Canadian Distributor Strongco Posts 10.5-Percent Q3 Revenue Hike

Strongco Corp., one of Canada’s largest construction equipment dealers, posted CDN $131.7 million (about U.S. $126.3 million) in the third quarter compared to CDN $119.2 million in the same period a year ago, a 10.5-percent hike. Equipment sales increased 16 percent year over year, while rental revenues plunged 19 percent from $10.5 million in the year-ago period to $8.5 million this year. Product support revenues totaled $35.4 million, an 8-percent jump compared to $32.7 million a year ago.

“In the third quarter, Strongco extended its record of solid revenue growth through market share gains in construction equipment despite declines in several of our key markets as well as strong growth in crane sales,” said Robert Dryburgh, president and CEO. “Our improved sales performance is a result of the recent upgrades made to the branch infrastructure and to our enhanced sales organization. Overall, demand in heavy equipment markets has been adversely affected by substantially less demand in Quebec, the Atlantic provinces and New England. Despite this market softness, we believe the company will continue to benefit from the organizational investments we have made to realize higher revenues and market share gains across the country.

“Looking ahead to the fourth quarter, Strongco’s sales backlogs and level of rental contracts with purchase options are strong, which suggests a continuing demand for heavy equipment. Thus, we remain cautiously optimistic for the balance of the year.”

EBITDA for the third quarter decreased slightly to $13.8 million (10.5 percent of revenue) a drop from $15.1 million (12.7 percent of revenue) a year ago.

Dryburgh said heavy equipment markets slowed in 2013 and overall demand for equipment remains flat to slightly down from last year for Canada overall with Quebec and the Atlantic provinces down substantially. “Economic forecasts continue to project modest growth in Canada overall in 2013 and construction activity is expected to stay flat for the balance of the year except in Quebec,” Dryburgh said.

Strongco is continuing to make strategic investments in its branch network to heighten visibility in its markets, better serve customers, and drive regional business growth, he added. “As part of this initiative for northern Alberta, our new Fort McMurray branch, which is currently under construction, will open for business in the first quarter of 2014.”

Dryburgh said the outlook for the fourth quarter and long-term outlook for Alberta is positive. The increased use of rail cars to transport Alberta’s unconventional crude to refineries on the U.S. Gulf Coast and the West Coast has partially relieved pipeline bottlenecks, which, along with other developments, has resulted in a price rebound for Alberta-produced oil.

Construction markets in Ontario are recovering slowly following the recession, but a lack of optimism and economic uncertainty continues, the company said. Strongco expects construction activity to remain flat in the near term. Demand is expected to remain somewhat weak in Quebec, the Maritimes and New England.

Overall, Strongco remains cautiously optimistic for the balance of 2013.

Strongco, based in Missisauga, Ontario, remains a strong rental player, No. 62 on the RER 100.