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 EPS at CAD 1.06, down from CAD 1.26.

• Cash flow from operations was CAD 35.8 million, a significant improvement from a CAD 6 million outflow last year, mainly due to lower inventory and receivables.

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

Financial highlights

• Selling and administrative expenses rose to 14.4% of revenue, mainly from higher personnel costs.

• Cash flow from operating activities was CAD 35.8 million, compared to a cash outflow of CAD 6 million in Q2 2023.

• Leverage ratio decreased to 2.17x from 2.2x in Q1, but remains above the target range of 1.5–2x.

• Working capital at June 30, 2024 was CAD 533.3 million, down CAD 9.6 million from March 31, 2024, mainly due to lower inventory.

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

Outlook and guidance

• Management expects stable gross margins and further inventory reductions in the second half of 2024.

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

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