Toromont declares solid third quarter
By Andrew Macklin
November 4, 2015 – Toromont’s third quarter financial results show that the company is faring well despite challenging equipment markets through the mining, agriculture and oil and gas industries.
“We are pleased with the steady performance of Toromont through these times of challenging and highly competitive market conditions,” said Scott J. Medhurst, president and chief executive officer of Toromont Industries Ltd. “In the Equipment Group, product support, heavy rents and power rentals continued to fuel growth, benefitting from focus and the increased installed base of equipment.”
Equipment Group revenues increased seven per cent to $439.3 million in the third quarter driven by increased product support and, to a lesser extent, increased heavy equipment and power rental revenues. Equipment sales were flat against a year ago as sales of construction equipment declined against a difficult comparator in 2014, which included $43.0 million of sales into a single project. This was offset by increased sales into mining and agriculture (benefitting from recent acquisitions), even though both markets continue to experience very tight conditions. The weaker Canadian dollar provides a positive impact on revenue as pricing is adjusted to reflect the higher cost of US sourced equipment and parts. Operating income(1) increased 9% compared to last year, reflecting the higher revenues and good expense management. Lower utilization levels in the expanded light equipment rental fleet together with extremely challenging conditions in the agricultural equipment market, were offsets to the improved profitability.
Equipment Group revenues were up 11 per cent to $1.2 billion year-to-date. Equipment sales were up $44.6 million or eight per cent on increased sales into construction, agricultural and mining markets and the weaker Canadian dollar. Product support revenues increased to a new high for the first nine months of the year on strong parts and services growth, reflecting higher activity levels and the weaker Canadian dollar. Operating income increased 16% compared to last year on the higher revenues, slightly improved gross profit margins and good expense management.
Net earnings increased 12 per cent in the quarter to $44.7 million and 16 per cent to $101.3 million year-to-date largely due to the higher revenues, improved gross profit margins and a relatively lower expense ratio.
“Toromont’s Equipment Group continued to perform well in the quarter, however we have seen some softening in construction markets in recent months as evidenced by lower total industry unit sales,” added Medhurst. “Infrastructure investment continues and there is potential for further long-term growth if the new Federal government follows through on its commitment to increase spending. The tight conditions experienced in mining markets are expected to continue. In the near-term, the weakened Canadian dollar exacerbating heightened competitive market conditions, together with lower utilization levels in the expanded light equipment rental fleet, are expected to exert downward pressure on earnings.”