Despite the impact of COVID-19 beginning in mid-March, Toromont Industries, owner of one of the world’s largest Caterpillar dealers, still posted $715.5 million in first quarter revenue compared to $700 million in the first quarter of 2019, a 2.2-percent increase. Operating income, however, declined from $58.8 million in the year-ago quarter to $55.2 million, a 6.1-percent decrease.
Product support and rental revenues were trending 5 percent and 7 percent higher, respectively, through February, but reduced activity in March largely offset this growth, Toromont said.
The decline in operating income was caused by tight pricing and lower rental fleet utilization, combined with increased expense associated with fleet investment strategy and an increase in the allowance for doubtful accounts.
In the equipment group, revenues increased $23.9 million or 4 percent to $657.8 million for the quarter on strong used equipment sales and product support growth. Operating income dropped $2.6 million or 5 percent. Bookings in the first quarter of $337.7 million were 15 percent higher. Construction orders, power systems and material handling were higher while mining and agricultural orders were lower than the comparable period a year ago.
“The recent outbreak of COVID-19 puts us in an unprecedented environment,” said Scott Medhurst, president and CEO of Toromont Industries. “While Toromont’s businesses have, to date, been declared essential services in all jurisdictions in which we operate, we are not insulated from the broader economic, financial and market impacts. We experienced lower earnings in the quarter and reduced activity. Actions have been taken and are on-going across three areas of focus: protecting our employees, serving our customers’ needs and protecting our business for the future. We appreciate our entire team’s effort and commitment to support our customers during this challenging time.
“Results in the quarter were dampened by higher expense levels compared to revenue growth. The first quarter of the year is typically softer, given seasonality and the impact of winter weather conditions in most segments of our business. This was exacerbated towards the end of the quarter with reductions in activity, most notably mine and construction shutdowns.”
On April 17, 2020, Toromont closed a $250 million one-year syndicated facility on substantially similar terms to the existing revolving credit facility, to provide additional liquidity in this era of economic uncertainty. This brings total bank lines to $750 million.
“As governments around the world enact measures to combat the spread of COVID-19, we are proud to take part as an essential service,” added Medhurst. “Toromont’s businesses serve critical, essential services including but not limited to food production, storage and distribution networks, power generation including back-up power, critical infrastructure, transportation and emergency response. A Critical Incident Executive Response Team was activated at an early stage and focuses on developing plans, assessing developments and responding appropriately. The collective management and leadership teams continue to monitor the situation closely and are implementing responsible measures to manage and protect the long-term health of the business, including voluntary compensation reductions by the executive team and the board of directors. 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.”
Toromont Caterpillar, based in Toronto, represents Caterpillar in Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, and Nunavut. Toromont also owns a refrigeration division.
