Canadian corporate operating profits declined 2.6% to $56.1 billion in the first quarter of 2006, following five straight quarters of growth, according to new data from Statistics Canada.

Nevertheless, first quarter profits were the second strongest ever, surpassed only by the record high of $57.6 billion earned in the fourth quarter of 2005, it noted. “Oil and natural gas export prices weakened in the first quarter, reducing profits in the oil and gas sector. A string of price increases had fueled a run-up in oil and gas profits over the past several quarters, a major factor in the recent overall profit growth,” Statscan said.

Excluding the oil and gas extraction and refining industries, operating profits for the remaining industries increased 1.1% in the first quarter. The non-financial industries’ profits fell 2.8% to $41.3 billion in the first quarter, just the second decline in the past 11 quarters. Financial sector profits were also down, falling 2.1% to $14.8 billion. Overall, about half of the industries posted profit gains, while the remainder were down in the quarter, it reported.

Oil and gas extraction companies saw profits slide 9.1% to $8.0 billion in the first quarter. Profits were pared by lower crude oil export prices, as exports generally account for about two-thirds of domestic crude oil production, Statscan explained. Natural gas export prices were also down notably in the quarter.

The metal mining industry also saw first quarter profits fall to $0.8 billion from $1.2 billion in the previous quarter. “Potash producers reported lower first quarter profits as export demand for potash wavered. In addition, while non-ferrous metal prices swelled in the quarter, growth in ferrous metal prices eased. The export value of primary iron and iron ore declined substantially in the first three months of 2006,” it noted.

Operating profits improved in nine of 13 manufacturing industries in the first quarter. However, lower profits by the petroleum and coal refineries pulled overall profits down 4.6% to $10.6 billion. Manufacturing profits peaked in the second quarter of 2004 at $12.5 billion, but have faltered over the past few years due to the stronger Canadian dollar, rising input costs and volatile demand for products, Statscan said.

Petroleum and coal manufacturers saw their first quarter operating profits drop to $2.5 billion from a record high of $3.7 billion in the fourth quarter of 2005. Wood and paper producers saw $1.0 billion in first quarter profits, up from $0.9 billion in the fourth quarter. Motor vehicles and parts manufacturers’ operating profits edged up to $0.4 billion in the first quarter from $0.3 billion in the previous quarter.

Retailers earned record high profits of $3.3 billion in the first quarter, up 5.4% from the previous high in the fourth quarter of 2005. Statscan said that confident consumers continued to spend, boosting profits for retailers of furniture and electronics (+ 26.1%), food and beverages (+10.9%) and for clothing and department stores (+7.4%). Wholesalers saw their profits slip to $3.9 billion from the record high $4 billion in the fourth quarter.

Profits in the financial sector slipped 2.1% to $14.8 billion, following a 5.4% gain in the fourth quarter, it reported. Companies dealing in securities, commodity contracts and other financial investment activities earned $3.5 billion, down 4.8% from the fourth quarter. The chartered banks earned $6 billion in first quarter profits, little changed from the previous quarter.

The operating profit margin weakened to 8.1% in the first quarter from 8.3% in the fourth quarter, halting consecutive increases dating back to the fourth quarter of 2004. The return on shareholders’ equity also deteriorated, falling to 10.9% from 12% in the previous quarter. After-tax profits, fell 7.7% in the first quarter, reflecting lower operating profits and a decline in interest and dividend revenue.