Toromont Q2 results show 31 percent drop in rental revenues

Toromont Industries Ltd. (TSX: TIH) reported financial results for the second quarter ended June 30, 2020. “From the start of the COVID-19 pandemic, Toromont has continued to focus efforts on three areas: safeguarding our employees, servicing our customers’ needs and protecting our business for the future,” said Scott J. Medhurst, President and Chief Executive Officer of Toromont Industries Ltd. “As a result of reduced economic activity, caused by the response to the COVID-19 pandemic, we experienced lower earnings and net income in the quarter. Revenue decline lessened as the quarter progressed while remaining below prior year levels. We appreciate our entire team’s effort and commitment to supporting our customers during this challenging time.”

• Revenues decreased 13% to $849.6 million in the quarter versus last year due to lower economic activity caused by the necessary response to COVID-19. April experienced the lowest activity levels, with some recovery phasing in through May and June, however still below prior year levels. Product support and rental revenues were lower by 15% and 31% respectively. Equipment sales were lower by 8%, reflecting lower new equipment sales across most markets.
• Revenues decreased 7% to $1.6 billion year-to-date, after a somewhat positive start to the year in the first quarter. Similar trends were seen year-to-date as outlined above for the quarter.
• Operating income⁽¹⁾ was 31% lower in the second quarter on the lower revenues, reduced gross margins (mainly due to lower rental fleet utilization and sales mix) combined with higher expenses as a percentage of revenues due to fixed costs. Government subsidies ($0.8 million) were not significant factors.
• Operating income was 22% lower year-to-date on similar reasons as for the quarter. Operating income margin decreased 160 basis points (“bps”) to 8.5%.
• Backlogs⁽¹⁾ were $496.5 million at June 30, 2020, compared to $551.5 million at June 30, 2019. A new record was set at CIMCO while Equipment Group backlogs were lower.
• Net earnings decreased $26.2 million or 34% in the quarter versus a year ago to $51.2 million or $0.62 EPS.
• For the first half of the year, net earnings decreased $28.1 million or 24% and EPS was down 25%.

Equipment Group

• Revenues were down $118.8 million or 13% to $776.7 million for the quarter on reduced market activity. New equipment sales as well as product support and rental activity was lower across substantially all geographic markets and product groups.
• Revenues were down $94.9 million or 6% to $1.4 billion year-to-date with similar trends as the quarter.
• Operating income was down $32.0 million or 31% to $72.5 million in the quarter on lower revenues and gross profit margins. Operating income margin⁽¹⁾ decreased 240 bps to 9.3% reflecting the lower activity supporting fixed costs.
• Operating income was down $34.6 million or 21% to $127.6 million year-to-date, also on lower revenues and gross profit margins. Operating income margin decreased 170 bps to 8.9%.
• Bookings⁽¹⁾ decreased $129.4 million or 30% in the quarter and $84.9 million or 12% year-to-date. Reasonable deliveries continued through the quarter, while reduced order levels were reported in most market sectors. Backlogs of $268.8 million at the end of June 2020, were down $134.6 million or 33% from June 2019. Approximately 90% of the backlog is expected to be delivered this year.

The Board of Directors of the Company also announced today that, subject to annual shareholder approval, Mr. Robert Ogilvie, Chair, and Mr. Wayne Hill have agreed to continue to serve on the Board until 2023. The extension of their services will balance the Board renewal process with their depth of knowledge and experience, ensuring a smooth transition of roles with new directors.

“We are proud of our team’s ability to navigate through this pandemic and support our customers through the provision of essential services,” continued Mr. Medhurst. “Our Critical Incident Executive Response Team was activated at an early stage and continues to meet regularly to focus on developing trends and pronouncements, assessing best course of action and responding appropriately. The management and leadership teams continue to monitor the situation closely and are taking responsible measures to manage and protect the interests of our people and customers while managing the long-term health of the business. The diversity of our geographical landscape and markets served, extensive product and service offerings and financial strength together with a disciplined operating culture, position us well to weather this situation for the long term.”