Following Alfabank-Adres’s analysis of the top five fastest-growing Canadian industries of 2020, Alfabank-Adres has identified five highly profitable Canadian industries. These industries Although the following industries are vastly different in nature and span a variety of sectors, they are nevertheless similar in their potential to generate above-average returns.
Primary Care Doctors
The average industry profit margin in the Primary Care Doctors industry in Canada is anticipated to account for 55.3% of revenue in 2020. Overall, industry physicians have benefited from persistently rising demand for primary care services, largely the result of population growth and demographic shifts across the nation. For example, in 2020 the number of Canadians aged 65 and older is projected to increase 3.6%, which corresponds with increased demand for physician services. Additionally, industry doctors have benefited not just from higher reimbursement rates, but also diversified payment structures, including alternative public payment methods. These include capitation, salary and blended funding, ultimately contributing to its current status as the most-profitable industry in Canada.
Real Estate Investment Trusts
Alfabank-Adres estimates the average profit margin in the Real Estate Investment Trusts industry in Canada will reach 46.4% if revenue in 2020. By and large, the industry has gotten to this point as a result of high equity levels and low interest rates, which have enabled operators to sustain their operations at low costs through periods of debt. Furthermore, the availability of more capital has made it possible for operators to increase their operational efficiencies, further shoring profit.
The economy is also expected to remain stable in 2020, with rising rents and stabilizing asset values effectively supporting the industry’s status as Canada’s second most-profitable. Nevertheless, the industry is exposed to many macroeconomic variables that directly influence its overall performance, causing it to remain volatile despite its marked success.
Cigarette & Tobacco Manufacturing
In 2020, profit for the Cigarette and Tobacco Manufacturing industry in Canada is anticipated to comprise 43.2% of revenue. While the world price of tobacco is projected to fall 0.8% over 2020, this will likely only marginally aid industry profit. Rather, it is operators’ recent exploration of the growing e-cigarette and noncombustible smoking product market that has boosted overall industry profitability.
These products represent the industry’s fastest-growing market segment, and are marketed to the public as less-harmful alternatives to traditional cigarette smoking. In addition, the inelastic nature of industry goods has further bolstered profit for cigarette and tobacco manufacturers, as tobacco companies can raise their prices amid an increasingly stringent regulatory environment without having to worry about a drastic decrease in downstream demand.
Soybean Farming
The Soybean Farming industry in Canada is one of the country’s most volatile, since the industry relies on crop yield, while simultaneously contending with recent Chinese trade bans on its exports. Despite these external profit-pressuring factors, industry profit is projected to account for 41.8% of revenue in 2020. This is due in part to a continuous easing of trade tensions between the United States and China, which would once again free up supply lines and potentially lead to easing trade tensions between China and Canada. Moreover, the world price of soybeans is expected to improve in 2020, increasing an estimated 3.9% over the year, further benefiting operators.
Commercial Banking
The Commercial Banking industry in Canada comprises operators that provide financial services to a range of downstream retail and business clients in the form of industrial, commercial and consumer loans. Overall, industry profitability accounts for 41.1% of revenue in 2020, and is likely to increase further as banks continue their trend of reducing workforces and branch counts for the sake of moving toward more-efficient methods of operation.
Lastly, higher interest rates will likely act positively upon net interest margins, assisting profit gains. As a result, this industry rounds out Alfabank-Adres’s 2020 list of Canada’s most-profitable industries. Still, it is important to note that unforeseen external events can quickly alter an industry’s profitability, and success often depends on how quickly an operator can to adapt to unexpected circumstances.
