Bombardier soars to second place as Canada's Top 100 firms boost R&D by 6%

Guest Contributor
November 9, 2012

Bullish attitude defies expectations

Bombardier Inc is giving Research In Motion Ltd a run for bragging rights as Canada's top corporate R&D spender, exploding from 10th to 2nd place in the ranking as it ramps up development of its C-Series mid-range jet airliners. The Top 100 R&D performing firms increased their performance by 6.1% in 2011, spending a total of $10.9 billion, up from $10.3 billion in 2010 — a powerful indication that Canadian big R&D spenders are not deterred by an uncertain economic environment.

Bombardier also restated its R&D outlays for 2010, changing its previously announced $198.8 million to $1.1 billion — a difference of $852.8 million — turning last year's dismal drop of 9.4% decline in Top 100 expenditures into a drop of less than 1%.

"We're in a more intense phase of aircraft development programs ... The research money is for the development of our aircraft programs but it's mostly for the C-30," says Isabelle Rondeau, Bombardier's director of communications. "In the first six months of 2012, we have spent $400 million in R&D on the C Series alone."

The annual ranking — produced by Research Infosource, a sister company to RE$EARCH MONEY — reveals three major R&D strengths at work: new product development activities in some parts of the manufacturing sector; continued strength in the services sector led by telecommunications; and, major increases in R&D related to natural resources, particularly oil and gas.

A regional breakdown reveals that the 13 Alberta-based companies in the Top 100 boosted R&D outlays by 33.4% — more than five times the national average — to $824.8 million or 7.6% of the Top 100 total. Oil firms Imperial Oil Ltd, Syncrude Canada Ltd and Suncor Energy increased their R&D spending by 52.3%, 24.3% and 16.7% respectively.

Ontario dominates the Top 100 ranking with 48 firms but they managed growth of just 5.4% on $5.66 billion in spending. That was higher than the 1.4% growth managed by the 25 Quebec-based firms, which spent $3.77 billion. British Columbia has 11 companies in the ranking and they cumulatively achieved 14.3% growth with $596.3 million in spending.

The leading sector remains communications and telecom equipment — long Canada's dominant R&D strength — which racked up $2.48 billion in outlays for 23% of the total. Five firms in the aerospace sector (including the high-flying Bombardier) spent $2.01 billion for 18% of the total. Next, 21 companies in the pharmaceuticals/biotechnology sector accounted for $1.27 billion for an 11.7% share, although the sector's Top 100 spending was down 8.3% from 2010.

"We were surprised. We thought companies would be less bullish," says Research Infosource president Ron Freedman. "Corporate profits are holding up but there's a lot of uncertainty that we thought would constrain companies from making investments. It's largely the case of where the total result is driven by the $100 million club, which had 24 members this year. The underlying trend is much more subdued."

The likelihood of the Top 100 companies maintaining or exceeding their 2011 performance remains in doubt, however, due to the looming economic turmoil in Europe and elsewhere, combined with the decision by the federal government to reduce tax-based incentives for corporate R&D performance.

The 2012 Budget announced decreases in the level and type of support provided through the scientific research and experimental development (SR&ED) tax incentive program. Specifically, it reduces the tax credit rate for larger R&D performers from 20% to 15%, eliminates the eligibility of capital expenses and reduces the proxy rate for overhead expenditures, with full implementation by 2014.

"The SR&ED changes will depress all decision-making, especially for multinationals. It makes it harder for these companies to convince head office to invest in Canada," says Freedman. "We have to modernize the concept of what research is."

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Canada's Top 100 Corporate R&D Spenders 2012

($000s)   
    R&D Expenditures     Research       
2011    2010    Company FY2011    FY2010    % Change    Revenue    Intensity    Industry
1    1    Research In Motion Ltd* $1,542,007    $1,391,395    10.8    $18,234,059    8.5    Comm/Telecom Equipment
2    10    Bombardier Inc* $1,336,274    $1,052,558    27.0    $18,147,018    7.4    Aerospace
3    2    BCE Inc $569,100    $821,000    -30.7    $19,497,000    2.9    Telecommunications Services
4    5    Magna International Inc* $519,278    $463,455    12.0    $28,434,647    1.8    Automotive
5    3    IBM Canada Ltd (fs) $500,000    $551,100    -9.3    nd        Software & Computer Services
6    6    Pratt & Whitney Canada Corp (fs) $473,000    $395,000    19.7    $2,730,000    17.3    Aerospace
7    4    Atomic Energy of Canada Ltd $441,900    $476,400    -7.2    $508,015    87.0    Engineering Services
8    7    Ericsson Canada Inc (fs) $323,000    $353,000    -8.5    $1,055,000    30.6    Comm/Telecom Equipment
9    8    AMD Canada (fs) $283,255    $241,694    17.2    nd        Electronic Systems & Parts
10    9    Alcatel-Lucent (fs) $237,000    $233,000    1.7    nd        Comm/Telecom Equipment
11        Cenovus Energy Inc $200,000    $135,000    48.1    $15,696,000    1.3    Energy/Oil & Gas
12    16    TELUS Corp $183,000    $124,000    47.6    $10,397,000    1.8    Telecommunications Services
13    11    Apotex Inc $174,003    $178,852    -2.7    $1,316,637    13.2    Pharmaceuticals/Biotechnology
14    21    Imperial Oil Ltd $163,000    $107,000    52.3    $30,474,000    0.5    Energy/Oil & Gas
15    12    Sanofi (fs) (a) $151,695    $159,182    -4.7    $563,296    26.9    Pharmaceuticals/Biotechnology
16    14    Open Text Corp* $144,401    $133,246    8.4    $1,022,040    14.1    Software & Computer Services
17    15    Ontario Power Generation Inc $125,000    $127,000    -1.6    $5,061,000    2.5    Electrical Power & Utilities
18    18    GlaxoSmithKline Canada (fs) $118,433    $161,315    -26.6    $990,498    12.0    Pharmaceuticals/Biotechnology
19    19    CAE Inc $117,042    $116,951    0.1    $1,629,000    7.2    Aerospace
20    13    Pfizer Canada Inc (fs) $113,544    $145,488    -22.0    $1,477,702    7.7    Pharmaceuticals/Biotechnology
21    16    Rogers Communications Inc $109,000    $127,000    -14.2    $12,428,000    0.9    Telecommunications Services
21    35    Vale Canada Ltd (fs) $109,000    $67,000    62.7    $8,043,000    1.4    Mining & Metals
23    25    Constellation Software Inc* $107,645    $91,282    17.9    $764,912    14.1    Software & Computer Services
24    22    Hydro-Québec $100,000    $100,000    0.0    $12,392,000    0.8    Electrical Power & Utilities
25        General Motors of Canada Ltd* (fs) $96,932    $77,448    25.2    nd        Automotive
* Converted to CDN dollars at annual average 2011 = 0.9891, 2010 = 1.0299 (Bank of Canada); (fs) foreign subsidiary; (nd) not disclosed   
Source: Research Infosource   



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