Strongco posted a 0.7-percent revenue increase in the first quarter to CDN $97.5 million (about U.S. $95.9). Gross margin was $18.7 million, compared to $19.4 million for the first quarter in 2012. EBITDA was $6.5 million, compared to $7.8 million a year ago. The company posted a net loss of $2.2 million compared to net income of $1.1 million a year ago.
“Our markets took a marked pause in the first quarter of 2013, most significantly, losing momentum in the month of March, which saw customers postpone deliveries and delay conversions on rental purchase options,” said Robert Dryburgh, Strongco president and CEO. “Compared to the same quarter last year, our overall market declined, particularly in Alberta and Quebec. However, with help from an improved market presence through new branches, Strongco’s revenues were relatively steady in comparison to the first quarter of 2012. While our cost base has increased from last year, the major factor affecting expenses in the quarter were a combination of under-absorption of labor and ancillary costs, and a much lower level of warranty activity. Both of these were adversely affected by weather and economic conditions, which curtailed machine use and, consequently, the utilization of our field crews.”
Dryburgh said Strongco remained focused on reducing its level of equipment inventory, resulting in higher debt and interest costs.
“Although we did not see the increase in sales levels that were anticipated for the quarter, our backlog level remains strong and importantly, customer activity substantially increased in April and May,” said Dryburgh. “The customer hesitancy experienced in the first quarter is diminishing with the late arrival of spring weather conditions. Given the current level of activity combined with modest economic growth projections, we remain optimistic of continuing growth in 2013.”
Forecasts project modest economic growth in Canada in 2013, although at a pace of growth lower than in 2012. In the United States, the expectation remains for an upturn in the second half of this year. The company expects construction markets to remain active, with a continued demand for heavy equipment, varying by region. The long-term outlook is positive for Alberta, however the high cost of refining oil from the oil sands and high cost of transportation has created an atmosphere of caution regarding the pace of activity in the oil sands and concern that the demand for heavy equipment in the region could soften in the near term. However, quoting activity has increased recently after a long winter.
Strongco, based in Mississauga, Ontario, is No. 62 on the new RER 100.
