Energy, mining cause Wajax revenue losses
By Andrew Macklin
August 18, 2015 – Revenue growth in central and eastern Canada couldn’t offset revenue losses from the energy and mining sector in western Canada as Wajax posted declines in its second quarter financial results.
Consolidated second quarter revenue of $340.7 million decreased $33.7 million, or nine per cent, compared to last year. All three segments recorded decreased revenue in the quarter as a result of the energy and mining sector related slowdowns in western Canada. The Equipment, Power Systems and Industrial Components segments reported revenue declines of 11 per cent, 10 per cent and four per cent respectively. Revenue gains were realized in central and eastern Canada in all three segments, particularly related to gains in the forestry sector in the Equipment segment and in the bearing and power transmission product category in the Industrial Components segment.
“As expected, weakness in the western Canada economy resulted in lower second quarter revenue and earnings,” said Mark Foote, president and CEO of Wajax. “While all three segments were impacted by the western Canada slowdown, the effect was most significant in the Equipment and Power Systems segments. Despite the headwinds in western Canada, the Industrial Components segment recorded an increase in segment earnings as a result of cost reductions implemented last year and improved bearing and power transmission parts sales. In addition, revenue in central and eastern Canada improved in all three businesses.”
Net earnings for the quarter of $9.0 million, decreased $3.3 million compared to $12.3 million, recorded in 2014. The lower earnings were attributable to the decreased revenue and a $2.1 million pre-tax restructuring charge recorded in the Power Systems segment. The restructuring of the Power Systems segment is expected to realign branch support activities, including the centralization of supply chain management, and certain other administrative support functions. The restructuring, combined with other cost reductions related to reduced economic activity in western Canada, are anticipated to result in annualized pre-tax savings of approximately $7.4 million, of which $4.2 million is expected to be achieved in 2015.
“With commodity markets and the western Canada economy anticipated to be soft for the foreseeable future, we continue to expect that 2015 will be a challenging year,” said Foote. “Consequently we continue to expect 2015 full year earnings to be less than the previous year. We are pleased with the performance of our team and remain very confident that our growth strategy and responsiveness to market conditions will result in an improving business in the medium term and a strong growth company for the future.”