Canadian Rental Service

Strongco announces Q1 2010 results



June 1, 2010 – Strongco Income Fund has released financial results for the first quarter ended March 31, 2010. 

June 1, 2010 – Strongco Income Fund has released financial results for the first quarter ended March 31, 2010. 
“The recessionary business pattern that existed during most of 2009 continued in the first quarter of 2010,” said Robert Dryburgh, President and Chief Executive Officer of the Fund. “The first quarter of 2009, although in recession, enjoyed carryover backlogs from 2008. Conversely, while the economy is officially now in recovery, construction markets tend to lag the broader economy by about six months. 

Consequently, many customers have continued to defer purchases of new equipment until they experience tangible signs of an improvement. In addition, the mild winter weather across the country required little use of snow removal equipment and resulted in low demand for related parts and service in the quarter.” 
“Construction markets are just now showing signs of improvement, and we expect demand for heavy equipment will increase for the balance of 2010. We are seeing it in our order backlogs and activity levels,” Dryburgh added. “The cost reductions and restructuring initiatives completed in 2009 have given Strongco a lower operating cost base and we continue to maintain overall gross margin. We anticipate improved profitability as construction markets recover during the year.” 
Construction and heavy equipment markets typically lag the economy by approximately six months. That means while the recession is officially over in Canada, the first quarter of 2010 is still bearing the effects of the recession, with low opening backlogs and continuing weak demand for construction equipment. Conversely, last year’s first quarter had not yet experienced the full recessionary impact.  

Total revenues during the first quarter of 2010 decreased by 26% from the same period in 2009 to $53.7 million.  In the aftermath of the 2009 recession, customers remained reluctant to purchase larger, higher-priced equipment.  In addition, increased competition from dealers carrying excess supplies of aging inventories put pressure on selling prices and the recent strength of the Canadian dollar also reduced equipment selling prices.  Reduced supply and longer delivery lead times for heavy equipment from OEM’s also hampered sales.  The mild winter in Eastern Canada meant less usage of snow removal equipment which, in turn, resulted in reduced sales of parts and service. 

Equipment sales decreased by 32% to $29.9 million. By contrast, product support revenues moved down only 19% to $20.1 million, and rentals declined by 13% to $3.7 million as customers continued to repair existing equipment or rent to meet their equipment needs. 
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