Distributor sees success in industrial components segment and challenges in others
Toronto, Ontario – Wajax Corporation, in announcing its 2015 first quarter results on May 5, revealed that consolidated first quarter revenue of $317.2 million decreased $14.2 million, or 4%, compared to last year. Compared to the previous year, Equipment and Power Systems segment revenue declined 9% and 3%, respectively, while Industrial Components segment sales increased 2%.
Reduced activity in the mining, oil and gas, and oil sands sectors negatively affected revenue from western Canada in all three segments. However, in the Industrial Components segment this was more than offset by stronger sales in Ontario and eastern Canada.
The company’s net earnings for the quarter of $5.7 million, or $0.34 per share, decreased $1.0 million compared to $6.7 million, or $0.40 per share recorded in 2014. Equipment segment earnings decreased to $6.8 million, while Power Systems segment earnings were essentially flat at $3.4 million. Industrial Components segment earnings increased $2.2 million, to $3.4 million. Earnings in this segment were positively impacted by higher volumes and reduced selling and administrative costs compared to last year, despite a $1.3 million increase in bad debt expenses.
On a consolidated basis, selling and administrative costs were $3.8 million lower than the previous year as a result of workforce reductions and lower incentive accruals, severance costs and sales related expenses.
Wajax previously announced on March 3, 2015, a quarterly dividend of $0.25 per share payable on July 3 to shareholders of record on June 15, 2015.
Commenting on first quarter results and the outlook for the remainder of 2015, Mark Foote, president and CEO, stated: “As expected, weakness in oil and other commodity prices had a negative effect on our customers in the mining, oil and gas and oil sands markets in western Canada, resulting in lower first quarter revenue and earnings. The impact was most significant in the Equipment segment, which experienced a 17% reduction in parts and service revenues as oil sands operators and miners idled portions of their equipment fleets.
“Conversely, operating results in central Canada improved. This was particularly evident for the Equipment and Industrial Components segments where sales in those regions increased 40% and 12%, respectively.
“Our focus in 2015 continues to be centred on three objectives; cost management; managing our asset base and debt level, and; executing a prudent investment plan to support our 4 Points of Growth strategy.
“With respect to cost management, reductions in consolidated selling and administrative costs of $3.8 million, partially mitigated the earnings impact of lower first quarter volumes. We are very pleased with the progress made in the Industrial Components segment, where our restructuring efforts in 2014 have resulted in a significant improvement in earnings based on both cost reduction and improved selling effectiveness.
“We plan to communicate and begin implementation of restructuring activities in our Power Systems segment in the second quarter with severance costs expected to approximate $1.8 million. This restructuring, combined with Power Systems segment cost reductions realized to date, are anticipated to result in annualized savings of approximately $5 million.
“The increase in our March 31, 2015, debt level from December, 2014 was attributable to a combination of the drop in customer demand in western Canada and seasonal factors. We expect to reverse this debt level trend by year end.
“We continued to execute our 4 Points of Growth strategy in the first quarter. As previously stated, we are moving forward on all components of our strategy, including activities related to our core capabilities, organic growth initiatives, ERS acquisitions and systems implementation. While we will control the pace of execution given current market conditions, we will continue to make progress on these programs that are vitally important to future earnings.
“With commodity markets and the western Canada economy anticipated to be soft for the remainder of the year, we continue to expect that 2015 will be a challenging year. Consequently we expect 2015 full year earnings to be less than the previous year. However, we are very confident that our growth strategy and responsiveness to market conditions will result in an improving business in the medium term and a strong growth company for the future.”
About Wajax Corporation
Wajax is a Canadian distributor engaged in the sale, rental and after-sale parts and service support of equipment, power systems and industrial components, through a network of 123 branches across Canada. The Corporation is a multi-line distributor and represents a number of leading worldwide manufacturers across its core businesses. Its customer base is diversified, spanning natural resources, construction, transportation, manufacturing, industrial processing and utilities.