Toromont Industries Ltd. (TSX: TIH) today reported financial
results for the three months and year ended December 31, 2018.
Financial
Highlights |
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Three months ended December 31 |
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Years ended December 31 |
millions, except
per share amounts |
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2018 |
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2017 |
%
change |
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2018 |
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2017 |
%
change |
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Revenues |
$ |
966.0 |
$ |
822.8 |
17 % |
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$ |
3,504.2 |
$ |
2,350.2 |
49 % |
Operating income |
$ |
121.6 |
$ |
86.6 |
40 % |
|
$ |
369.6 |
$ |
249.6 |
48 % |
Net earnings |
$ |
84.9 |
$ |
59.1 |
44 % |
|
$ |
252.0 |
$ |
176.0 |
43 % |
Basic earnings per
share ("EPS") |
$ |
1.04 |
$ |
0.73 |
43 % |
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$ |
3.10 |
$ |
2.22 |
39 % |
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These results include the operations of the
significant acquisition completed in October 2017. This transaction
expanded Toromont’s operations to include the Caterpillar
dealerships for Quebec, the Maritime Provinces and Western Labrador
and the MCFA lift truck dealership for Quebec and Ontario, in
addition to other distribution rights. The acquired operations are
collectively referenced as “Toromont QM or TQM” throughout this
press release.
“Toromont delivered solid results in the fourth
quarter and full year of 2018,” said Scott J. Medhurst, President
and Chief Executive Officer of Toromont Industries Ltd. “The
Equipment Group recorded growth across its expanded territory and
in most revenue streams. CIMCO, coming off of a record year,
continued to grow its product support business but faced specific
challenges, which dampened their results.”
Considering the Company’s solid financial position
and positive long-term outlook, the Board of Directors today
increased the quarterly dividend by 17.4% to 27 cents per share.
The next dividend is payable April 3, 2019 to shareholders of
record at the close of business on March 8, 2019. Toromont has paid
dividends every year since 1968 and this is the 30th consecutive
year of dividend increases.
Highlights:
Consolidated results
- Net earnings in 2018 were $252.0
million, up 43% from 2017, while basic EPS increased $0.88 or 39%
to $3.10. Toromont QM achieved improved profitability and
contributed $64.1 million for the full year of operations under
Toromont’s ownership. Integration-related costs, largely related to
interest expense on the acquisition financing, reduced net earnings
by $18.0 million.
- The following table identifies the
components of contributions to the 2018 results versus last
year:
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Years ended December 31 |
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Net earnings |
Basic EPS (a) |
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millions, except
per share amounts |
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2018 |
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2017 |
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%
change |
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2018 |
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2017 |
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%
change |
Legacy Toromont
(b) |
$ |
205.9 |
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$ |
175.6 |
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17% |
$ |
2.61 |
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$ |
2.29 |
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14% |
Toromont QM (c) |
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64.1 |
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8.3 |
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nm |
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0.81 |
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0.11 |
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nm |
Acquisition-related
interest expense and integration-related costs (e) |
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(18.0 |
) |
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(7.9 |
) |
nm |
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(0.23 |
) |
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(0.10 |
) |
nm |
Dilutive impact of
acquisition shares (d) |
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- |
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- |
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- |
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(0.09 |
) |
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(0.08 |
) |
nm |
As reported |
$ |
252.0 |
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$ |
176.0 |
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43% |
$ |
3.10 |
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$ |
2.22 |
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39% |
(a)
Separately identifies impact of shares issued at acquisition for
year-over-year comparability |
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(b) Defined
as all businesses continuing from prior to the acquisition |
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(c) Defined
as all businesses acquired October 27, 2017 |
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(d) EPS
impact of 2.2 million shares issued on acquisition to total net
earnings |
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(e) Expenses shown net
of taxes |
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- Legacy Toromont net earnings increased $30.3 million or 17%
with solid growth in the Equipment Group offsetting softer results
at CIMCO. Net earnings growth mainly reflects higher margins and
revenues in the legacy Equipment Group, together with a favorable
impact of mark-to-market adjustments on Deferred Share Units on the
lower share price ($4.0 million after-tax).
- Net earnings for the fourth quarter were $84.9 million, up 44%
from 2017, while basic EPS increased $0.31 or 43% to $1.04. The
following table identifies the components of contributions to the
fourth quarter results versus last year:
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Three months ended December 31 |
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Net earnings |
Basic EPS (a) |
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millions,
except per share amounts |
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2018 |
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2017 |
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% change |
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2018 |
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2017 |
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% change |
Legacy Toromont
(b) |
$ |
67.2 |
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$ |
56.8 |
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18% |
$ |
0.85 |
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$ |
0.72 |
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18% |
Toromont QM (c) |
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21.4 |
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8.3 |
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nm |
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0.27 |
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0.11 |
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nm |
Acquisition-related
interest expense and integration-related costs (e) |
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(3.7 |
) |
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(6.0 |
) |
nm |
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(0.05 |
) |
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(0.07 |
) |
nm |
Dilutive impact of
acquisition shares (d) |
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- |
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- |
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- |
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(0.03 |
) |
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(0.03 |
) |
- |
As reported |
$ |
84.9 |
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$ |
59.1 |
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44% |
$ |
1.04 |
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$ |
0.73 |
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43% |
(a)
Separately identifies impact of shares issued at acquisition for
year-over-year comparability |
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(b) Defined
as all businesses continuing from prior to the acquisition |
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(c) Defined
as all businesses acquired October 27, 2017 |
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(d) EPS
impact of 2.2 million shares issued on acquisition to total net
earnings |
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(e) Expenses shown net
of taxes |
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- Legacy Toromont, net earnings
increased $10.4 million or 18% on growth in the Equipment Group,
partially offset by lower earnings from CIMCO. Net earnings
growth mainly reflects higher margins and revenues in the legacy
Equipment Group, together with a favorable impact of mark-to-market
adjustments on Deferred Share Units on the lower share price ($2.8
million after-tax).
Equipment Group
- Revenues were up $1.1 billion to $3.2 billion for the year.
Toromont QM contributed $1.3 billion for the year versus $242.6
million for the two months last year. Against a tough prior year
comparator, which included the delivery of a large mining package
in 2017, legacy Toromont revenues were up $102.5 million or 6% on
growth across most revenue streams.
- Operating income(1) was up $129.1 million for the year. In the
legacy Equipment Group, operating income increased $42.3 million or
20% and was up 160 basis points (“bps”) as a percentage of revenues
(13.7% versus 12.1%), largely reflecting higher margins on the
higher revenues, partially offset by a relatively higher expense
ratio.
- For the fourth quarter, revenues were up $147.9 million to
$873.9 million. Toromont QM contributed an incremental $114.1
million while the legacy Equipment Group revenues increased $33.8
million or 7% with increases across most revenue streams.
- Operating income was up $40.3 million in the quarter. In the
legacy Equipment Group, operating income increased $13.5 million or
20% and was up 170 bps as a percentage of revenues to 15.6%, for
similar reasons outlined above for the full year results.
- Bookings(1) in 2018 increased $524.0 million to $1.5 billion
largely due to $508.0 million of incremental bookings at Toromont
QM. Bookings in the legacy businesses increased 2% due to a large
power systems order, together with higher construction and
agriculture orders, offset by the impact of the large mining order
in 2017. Fourth quarter bookings were up $95.0 million to $423.0
million, $80.0 million of which related to incremental orders at
Toromont QM. Backlogs(1) increased $15.0 million or 5% to $342.0
million, most of which is expected to be delivered in 2019.
CIMCO
- Revenues for the year increased $24.9 million or 8% to a record
$343.1 million. Package revenues increased in Canada, but were
lower in the US following a record 2017. Sales into industrial
market segments were strong in both Canada and the US, while
recreational markets were down. Product support revenues increased
in both Canada and the US.
- Operating income was lower by $9.1 million or 30% in 2018,
mainly due to an inventory write-down of $6.0 million and execution
issues on one US-based project ($2.9 million). Operating income
margin(1) was 6.0% for the year.
- For the fourth quarter, revenues were down $4.6 million or 5%
to $92.2 million. Product support growth in both Canada and US were
more than offset by lower package revenues in both countries.
- Operating income was lower by $5.3 million or 47% in 2018, due
to the aforementioned inventory write-down.
- Bookings of $185.0 million for the year were lower by $48.0
million versus the record levels achieved in 2017. Fourth quarter
bookings were up $11.0 million or 44% on strong orders in both
Canada and the US. Backlogs of $113.0 million at December 31, 2018
were also lower against the all-time high set in 2017.
Substantially all of the backlog is expected to be realized as
revenue in 2019.
Financial Position
- Toromont continued to produce superior shareholder returns,
delivering increased dividends, a 22.3% return on opening
shareholders’ equity(1) and a 21.7% pre-tax return on capital
employed(1).
- Toromont’s share price of $54.26 at the end of 2018, translates
to a market capitalization(1) of $4.4 billion and a total
enterprise value(1) of $4.7 billion.
- The Company maintained a very strong financial position. During
the year, the Company repaid $250.0 million drawn on a term credit
facility last year to partially fund the acquisition of TQM. As a
consequence, leverage, as represented by the net debt to total
capitalization(1) ratio decreased to 18% at the end of December 31,
2018 from 40% at the end of December 31, 2017.
“Infrastructure projects and broader construction
activity continue to present opportunities for Toromont’s Equipment
Group for equipment sales, product support and rentals.
Opportunities exist for equipment supply into the mining sector,
especially in support of the replacement and expansion requirements
at existing mine sites. Overall, we are very pleased with the
progress achieved so far on the transition and integration fronts
and remain cautiously optimistic about the significant potential
which lies ahead. CIMCO continues to grow its product support,
reflecting its strong presence and solid reputation as a leader in
the key markets it serves,” continued Mr. Medhurst. “We enter 2019,
a much stronger and cohesive team than this time a year ago.
Supported by a strong balance sheet, we remain well positioned to
continue building shareholder value.”
Financial and Operating
Results
All comparative figures in this press release are
for the fourth quarter and fiscal year ended December 31, 2018
compared to the fourth quarter and fiscal year ended December 31,
2017. All financial information presented in this press release has
been prepared in accordance with International Financial Reporting
Standards ("IFRS") and are reported in Canadian dollars. This press
release contains only selected financial and operational highlights
and should be read in conjunction with Toromont's audited
consolidated financial statements and related notes and
Management's Discussion and Analysis ("MD&A") for the year
ended December 31, 2018, which are available on SEDAR at
www.sedar.com and on the Company's website at www.toromont.com. The
Company's audited consolidated financial statements and MD&A
contain detailed information about Toromont's financial position,
results, liquidity and capital resources, strategy, plans and
outlook, which investors are encouraged to read carefully.
Quarterly Conference Call and
Webcast
Interested parties are invited to join the
quarterly conference call with investment analysts, in listen-only
mode, on Friday, February 15, 2019 at 8:00 a.m. (ET). The call may
be accessed by telephone at 1-888-394-8218 (toll free) or
647-484-0475 (Toronto area). A replay of the conference call will
be available until Friday, February 22, 2019 by calling
1-800-408-3053 or 905-694-9451 and quoting passcode 4049761#.
Both the live webcast and the replay of the
quarterly conference call can be accessed at www.toromont.com.
Advisory
Information in this press release that is not a
historical fact is "forward-looking information". Words such as
"plans", "intends", "outlook", "expects", "anticipates",
"estimates", "believes", "likely", "should", "could", "will", "may"
and similar expressions are intended to identify statements
containing forward-looking information. Forward-looking information
in this press release reflect current estimates, beliefs, and
assumptions, which are based on Toromont’s perception of historical
trends, current conditions and expected future developments, as
well as other factors management believes are appropriate in the
circumstances. Toromont’s estimates, beliefs and assumptions are
inherently subject to significant business, economic, competitive
and other uncertainties and contingencies regarding future events
and as such, are subject to change. Toromont can give no assurance
that such estimates, beliefs and assumptions will prove to be
correct. This press release also contains forward-looking
statements about the recently acquired businesses.
Numerous risks and uncertainties could cause the
actual results to differ materially from the estimates, beliefs and
assumptions expressed or implied in the forward-looking statements,
including, but not limited to: business cycles, including general
economic conditions in the countries in which Toromont operates;
commodity price changes, including changes in the price of precious
and base metals; changes in foreign exchange rates, including the
Cdn$/US$ exchange rate; the termination of distribution or original
equipment manufacturer agreements; equipment product acceptance and
availability of supply; increased competition; credit of third
parties; additional costs associated with warranties and
maintenance contracts; changes in interest rates; the availability
of financing; potential environmental liabilities of the acquired
businesses and changes to environmental regulation; failure to
attract and retain key employees; damage to the reputation of
Caterpillar, product quality and product safety risks which could
expose Toromont to product liability claims and negative publicity;
new, or changes to current, federal and provincial laws, rules and
regulations including changes in infrastructure spending; and any
requirement of Toromont to make contributions to the registered
funded defined benefit pension plans, postemployment benefits plan
or the multi-employer pension plan obligations in which it
participates in and acquired in excess of those currently
contemplated. Risks and uncertainties related to the 2017
significant acquisition could also cause the actual results to
differ materially from the estimates beliefs and assumptions
expressed or implied in the forward-looking statements, including
but not limited to: changes in consumer and business confidence as
a result of the change in ownership; the potential for liabilities
assumed in the acquisition to exceed our estimates or for material
undiscovered liabilities in the 2017 acquisition; the potential for
third parties to terminate or alter their agreements or
relationships with Toromont as a result of the acquisition; and
risks related to integration of the acquired operations with those
of Toromont including cost of integration and ability to achieve
the expected benefits. Readers are cautioned that the foregoing
list of factors is not exhaustive.
Any of the above mentioned risks and uncertainties
could cause or contribute to actual results that are materially
different from those expressed or implied in the forward-looking
information and statements included in this press release. For a
further description of certain risks and uncertainties and other
factors that could cause or contribute to actual results that are
materially different, see the risks and uncertainties set out in
the "Risks and Risk Management" and "Outlook" sections of
Toromont’s most recent annual Management Discussion and Analysis,
as filed with Canadian securities regulators at www.sedar.com or at
our website www.toromont.com. Other factors, risks and
uncertainties not presently known to Toromont or that Toromont
currently believes are not material could also cause actual results
or events to differ materially from those expressed or implied by
statements containing forward-looking information.
Readers are cautioned not to place undue reliance
on statements containing forward-looking information, which reflect
Toromont’s expectations only as of the date of this press release,
and not to use such information for anything other than their
intended purpose. Toromont disclaims any obligation to update or
revise any forward-looking information, whether as a result of new
information, future events or otherwise, except as required by
law.
About Toromont
Toromont Industries Ltd. operates through two
business segments: the Equipment Group and CIMCO. The Equipment
Group includes one of the larger Caterpillar dealerships by revenue
and geographic territory - spanning the Canadian provinces of
Newfoundland & Labrador, Nova Scotia, New Brunswick, Prince
Edward Island, Québec, Ontario and Manitoba, in addition to most of
the territory of Nunavut. The Group includes industry leading
rental operations, a complementary material handling business and
an agricultural equipment business. CIMCO is a market leader in the
design, engineering, fabrication and installation of industrial and
recreational refrigeration systems. Both segments offer
comprehensive product support capabilities. This press release and
more information about Toromont Industries Ltd. can be found at
www.toromont.com.
For more information contact:
Paul R. JewerExecutive Vice President and Chief
Financial OfficerToromont Industries Ltd.Tel: (416) 514-4790
FOOTNOTES
- These financial metrics do not have a
standardized meaning under International Financial Reporting
Standards (IFRS), which are also referred to herein as Generally
Accepted Accounting Principles (GAAP), and may not be comparable to
similar measures used by other issuers. These measurements are
presented for information purposes only. The Company’s Management’s
Discussion and Analysis (MD&A) includes additional information
regarding these financial metrics, including definitions and a
reconciliation to the most directly comparable GAAP measures, under
the headings “Additional GAAP Measures”, “Non-GAAP Measures” and
“Key Performance Indicators.”
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