is going on around us and consider the possible impacts.
Stay in Contact – When the world is in an economic crisis, investors tend to be extremely reactive to any tidbit of information, which brings significant volatility to the stock market. I remember that not long ago Market Surveillance would call if a stock moved 5% in one day. Now, a 5% movement is considered a normal trading day! Such volatility attracts ‘fast money managers’ to stocks and, while they have a place in the trading world, IROs do not want this type of investor to become the majority of the shareholder base. In uncertain economic times, it is crucial to monitor the shareholder base closely and maintain relationships with major shareholders. These are times when the ‘relations’ in investor relations is key. Stay in contact. Even though for every seller there is a buyer, it is generally easier to hold onto existing shareholders than to find new ones. Ensure that shareholders understand the company’s business strategy, strengths versus peers, and long-term view. After all for every economic downturn, there has always been a recovery!
Be Honest – In challenging times, there may be pressure to increase the share price and put a positive spin on every company announcement. Investor relations professionals must resist the temptation and simply ‘tell it like it is’. Open and honest communication is especially important during uncertain times – investors of all levels of sophistication value messages that are clearly crafted. Remember that the IRO’s role is not to control the share price but ensure the market understands the story. Be transparent and make sure your company gets out in front of any issues or bad news. Losing trust in this environment could be detrimental. Make sure to also communicate any changes in the direction or strategy of the company as soon as possible. Balance the negatives with the positive actions of the company. Finally, ensure that the website and corporate presentation are up-to-date.
Tighten the Message – Now is a good time to review messaging. Context, clarity and content are equally important. Investors want context, especially now. They need to know that the company understands the macro environment and is taking steps to preserve shareholder value. They want to know assumptions made about the next 12 to 18 months, how flexible the company is and scenarios it has considered if the environment changes quickly.
Messaging should not only reflect the value proposition in the current environment, but also what the company looks like in a recovery – leaner, meaner, more focused. Look at your peers. What are they saying? Read analyst reports and reinforce their positive key messages. Ensure the message is clear, concise and compelling. Does the front page of each news release stand out among the 20 to 30 a typical portfolio manager reads every day?
It may also be worth doing a quick perception survey to make sure investors understand the company’s strategy, key messages and, most importantly, have confidence in the executive team.
Look for Opportunities – Since the second half of 2014, we have been reminded of the sensitivity of Canada’s economy to low commodity prices. The TSX energy index is sitting at approximately one-third of where it was in June of 2014 as resource company profits have plunged with oil prices that have fallen from over $100 per barrel to below $30 at one point. Balance sheets are under pressure and companies have seen credit rating downgrades; bank covenants are being tested. Energy companies have taken dramatic steps to lower operating and G&A costs, cutting tens of thousands of jobs. So while these are unfortunate circumstances for the oil and gas industry, this could translate into opportunities for other industries. Both global capital and some highly skilled and trained individuals are looking for opportunities outside of the oil and gas industry. Consider if your company could benefit from fallout from the energy sector.
Take Care – During times of economic uncertainty, measures of optimism and happiness decline while stress levels tend to increase. Make sure you are taking care of yourself and managing your stress with good nutrition, exercise, or whatever relieves your stresses. While you may be faced with longer work days, intense deadlines and more pressure, schedule time for family and friends. They will keep things in perspective for you. This isn’t the first economic downturn. We’ve always rebounded and resurfaced and will do so once again. I just don’t know when!
Lavonne Zdunich is a Chartered Accountant with over 20 years of finance and investor relations experience in Calgary and abroad. She is currently the Director of Investor Relations and Communications at Keyera Corp. in Calgary, Alberta.