04.11.2013

Revenues climb/profits slip at Strongco

Canadian crane and equipment sales and rental company Srongco, has reported solid revenue gains in the third quarter, while profits continue to slide.

Total revenue for the first nine months was $369.4 million, up over six percent on last year, while pre-tax profits slumped from $9.1 million to $3.9 million, due to higher costs involved with a heavy investment in new locations, combined with higher interest costs.

Looking at the third quarter, revenues were up 10.5 percent to $131.7 million, with most of the gains coming from new equipment sales and product support, while rental revenues declined quite sharply. Pre-tax profit for the period was $2.9 million - down almost 15 percent on the same period last year.

Chief executive Robert Dryburgh said: "In the third quarter, Strongco extended its record of solid revenue growth through market share gains in construction equipment despite declines in several of our key markets as well as strong growth in crane sales. Our improved sales performance is a result of the recent upgrades made to the branch infrastructure and to our enhanced sales organisation,"

"Overall, demand in heavy equipment markets has been adversely affected by substantially less demand in Quebec, the Atlantic provinces and New England. Despite this market softness, we believe the Company will continue to benefit from the organisational investments we have made to realize higher revenues and market share gains across the country."

"Looking ahead to the fourth quarter, Strongco's sales backlogs and level of rental contracts with purchase options are strong, which suggests a continuing demand for heavy equipment. Thus, we remain cautiously optimistic for the balance of the year."

"We also remain keenly focused on reducing floor plan debt through inventory reductions. In the third quarter, equipment notes declined by $8 million as equipment inventory decreased by approximately $8 million from the second quarter and is running $10 million lower than at the same time last year. Inventory committed to RPOs did increase slightly with the delay of some conversions into the fourth quarter. With our anticipated level of sales combined with the RPO conversions expected in the fourth quarter, we look forward to a substantial reduction in inventory by the end of the year."

"Heavy equipment markets slowed in 2013. Overall demand for equipment remains flat to slightly down from last year for Canada overall with Quebec and the Atlantic Provinces down substantially. Economic forecasts continue to project modest growth in Canada overall in 2013 and construction activity is expected to stay flat for the balance of the year except in Quebec. Going forward, Strongco continues to make further strategic investments in its branch network to heighten visibility in our markets, better serve customers and drive regional business growth. As part of this initiative for northern Alberta, our new Fort McMurray branch, which is currently under construction, will open for business in the first quarter of 2014."
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