September 6, 2016 / 5:11 AM / a year ago

Canada tech players reap benefits as export picture brightens

TORONTO (Reuters) - Smaller Canadian technology companies making products like robotics, drones and high-tech thermostats are proving to be some of the biggest winners as the country’s recently struggling non-commodity export sector shows signs of revival.

Data released on Friday showed Canada’s trade deficit in July unexpectedly shrank on stronger non-energy exports, which had struggled for months. The Bank of Canada sees the sector as crucial to helping revive an economy hit by low oil prices.

Bank of Canada Governor Stephen Poloz has admitted to being puzzled by disappointing export data, given a soft currency and improving U.S. demand.

But executives with several export-oriented technology companies said both factors are helping drive demand for their products, and prospects for sales abroad are better than what many people believe.

“Despite what you read, the economy is incredibly strong,” said Stuart Lombard, founder and chief executive of Ecobee, a maker of Wi-Fi-enabled thermostats that does 90 percent of its business outside of Canada.

    “We are growing our revenue at 100 percent year-over-year... and I would say our outlook is only positive.”

    His optimism is shared by several makers of innovative products aimed mainly at foreign buyers. They note Canada’s weak dollar has helped keep labor costs low and prices competitive.

    “We are roughly doubling every year in sales,” said Bryan Webb, chief financial and operating officer and co-founder of Clearpath Robotics, which develops self-driving vehicles for industry. He estimates that 60 percent of his sales are to the United States.

    ”We earn a lot more right now that the (Canadian) dollar is low,“ he said. ”We’re able to innovate more, we’re able to serve more customers, we’re able to expand faster because of that.”

To be sure, high-tech exports remain a small part of the picture, which includes commodities like oil, natural gas and minerals, as well as non-resource exports like auto parts.

The environment is not perfect, Webb said, noting some larger U.S. businesses are taking longer to make decisions than in the past. But he believes the doldrums are ending and business investment is poised for longer-term growth.

Executives said while it was at times a very tough slog to find buyers following the 2008-2009 financial crisis and U.S. economic slump, conditions are improving - just as the Bank of Canada has been anticipating.

“It was a tough period, and it was an early period (of business development) for us too, so it was hard for us to wait those guys out,” said Phillip Abrary, chief executive of Ostara, which sells systems that recover phosphorus and nitrogen from sewage to sell as fertilizer.

But the business is booming now as U.S. budgets recover and green technology becomes a requirement forced by regulatory change, said Abrary.

The executives said they still face challenges like barriers to trade, financing, regulatory uncertainty, rising anti-trade sentiment and finding qualified employees.

    “Things like Brexit and the fall of the pound have hurt us a little bit and pushed out some deals, or put price pressures on some deals as a result,” said David Kroetsch, chief executive of Aeryon Labs, a drone maker that exports 80 percent of its product.

Reporting by Fergal Smith; Additional reporting by Andrea Hopkins in Ottawa, Alastair Sharp in Toronto and Allison Lampert in Montreal; Editing by Jeffrey Hodgson and Dan Grebler

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