31.03.2014

Profits slide at Strongco

Canadian distribution and rental group Strongco has reported a sharp fall in profits on higher revenues.

Total revenues for the year were up five percent to $485.7 million, while pre-tax profits slumped from $9.7 million in 2012 to $3.7 million in 2013. Due says the company to higher interest charges and “investments made to drive future growth in the business”.

The fourth quarter showed revenues up marginally to $116.4 million, while the pre-tax profit of $847,000 in 2012 turned into a loss of $229,000 in 2013.

Chief executive Bob Dryburgh said: “Given the challenging market conditions in 2013, we were pleased to achieve overall sales increases for Equipment and Product Support, continuing Strongco's record of revenue growth and improved market position in all the regions in which we operate. While increased sales and market share in a down market indicates that we are doing the right things, we were not able to completely offset cost increases associated with the new and upgraded branches, and improved sales organisation. Our stated goal for 2013 was to reduce equipment inventories and the associated floor-plan debt. By year end, we were successful in reducing year-over-year inventories by $32.4 million. However, in the first half of the year we carried higher levels of inventories ahead of strong sales in the construction season. This contributed to increased interest costs which, together with the costs associated with building Strongco for the future, resulted in a decline in earnings for the year.”

“Consistent with our strategy of focusing capital on our core business, we completed a sale and leaseback of our new branch in Acheson, Alberta and sold the vacated branch in St. Foy, Quebec. These transactions generated a gain of $3 million and freed up significant cash."

"With new and updated branches in key markets, including Fort McMurray, which opened in February 2014, as well as our new sales organization beginning to have an impact, we are now positioned to fully capitalise on the market opportunities that we see. Early indications show that, despite a flat overall market and the long difficult winter, sales growth and market share improvement are continuing for Strongco in 2014.Improved inventory management and debt reduction will continue to be our focus this year with the goal to reduce balance sheet leverage and lower interest costs. In 2013, we saw tangible benefits from our significant investment in facilities and people, and we are optimistic that these improvements will be evident in our bottom line by year end."