Canadian distributor Strongco Corp. shrunk revenues 16 percent in the third quarter compared to the third quarter of 2014, primarily because of lower revenues in Alberta. Revenues were $108.4 million compared to $129.2 million in the year ago quarter. For the first nine months of 2015, revenue was $346.1 million compared to $369.5 million in the first nine months of 2014, a 6.3-percent slide.
With two major markets at depressed levels – the Alberta market down 60 percent and Quebec down 40 percent from two years ago – the company reduced costs, decreased inventories and lowered debt to produce improved operating profit on lower sales. Alberta revenues were down 52 percent, or $21.6 million, because of continuing weak market conditions brought on by the decline in oil prices. Demand for heavy equipment in Alberta is estimated to be down close to 40 percent, with general purpose equipment down almost 60 percent, the company said. With large amounts of equipment sitting idle, demand for parts and service has also been curtailed.
“Difficult market conditions related to the current low price of oil in Alberta, the impact of a weaker Canadian dollar, which declined by $0.09 in the quarter, and the familiar headwinds we continue to experience in Quebec, have delayed the full realization of Strongco’s significant investments over the past three years in the branch network, operations and our people,” said Robert Dryburgh, president and CEO of Strongco. “We are responding to this environment and are pleased to be seeing tangible improvements in cost controls and recoveries, operating efficiencies and sales execution, as well as reduced equipment inventories and related equipment finance debt.
“Despite the lower revenues during the quarter, we achieved improved margins as a percentage of sales, lower operating expenses, and – excluding foreign exchange losses – an increase in operating profit year over year.”
Dryburgh said he expects challenging conditions to continue.
“While we anticipate that the tough economic conditions in Atlanta and Quebec will persist, offset slightly by improving conditions in other markets such as the northeast United States, our overall strategy for the business remains on course,” he said. “In response to the current market outlook, we have taken additional actions to contain and reduce costs in ways that are not felt by our customers in order to maintain our strong service reputation and increase market share through this challenging period.”
Based in Mississauga, Ontario, Canada, Strongco is No. 72 on the RER 100.