Strongco Corp. last week reported total revenues for the three months ended March 31 increased by 63 percent on a year-over-year basis to CA $87.5 million (about U.S. $89.5 million) in 2011 from CA $53.7 million in 2010. Equipment sales in the first quarter increased by 87 percent over last year to CA $56.0 million. Rental revenues were CA $5.5 million, up 49 percent from $CA3.7 million in the year-earlier period. Product support revenues gained 29 percent to CA $26.0 million from CA $20.1 million in the first three months of 2010.
The company’s acquisition of U.S.-based heavy equipment dealer Chadwick-BaRoss, completed earlier this year, added $6 million in revenue for the first quarter.
“The momentum we created in the third and fourth quarters of last year continued into the first quarter of 2011,” said Robert Dryburgh, president and CEO of Strongco. “We are seeing growth in all revenue categories in virtually all regions as a result of improving markets and better sales execution. We are also pleased that Chadwick-BaRoss, Inc. has made a positive contribution to earnings since we completed the acquisition on February 1, 2011.”
Gross margin increased by 49.1 percent to $17.0 million during the first quarter. As a percentage of revenue, gross margin declined slightly to 19.4 percent from 21.3 percent in the same period of 2010. “The change in gross margin percentage was primarily due to the large increase and resulting higher proportion of equipment sales relative to the higher margin product support and rental revenues,” said David Wood, vice president and chief financial officer.
Administrative, distribution and selling expenses during the first quarter totaled $15.2 million, compared to $12.7 million in 2010. Expenses for the period just ended included $0.4 million in one-time acquisition costs and $1.2 million in operating costs for the newly acquired Chadwick-BaRoss unit.
EBITDA for the first quarter increased to $6.8 million from $2.2 million a year earlier. As a result of the strong revenue and EBITDA performance, Strongco’s net income in the first quarter of 2011 was $0.6 million ($0.05 per share), a significant improvement from a net loss of $2.0 million ($0.20 per share) in the first quarter of 2010.
The recovery in construction markets that became evident in the latter half of 2010 continued into 2011, the company said. With that, demand for equipment has continued to increase. The economy and construction markets across Canada are expected to continue to improve throughout 2011, which in turn is expected to lead to increased demand for heavy equipment, and increased willingness of customers to purchase equipment.
“The market signs in both Canada and the United States are positive and our order book reflects our efforts in the marketplace,” Dryburgh said. “Expense levels in the first quarter were higher because of the costs of the acquisition of Chadwick-BaRoss but we anticipate those to normalize through the rest of the year. The combination of these factors gives us optimism for the balance of 2011.”
Management remains cautiously optimistic that the improving trend in Canadian construction markets will continue through 2011. Growing demand for heavy equipment will lead to increased revenues in 2011. In addition, the acquisition of Chadwick-BaRoss in the first quarter will contribute to improved sales levels for Strongco in 2011.
Mississauga, Ontario-based Strongco Corp. is one of Canada's largest multi-line mobile equipment dealers and also operates in the northeastern U.S. through Chadwick-BaRoss. Strongco sells, rents and services equipment used in construction, infrastructure, mining, oil and gas, utilities, municipalities, waste management and forestry. Strongco Equipment is No. 67 on the new RER 100.