Three months ended | Years ended | |||||
($ millions, except per share amounts) | 2023 | 2022 | % change | 2023 | 2022 | % change |
Revenue | $ 1,226.9 | $ 1,128.5 | 9 % | $ 4,622.3 | $ 4,115.3 | 12 % |
Operating income | $ 204.6 | $ 210.4 | (3) % | $ 704.2 | $ 619.1 | 14 % |
Net earnings | $ 154.1 | $ 159.9 | (4) % | $ 534.7 | $ 454.2 | 18 % |
Basic earnings per share ("EPS") | $ 1.87 | $ 1.94 | (4) % | $ 6.50 | $ 5.52 | 18 % |
"We are pleased with the operating and financial performance which our teams delivered this year," stated
Considering the Company's strong financial position and long-term outlook, the Board of Directors today increased the quarterly dividend by 11.6% to
HIGHLIGHTS:
Consolidated Results
- Revenue increased
$98.4 million or 9% in the fourth quarter compared to the similar period last year, with higher revenues in both groups.Equipment Group was up 9% and CIMCO revenue was up 2%. - Revenue increased
$507.0 million (up 12%) to$4.6 billion for the year. Revenue increased in both groups, with theEquipment Group up 12% and CIMCO up 13% compared to 2022. Growth reflects in part improved supply from vendors, good opening order backlog, solid execution and the larger rental fleet investment. Product support revenues increased in both groups, reflecting continued activity in end markets. Our increased technician labour workforce continues to support growth. - In the fourth quarter of 2022, a property was sold resulting in a pre-tax gain of
$17.7 million , and reported in theEquipment Group . This impacts comparability of results in both the quarter and year. - Operating income(1) decreased 3% in the quarter reflecting the property gain in the prior year. Excluding property gains in both years, operating income increased 5%, reflecting higher revenue partially offset by lower gross margins. Operating income as a percentage of sales decreased to 16.7% from 18.6% in the prior year, reflecting lower gross margins in the current period and the large property gain in the prior year.
- Operating income increased 14% in the year, and was 15.2% of revenue compared to 15.0% in the similar period last year, reflecting similar trends as noted for the quarter.
- As previously reported, the Company completed the sale of
AgWest Ltd. , a wholly-owned subsidiary, in the second quarter of 2023. - Net earnings from continuing operations decreased
$4.2 million or 3% in the quarter versus a year ago to$154.1 million or$1.87 EPS (basic) and$1.86 EPS (fully diluted). - For the year, net earnings from continuing operations increased
$79.0 million or 18% to$529.1 million , or$6.43 EPS (basic) and$6.38 EPS (fully diluted). - Bookings(1) increased 49% in the quarter compared to the similar period in 2022, and were 15% higher on a full year basis. Both
Equipment Group and CIMCO reported higher bookings in both periods, although activity has been somewhat variable through the year due to a variety of market-related factors and customer buying patterns. - Backlog(1) remained relatively unchanged from this time last year at
$1.2 billion , reflecting strong order activity. Equipment inflow through the supply chain has generally improved.
- Revenue was up
$96.1 million or 9% to$1.1 billion for the quarter. Equipment sales (up 15%) improved across most markets. New equipment sales increased 19% on improving equipment availability, customer delivery schedules and year-end buying decisions. Rental revenue continued to grow on higher market activity, good execution and an expanded heavy and light equipment fleet. Product support activity was strong, with increases in both parts and service, reflecting good demand and increased technician levels. - Revenue was up
$460.8 million or 12% to$4.2 billion for the year. Equipment sales, product support and rental activity were higher across most geographical markets and product groups on similar reasons as the quarter. - Operating income decreased
$4.1 million or 2% in the fourth quarter when including the property gain reported in the prior period. Excluding this item, operating income increased 7%, reflecting higher revenue and lower expenses, partially offset by lower gross margins. - Operating income increased
$72.1 million or 12% to$664.7 million in the year, reflecting the higher revenue, partially offset by lower gross margins and higher expenses. Operating income margin was unchanged from last year at 15.7%. - Bookings in the fourth quarter were
$537.2 million , an increase of 53%. Customer demand improved late in the quarter, mainly in the construction sector, which had been slower throughout the year. Bookings in the full year 2023 were$1.9 billion , an increase of 14% from the prior year, with higher activity in mining, power and construction. Construction markets remain somewhat cautious given current business and economic factors which continue to override normal seasonality. - Backlog of
$957.3 million at the end ofDecember 2023 was down$74.7 million or 7% from the end ofDecember 2022 , reflecting good new order intake, improving equipment delivery from suppliers as well as planned deliveries against customer orders.
CIMCO
- Revenue increased
$2.4 million or 2% compared to the fourth quarter last year. Product support revenue was strong, up 14%, reflecting good market activity, with an increase in winter activities. Package revenue was lower, down 8%, with some delays in equipment delivery and project schedules by customers. - Revenue increased
$46.2 million or 13% to$397.2 million for the year on higher package revenue (up 8%), mainly lead by an increase in the industrial market (up 12%), while recreational market activity was relatively flat (up 2%). Product support sales also increased (up 18%) on higher activity in bothCanada and the US. - Operating income decreased
$1.7 million or 12% for the quarter, as higher revenue was dampened by lower gross margins and higher selling and administrative expenses. - Operating income was up
$13.0 million or 49% to$39.5 million for the year, reflecting improved gross margins and higher revenue. Operating income margin increased to 10.0% (2022 was 7.5%) reflecting higher gross margins on solid execution. - Bookings increased 24% in the fourth quarter to
$56.2 million , and increased 19% for the year to$245.9 million . For the year, bookings were 35% higher inCanada and 18% lower in the US. Industrial bookings were 58% higher while recreational bookings were down 30%. Booking activity can be variable over time based on customer decision making schedules. - Backlog of
$255.2 million atDecember 31, 2023 was up$56.8 million or 29% from last year, with an increase in the industrial market, on good order intake, being partially offset by a decrease in the recreational market. Backlog also reflects delays in equipment deliveries and customer construction schedules.
Financial Position
- Toromont's share price of
$116.10 at the end ofDecember 2023 , translated to market capitalization(1) of$9.6 billion and total enterprise value(1) of$9.2 billion . - The Company maintained a strong financial position. Leverage, as represented by the net debt to total capitalization(1) decreased to -17% at the end of
December 31, 2023 compared to -14% at the end ofDecember 2022 . The change in the ratio reflects strong cash generation, in excess of investments made in working capital and capital assets in support of current and future activity levels. - The Company purchased 353,000 common shares for
$37.5 million in the year endedDecember 31, 2023 (473,100 common shares for$48.5 million in 2022). - The Company's return on equity(1) was 22.8% for 2023, compared to 23.3% for 2022, while return on capital employed(1) was 30.1% for 2023, compared to 32.1% for 2022. Both metrics decreased year over year reflecting higher investments in working capital.
"We are mindful of the uncertain economic environment and continue to monitor key metrics and supply‑dynamics," continued
FINANCIAL AND OPERATING RESULTS
All financial information presented in this press release has been prepared in accordance with International Financial Reporting Standards ("IFRS"), except as noted below, and are reported in Canadian dollars. This press release contains only selected financial and operational highlights and should be read in conjunction with Toromont's audited consolidated financial statements and related notes and Management's Discussion and Analysis ("MD&A"), as at and for the year ended
The Company's audited consolidated financial statements and MD&A contain detailed information about Toromont's financial position, results, liquidity and capital resources, strategy, plans and outlook, which investors are encouraged to read carefully.
QUARTERLY CONFERENCE CALL AND WEBCAST
Interested parties are invited to join the quarterly conference call with investment analysts, in listen-only mode, on
Presentation materials to accompany the call will be available on our investor page on our website.
NON-GAAP AND OTHER FINANCIAL MEASURES
Management believes that providing certain non-GAAP measures provides users of the Company's audited consolidated financial statements and MD&A with important information regarding the operational performance and related trends of the Company's business. By considering these measures in combination with the comparable IFRS measures set out below, management believes that users are provided a better overall understanding of the Company's business and its financial performance during the relevant period than if they simply considered the IFRS measures alone.
The non-GAAP measures used by management do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Accordingly, these measures should not be considered as a substitute or alternative for net income or cash flow, in each case as determined in accordance with IFRS.
Management also uses key performance indicators to enable consistent measurement of performance across the organization. These KPIs are non-GAAP financial measures, do not have a standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers.
Gross Profit / Gross Profit Margin
Gross Profit is defined as total revenue less cost of goods sold.
Gross Profit Margin is defined as gross profit (defined above) divided by total revenue.
Operating Income / Operating Income Margin
Operating income is defined as net income from continuing operations before interest expense, interest and investment income and income taxes and is used by management to assess and evaluate the financial performance of its operating segments. Financing and related interest charges cannot be attributed to business segments on a meaningful basis that is comparable to other companies. Business segments do not correspond to income tax jurisdictions and it is believed that the allocation of income taxes distorts the historical comparability of the performance of the business segments.
Operating income margin is defined as operating income (defined above) divided by total revenue.
Three months ended | Years ended | |||
($ thousands) | 2023 | 2022 | 2023 | 2022 |
Net income from continuing operations | $ 154,052 | $ 158,267 | $ 529,107 | $ 450,100 |
plus: Interest expense | 7,122 | 6,784 | 28,098 | 27,331 |
less: Interest and investment income | (13,132) | (8,652) | (45,982) | (21,717) |
plus: Income taxes | 56,513 | 54,015 | 193,005 | 163,384 |
Operating income | $ 204,555 | $ 210,414 | $ 704,228 | $ 619,098 |
Total revenue | $ 1,226,937 | $ 1,128,528 | $ 4,622,301 | $ 4,115,347 |
Operating income margin | 16.7 % | 18.6 % | 15.2 % | 15.0 % |
Net Debt to Total Capitalization/Equity
Net debt to total capitalization/equity are calculated as net debt divided by total capitalization and shareholders' equity, respectively, as defined below, and are used by management as measures of the Company's financial leverage.
Net debt is calculated as long-term debt plus current portion of long-term debt less cash and cash equivalents. Total capitalization is calculated as shareholders' equity plus net debt.
The calculations are as follows:
($ thousands) | 2023 | 2022 |
Long-term debt | $ 647,784 | $ 647,060 |
less: Cash and cash equivalents | 1,040,757 | 927,780 |
Net debt | (392,973) | (280,720) |
Shareholders' equity | 2,683,852 | 2,325,359 |
Total capitalization | $ 2,290,879 | $ 2,044,639 |
Net debt to total capitalization | (17) % | (14) % |
Net debt to equity | (0.15):1 | (0.12):1 |
Market Capitalization & Total Enterprise Value
Market capitalization represents the total market value of the Company's equity. It is calculated by multiplying the closing share price of the Company's common shares by the total number of common shares outstanding.
Total enterprise value represents the total value of the Company and is often used as a more comprehensive alternative to market capitalization. It is calculated by adding debt/net debt (defined above) to market capitalization.
The calculations are as follows:
($ thousands, except for shares and share price) | 2023 | 2022 |
Outstanding common shares | 82,297,341 | 82,318,159 |
times: Ending share price | $ 116.10 | $ 97.71 |
Market capitalization | $ 9,554,721 | $ 8,043,307 |
Long-term debt | $ 647,784 | $ 647,060 |
less: Cash and cash equivalents | 1,040,757 | 927,780 |
Net debt | $ (392,973) | $ (280,720) |
Total enterprise value | $ 9,161,748 | $ 7,762,587 |
Order Bookings and Backlog
Order bookings represent the retail value of firm equipment or project orders received during a period. Backlog is defined as the retail value of equipment units ordered by customers with future delivery, and the remaining retail value of package/project orders remaining to be recognized in revenue under the percentage of completion method. Management uses order backlog as a measure of projecting future equipment and project deliveries. There are no directly comparable IFRS measures for order bookings or backlog.
Return on Capital Employed ("ROCE")
ROCE is utilized to assess both current operating performance and prospective investments. The adjusted earnings numerator used for the calculation is income from continuing operations before income taxes, interest expense and interest income (excluding interest on rental conversions). The denominator in the calculation is the monthly average capital employed, which is defined as net debt plus shareholders' equity, also referred to as total capitalization, adjusted for discontinued operations.
($ thousands) | 2023 | 2022 |
Net earnings from continuing operations | $ 529,107 | $ 450,100 |
plus: Interest expense | 28,098 | 27,331 |
less: Interest and investment income | (45,982) | (21,717) |
plus: Interest income – rental conversions | 3,348 | 4,760 |
plus: Income taxes | 193,005 | 163,384 |
Adjusted net earnings | $ 707,576 | $ 623,858 |
Average capital employed | $ 2,347,864 | $ 1,944,501 |
Return on capital employed | 30.1 % | 32.1 % |
Return on Equity ("ROE")
ROE is monitored to assess profitability and is calculated by dividing net earnings from continuing operations by opening shareholders' equity (adjusted for shares issued and shares repurchased and cancelled during the year).
($ thousands) | 2023 | 2022 |
Net earnings from continuing operations | $ 529,107 | $ 450,096 |
Opening shareholder's equity (net of adjustments) | $ 2,317,906 | $ 1,935,365 |
Return on equity | 22.8 % | 23.3 % |
ADVISORY
Information in this press release that is not a historical fact is "forward-looking information". Words such as "plans", "intends", "outlook", "expects", "anticipates", "estimates", "believes", "likely", "should", "could", "would", "will", "may" and similar expressions are intended to identify statements containing forward-looking information. Forward-looking information in this press release reflects current estimates, beliefs, and assumptions, which are based on Toromont's perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. Toromont's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and as such, are subject to change. Toromont can give no assurance that such estimates, beliefs and assumptions will prove to be correct.
Numerous risks and uncertainties could cause the actual results to differ materially from the estimates, beliefs and assumptions expressed or implied in the forward-looking statements, including, but not limited to: business cycles, including general economic conditions in the countries in which Toromont operates; commodity price changes, including changes in the price of precious and base metals; inflationary pressures; potential risks and uncertainties relating to COVID-19 or a potential new world health issue; increased regulation of or restrictions placed on our businesses; changes in foreign exchange rates, including the Cdn$/US$ exchange rate; the termination of distribution or original equipment manufacturer agreements; equipment product acceptance and availability of supply, including reduction or disruption in supply or demand for our products stemming from external factors; increased competition; credit of third parties; additional costs associated with warranties and maintenance contracts; changes in interest rates; the availability and cost of financing; level and volatility of price and liquidity of Toromont's common shares; potential environmental liabilities and changes to environmental regulation; information technology failures, including data or cybersecurity breaches; failure to attract and retain key employees as well as the general workforce; damage to the reputation of
Any of the above mentioned risks and uncertainties could cause or contribute to actual results that are materially different from those expressed or implied in the forward-looking information and statements included in this press release. For a further description of certain risks and uncertainties and other factors that could cause or contribute to actual results that are materially different, see the risks and uncertainties set out in the "Risks and Risk Management" and "Outlook" sections of Toromont's most recent annual Management Discussion and Analysis, as filed with Canadian securities regulators at www.sedar.com or at our website www.toromont.com. Other factors, risks and uncertainties not presently known to Toromont or that Toromont currently believes are not material could also cause actual results or events to differ materially from those expressed or implied by statements containing forward-looking information.
Readers are cautioned not to place undue reliance on statements containing forward-looking information, which reflect Toromont's expectations only as of the date of this press release, and not to use such information for anything other than their intended purpose. Toromont disclaims any obligation to update or revise any forward‑looking information, whether as a result of new information, future events or otherwise, except as required by law.
ABOUT TOROMONT
For more information contact:
Executive Vice President and
Chief Financial Officer
Tel: (416) 514-4790
FOOTNOTE
(1) | These financial metrics do not have a standardized meaning under International Financial Reporting Standards (IFRS), which are also referred to herein as Generally Accepted Accounting Principles (GAAP), and may not be comparable to similar measures used by other issuers. These measurements are presented for information purposes only. The Company's Management's Discussion and Analysis (MD&A) includes additional information regarding these financial metrics, including definitions and a reconciliation to the most directly comparable GAAP measures, under the headings "Additional GAAP Measures", "Non-GAAP Measures" and "Key Performance Indicators." |
SOURCE
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