Wajax (WJX) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was CAD 568.3 million, down 3.1% year-over-year, mainly due to lower construction, forestry, and mining equipment sales in western and central Canada, partially offset by higher sales in eastern Canada and the absence of a large mining shovel delivery in Q2 2023.

• Gross profit margin improved to 20.9%, up 100 basis points year-over-year, driven by higher margins on ERS and product support sales.

• Adjusted EBITDA was CAD 54.7 million, down 4.3% year-over-year, with adjusted net earnings per share at CAD 1.06, down 16.3% from Q2 2023.

• Cash flow from operating activities was CAD 35.8 million, a significant improvement from a CAD 6 million outflow last year.

• ERP system rollout expanded to 99 branches, covering about 90% of 2023 revenue.

Financial highlights

• Selling and administrative expenses rose 9.1% year-over-year, mainly from higher personnel costs, and represented 14.4% of revenue.

• Heavy equipment revenue declined 1.8% year-over-year to CAD 336.1 million, with construction and forestry up but mining down significantly.

• Cash flow from operating activities was CAD 35.8 million, compared to a cash outflow of CAD 6 million in Q2 2023, mainly due to lower inventory and receivables.

• Leverage ratio improved to 2.17x from 2.20x in Q1 2024, but remains above the target range of 1.5–2x.

• Board approved a Q3 2024 dividend of CAD 0.35 per share.

Outlook and guidance

• Management expects stable gross margins and further inventory reductions through the remainder of 2024, with no significant changes in demand trends anticipated.

• Solid fundamentals remain in mining and energy, but reduced activity is seen in industrial and forestry markets.

• Management continues to focus on cost prudence, executing six strategic priorities, and evaluating options to repay or refinance CAD 57 million in debentures maturing January 2025.