The massive Fort McMurray wildfires forced Wajax to close four branches for more than a month, impacting the company's second quarter revenues and profits.
Canadian national equipment distributor Wajax posted consolidated second quarter revenue of CDN $336.6 million compared to $340.7 million in the second quarter a year ago, a decrease of about 1 percent. The equipment segment increased 7 percent year over year from $166.9 million a year ago to $178 million this year as a result of the delivery of two large mining shovels in the quarter. Power Systems and Industrial Components revenue dropped 16 percent and 3 percent respectively primarily because of reduced activity in the Western Canada energy sector, exacerbated by the massive wildfires in the Fort McMurray, Alberta, area.
The wildfires resulted in the temporary shutdown of Wajax’s three branches in the Fort McMurray area as well as its Fort MacKay branch. As a result, revenue in these branches declined about $8.3 million during the quarter compared to the second quarter of 2015. The branch facilities incurred minimal damage and normal operations resumed during June. Wajax estimates lost profits and damages caused by the wildfires to be at least $1 million, with insurance enabling the company to recover much of the loss.
For the first six months of 2016, revenue declined from $658 million in Q215 to $621.6 million, about 5.5 percent.
Rental revenue totaled $10.2 million for the second quarter compared to $12.3 million for the same period in 2015, a 17-percent drop. For the first six months of the year, rental revenue was $21.6 million, compared to $24.8 million for the first half of 2015, a 13-percent slide.
“Second quarter segmentfor the Equipment and Industrial Components segments exceeded our expectations, however, results for the Power System segment were disappointing,” said Mark Foote, Wajax, president and CEO. “We are particularly encouraged by results in our Equipment segment, where revenue and earnings exceeded amounts recorded last year despite a more challenging western Canada market and the business disruption caused by the Fort McMurray wildfires. In the Power Systems segment, lower selling and administrative costs could not overcome the significant decline in revenue and margins, mainly in Western Canada.
“Consistent with last quarter, our outlook for 2016 is that market conditions will remain very challenging. We continue to expect that revenue and margins will be under pressure due to difficult market conditions in Western Canada and reductions in resource customer capital and operating expenditures. During the second half of this year, we continue to expect that earnings will improve compared to the first half of 2016.”
Wajax, based in Mississauga, Ontario, Canada, is No. 54 on the RER 100.