Equipment sales push Toromont earnings for Q3
Toromont Industries Ltd. has reported its financial results for the third quarter ended September 30, 2018. These results include the operations of the significant acquisition completed by the Company on October 27, 2017. This transaction expanded Toromont's operations to include the Caterpillar dealerships for Quebec, the Maritime Provinces and Western Labrador and the MCFA lift truck dealership for Quebec and Ontario, in addition to other distribution rights. The acquired operations are collectively referenced as "Toromont QM or TQM" throughout this report.
"We have considerable work to complete to unlock the significant value of the TQM acquisition, but remain pleased with the integration and transition progress and with the earnings accretion over the relatively short timeline since the transaction closing. The team has embraced the sharing of best practices including key operational and financial disciplines, to further strengthen our position as a world class dealership," said Scott J. Medhurst, President and Chief Executive Officer of Toromont Industries Ltd. "Overall, the Company delivered good results in the third quarter on solid execution in the legacy Equipment Group together with the incremental contribution from the acquired businesses."
Net earnings increased $19.3 million or 39% in the quarter versus a year ago to $68.7 million or $0.84 EPS. Earnings in the legacy Toromont businesses ("Legacy Toromont") increased 7% in the quarter versus a year ago on solid growth in the Equipment Group, partially offset by weaker results at CIMCO. Toromont QM contributed $18.8 million and achieved improved profitability versus a year ago in the predecessor organization. Integration-related costs included severance and other one-time-only costs and combined with interest expense on the acquisition financing were $4.2 million in the quarter versus $1.3 million a year ago. Due to increases in Toromont's share price, significant increases in the mark-to-market adjustments related to Deferred Share Units ("DSUs") were experienced in all periods. These increased expenses by $3.6 million in the third quarter and $4.4 million for the first nine months of 2018, and $4.0 million and $6.1 million for the comparable periods of 2017.
On a year-to-date basis, net earnings increased $50.3 million or 43% to $167.1 million or $2.06 EPS. Legacy Toromont earnings increased 18% with EPS closely tracking the increase at 17%.
"Infrastructure projects and broader construction activity, continue to present opportunities for Toromont's Equipment Group. Opportunities exist for equipment supply into the mining sector, for new mines planned and in support of the replacement and expansion requirements at existing mine sites," continued Mr. Medhurst. "We're now one year into our ownership of TQM and our senior leadership team remains focused on the integration and expansion of the exciting opportunity. Success presents a substantial long-term growth opportunity for Toromont, so appropriately, we are taking a methodical approach to each element of the integration. CIMCO continues to grow its revenue base, reflecting its strong presence and solid reputation as a leader in the key markets it serves. The tariff increases and global trade disputes seen this year have not had a direct material impact on our business."
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