Hammond Power Solutions Inc. (“HPS”) (TSX: HPS.A) a leading
manufacturer of dry-type transformers, power quality products and
related magnetics, today announced its financial results for the
second quarter 2024.
HIGHLIGHTS
- Record sales of $197 million in the quarter, an
increase of 14.4% from quarter 2, 2023 and $388 million
year-to-date, a 12.9% increase versus 2023.
- Adjusted EBITDA at 16.5% of sales in the quarter.
Year-to-date Adjusted EBITDA at 16.4% of sales. Year-to-date
Adjusted EBITDA increased by 16.7% year-over-year.
- Gross margin of 32.8% for the quarter and 32.3%
year-to-date.
- Net Income of $23.6 million in the quarter, earnings
per share of $1.98. Year-to-date net income of $31.5 million,
earnings per share of $2.44.
“Hammond Power Solutions had a busy and exciting
second quarter with the official opening of a new factory in Mexico
and achieving record all-time shipments once again. As a result of
our continuous focus on capacity, we were able to realize sales
growth of 14% over last year,” said Adrian Thomas, CEO of Hammond
Power Solutions. “Our bookings were strong in the second quarter,
and we achieved our second-highest month of new orders ever in
April. New orders reverted to more normal levels in June as
standard product sales cooled in the United States (“U.S.”) offset
somewhat by increased sales activities at new and existing
distributors. We are expecting the standard product market to
remain stable for the remainder of the year, however we expect to
see continued strong activity in custom equipment as project
activity remains elevated.”
|
Geography |
Quarter 2, 2024 |
Quarter 2, 2023 |
$ Change |
% Change |
YTD 2024 |
YTD 2023 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
|
|
| U.S.
& Mexico* |
$133,176 |
$117,310 |
$15,866 |
13.5% |
$263,908 |
$236,114 |
$27,794 |
11.8% |
|
Canada |
55,858 |
45,542 |
10,316 |
22.7% |
104,154 |
81,956 |
22,198 |
27.1% |
|
India |
8,178 |
9,599 |
(1,421) |
(14.8%) |
19,830 |
25,515 |
(5,685) |
(22.3%) |
|
Total |
$197,212 |
$172,451 |
$24,761 |
14.4% |
$387,892 |
$343,585 |
$44,307 |
12.9% |
| |
|
|
|
|
|
|
|
|
The U.S. market experienced its strongest growth
in the distributor channel as the Company continued to grow both
the number of new distributors, as well as sales within existing
distributors. The Original Equipment Manufacturer (“OEM”) channel,
while higher on a year-to-date basis, decreased in the quarter.
However, combined sales between the OEM and private label channels
increased in the Quarter, with strong sales to switchgear
manufacturers, motor control, mining, and data centres. The
Canadian market continued its exceptional growth in the second
quarter through the distribution channel in both stock and flow
product and large custom projects in commercial construction,
electric vehicle (“EV”) charging, data centres, public
infrastructure, oil & gas, mining, utilities and motor
control.
Despite reaching record shipment levels, the
Company’s backlog increased 1.0% from Quarter 1, 2024.
“We are pleased with the adjusted EBITDA
percentage of 16.5% in the quarter. It is the result of continued
strong sales, along with effective margin maintenance,” said
Richard Vollering, Chief Financial Officer of Hammond Power
Solutions. “Strength in Canadian and U.S. distribution - made up of
both stock and flow and project work - stood out as the main driver
of quarterly growth. Offsetting this, we saw year-over-year
declines in India, Mesta and LATAM for various reasons, most of
which we believe are temporary. Margins remained strong in the
quarter for all channels and regions, despite challenges with
under-absorbed overhead in our new Mexico factory and a spike in
copper costs in March and April. Quotation activity remained strong
and price support remained steady during the quarter. Cash
converted from operating activities was high in the quarter and as
anticipated, our capital growth spending continues to be funded
with operating cash flows.”
The Company saw an increase in its gross margin
rate for Quarter 2, 2024 which was 32.8% compared to Quarter 2,
2023 margin rate of 30.9%, an increase of 190 basis points. The
improvement in gross margin is the result of better operating
leverage due to high factory throughput, price maintenance, and the
price increase implemented in April 2024, offset by higher
commodity costs and start-up costs at the new factory in Mexico.
Higher gross margins were achieved in most channels and
regions.
Total selling and distribution expenses were
$20,591 in Quarter 2, 2024 or 10.4% of sales, versus $18,950 in
Quarter 2, 2023 or 11.0% of sales, an increase of $1,641 but a
decrease as a percentage of sales. Year-to-date selling and
distribution expenses were $41,658 or 10.7% of sales in 2024
compared to $36,439 or 10.6% of sales in 2023, an increase of
$5,219. The quarter and year-to-date increase in selling and
distribution expenses is primarily a result of higher variable
freight and commission expenses attributed to the increase in
sales.
General and administrative expenses were $9,062
or 4.6% of sales for Quarter 2, 2024 compared to Quarter 2, 2023
expenses of $15,422 or 8.9% of sales, a decrease of $6,360.
Removing the impact of share-based compensation, general and
administrative expenses were $15,089 or 7.7% of sales in Quarter 2,
2024 compared to $11,442 or 8.9% of sales in Quarter 2, 2023, an
increase of $3,647.
Year-to-date general and administration expenses
were $38,201 or 9.8% of sales in 2024 compared to $29,757 or 8.7%
of sales in 2023, an increase of $8,444. Removing the impact of
share-based compensation, year-to-date general and administrative
expenses were $27,557 or 7.1% in 2024 compared to $21,299 or 6.2%
of sales in 2023, an increase of $6,258. Key drivers for the change
relate to strategic investment in people resources along with
engineering, marketing, legal and travel expenses.
Net earnings for Quarter 2, 2024 finished at
$23,590 compared to net earnings of $13,333 in Quarter 2, 2023, an
increase of $10,257. Year-to-date net earnings were $31,542 in 2024
compared to $29,059 in 2023, an increase of $2,483. The
year-to-date increase in earnings is primarily a result of higher
sales and gross margin dollars offset by higher general and
administrative expenses, selling and distribution expenses, and
income tax expense.
EBITDA for Quarter 2, 2024 was $36,711 versus
$21,444 in Quarter 2, 2023, an increase of $15,267 or 71.2%.
Adjusted for foreign exchange loss/gain and share-based
compensation expenses adjusted EBITDA for Quarter 2, 2024 was
$32,587 versus $25,338 in Quarter 2, 2023, an increase of $7,249 or
28.6%. Year-to-date EBITDA was $51,710 in 2024 and $45,589 in 2023,
an increase of $6,121 or 13.4%. Year-to-date adjusted EBITDA was
$63,559 in 2024 and $54,459 in 2023, an increase of $9,100 or
16.7%.
Adjusted EBITDA for Quarter 2, 2024 was $32,587,
or 16.5% of sales, versus Quarter 2, 2023 Adjusted EBITDA of
$25,338, or 14.7% of sales. Year-to-date 2024 Adjusted EBITDA was
$63,557, or 16.4% of sales, versus year-to-date 2023 Adjusted
EBITDA of $54,459, or 15.9% of sales.
Basic earnings per share were $1.98 for Quarter
2, 2024 versus $1.12 in Quarter 2, 2023, an increase of $0.86.
Year-to-date the basic earnings per share were $2.65 in 2024
compared to $2.44 in 2023, an increase of $0.21.
The Board of Directors of HPS declared a
quarterly cash dividend of twenty-seven and a half cents ($0.275)
per Class A Subordinate Voting Share of HPS and a quarterly cash
dividend of twenty-seven and a half cents ($0.275) per Class B
Common Share of HPS paid on June 25, 2024 to shareholders of record
at the close of business on June 18, 2024. The ex-dividend date was
June 18, 2024. Year-to-date the Company has paid a cash dividend of
forty-two and a half cents ($0.425) per Class A Subordinate Voting
Share and of forty-two and a half cents ($0.425) per Class B
Shares.
THREE MONTHS ENDED: (dollars in
thousands)
|
|
June 29, 2024 |
|
July 1, 2023 |
Change |
|
Sales |
$ |
197,212 |
$ |
172,451 |
$ |
24,761 |
|
Earnings from operations |
$ |
35,090 |
$ |
18,957 |
$ |
16,133 |
|
Exchange (gain) loss |
$ |
1,903 |
$ |
(86) |
$ |
1,989 |
|
Net earnings |
$ |
23,590 |
$ |
13,333 |
$ |
10,257 |
|
Earnings per share |
|
|
|
|
|
|
|
Basic |
$ |
1.98 |
$ |
1,12 |
$ |
0,86 |
|
Diluted |
$ |
1.98 |
$ |
1,12 |
$ |
0,86 |
|
Cash generated by (used in) operations |
$ |
18,656 |
$ |
12,295 |
$ |
6,361 |
|
EBITDA |
$ |
36,711 |
$ |
21,444 |
$ |
15,267 |
|
Adjusted EBITDA* |
$ |
32,587 |
$ |
25,338 |
$ |
7,249 |
|
Capital Spending |
$ |
9,868 |
$ |
4,309 |
$ |
5,559 |
| |
|
|
|
|
|
|
SIX MONTHS ENDED:(dollars in thousands)
|
|
June 29, 2024 |
|
July 1, 2023 |
Change |
|
Sales |
$ |
387,892 |
$ |
343,585 |
$ |
44,307 |
|
Earnings from operations |
$ |
45,389 |
$ |
41,580 |
$ |
3,809 |
|
Exchange (gain) loss |
$ |
1,205 |
$ |
412 |
$ |
793 |
|
Net earnings |
$ |
31,542 |
$ |
29,059 |
$ |
2,483 |
|
Earnings per share |
|
|
|
|
|
|
|
Basic |
$ |
2.65 |
$ |
2.44 |
$ |
0.21 |
|
Diluted |
$ |
2.65 |
$ |
2.44 |
$ |
0.21 |
|
Cash generated by (used in) operations |
$ |
24,941 |
$ |
1,829 |
$ |
23,112 |
|
EBITDA |
$ |
51,710 |
$ |
45,589 |
$ |
6,121 |
|
Adjusted EBITDA* |
$ |
63,559 |
$ |
54,459 |
$ |
9,100 |
|
Capital Spending |
$ |
17,355 |
$ |
6,319 |
$ |
11,036 |
| |
|
|
|
|
|
|
* EBITDA adjusted for foreign
exchange gain or loss and share-based compensation
Caution Regarding Forward-Looking
Information
This press release contains forward-looking
statements that involve a number of risks and uncertainties,
including statements that relate to among other things, HPS’
strategies, intentions, plans, beliefs, expectations and estimates,
and can generally be identified by the use of words such as “may”,
“will”, “could”, “should”, “would”, “likely”, “expect”, “intend”,
“estimate”, “anticipate”, “believe”, “plan”, “objective” and
“continue” and words and expressions of similar import. Although
HPS believes that the expectations reflected in such
forward-looking statements are reasonable, such statements involve
risks and uncertainties, and undue reliance should not be placed on
such statements. Certain material factors or assumptions are
applied in making forward-looking statements, and actual results
may differ materially from those expressed or implied in such
statements. Important factors that could cause actual results to
differ materially from expectations include but are not limited to:
general business and economic conditions (including but not limited
to currency rates); changes in laws and regulations; legal and
regulatory proceedings; and the ability to execute strategic plans.
HPS does not undertake any obligation to update publicly or to
revise any of the forward-looking statements contained in this
document, whether as a result of new information, future events or
otherwise, except as required by law.
ABOUT HAMMOND POWER SOLUTIONS
INC.
Hammond Power Solutions Inc. (“HPS” or the
“Company”) enables electrification through its broad range of
dry-type transformers, power quality products and related
magnetics. HPS’ standard and custom-designed products are essential
and ubiquitous in electrical distribution networks through an
extensive range of end-user applications. The Company has
manufacturing plants in Canada, the United States (U.S.), Mexico
and India and sells its products around the globe. HPS shares are
listed on the Toronto Stock Exchange and trade under the symbol
HPS.A.
Hammond Power Solutions – passionate people
energizing a better world
For further information, please contact:
David Feick Investor Relations 519-822-2441 x453
ir@hammondpowersolutions.com