Toromont Industries Earnings Call Highlights AVL-Driven Growth

Toromont Industries Ltd. ((TSE:TIH)) has held its Q4 earnings call. Read on for the main highlights of the call.

Toromont Industries’ latest earnings call sketched a generally upbeat picture, with solid revenue growth, a sharply higher backlog and strong order intake offsetting accounting noise from the AVL acquisition. Management stressed that organic demand, liquidity and capital returns remain robust, even as higher expenses, acquisition-related charges and some segment volatility weighed on reported earnings and margins.

Consolidated Growth Despite Accounting Headwinds

Toromont reported AVL revenue of $97.7 million in Q4 2025 and $254.7 million for the year, helping push consolidated revenue up 9% in the quarter and 4% for 2025 versus 2024. Management framed this growth as healthy given the drag from noncash AVL acquisition charges and higher financing costs, which masked the underlying operational momentum in the headline earnings numbers.

Backlog Surges, Signaling Strong Demand

The company closed the year with a record $1.5 billion backlog, up 46% year over year, underpinned by broad-based strength in orders. Consolidated bookings jumped 47% in Q4, with the Equipment Group backlog up 68% and bookings up 71%, signaling a robust pipeline that should support revenue as supply chains and delivery timing allow.

AVL Acquisition Supercharges Power Systems

AVL has become a key growth engine, contributing roughly $428 million of backlog and driving a 195% surge in Power Systems orders in Q4. Management highlighted that AVL’s Charlotte facility began phased production in 2025 and is expected to ramp through 2026, positioning the Power Systems segment for sustained expansion as production scales.

CIMCO Delivers Strong Full‑Year Results

CIMCO continued to perform well operationally, with revenue up 10% in Q4 and 14% for the year, and operating income rising 9% in the quarter and 20% for 2025. Year‑to‑date operating margin improved by 60 basis points to 12.2%, underscoring CIMCO’s profitability despite later‑year softness in new orders.

Product Support and Rentals Extend the Cycle

In the Equipment Group, product support revenue grew 9% in Q4 and 4% year‑to‑date, reflecting healthy service demand from the installed base. Rental revenue increased 5% in the quarter and 9% for the year, supported by a larger rental‑purchase‑option fleet of $92.5 million, which also seeds future equipment sales.

Margin Gains on Equipment Sales

Gross profit margins improved year over year, aided by roughly 50 basis points of equipment margin expansion in both Q4 and the full year. This helped lift operating income by 3% in the quarter and 2% for 2025, even with the drag from higher selling and administrative expenses and the accounting impact of the AVL deal.

Balance Sheet Strength and Capital Returns

Toromont emphasized its financial flexibility, with $1.3 billion of cash and $453 million available under credit facilities, and a negative 19% net debt‑to‑capitalization ratio. The company returned capital to shareholders via the repurchase of 337,500 shares for $40.1 million and a 7.7% increase in the quarterly dividend to $0.56 per share.

High Visibility on Deliveries

Management underscored visibility on near‑term revenue, noting that about 90% of the Equipment Group backlog and roughly 75% of CIMCO’s backlog are expected to be delivered within 12 months. This delivery profile, while still subject to supply and timing risks, supports confidence in the company’s ability to convert its record orders into sales.

Noncash AVL Charges Depress Reported Earnings

The AVL acquisition brought sizable noncash expenses, with $33.4 million pretax recognized in Q4 and $90.4 million for 2025, mainly from amortizing acquired backlog and intangibles. These charges reduced reported earnings in the near term, though management stressed they are accounting in nature and do not affect cash generation.

Earnings and EPS Under Near‑Term Pressure

Net earnings fell 2%, or $9.9 million, year over year, with basic EPS at $6.11 for 2025 and $1.93 in Q4, reflecting both growth investments and acquisition accounting. Management positioned these pressures as temporary, arguing that underlying profitability remains healthy and should benefit as AVL amortization rolls off.

Higher Interest Costs Weigh on the Bottom Line

Net interest expense rose by $17 million for the year, largely driven by higher borrowings tied to new senior debentures issued in March 2025. Lower interest income from softer market rates compounded the impact, adding another headwind to net earnings despite robust operating performance.

Expense Growth and Select Margin Compression

Selling and administrative expenses, excluding a property gain, increased 10% in Q4 and 5% for the year, pushing SG&A to 12.3% of revenue from 11.8%. Rental margins dipped 10 basis points in the quarter and 20 basis points year‑to‑date, while product support margins slipped 30 basis points in Q4 and 10 basis points for the year.

CIMCO Orders Slow After Strong Run

Despite its strong revenue and profit performance, CIMCO saw bookings drop 45% in Q4, a decline of $56 million, and end the year 11% below a tough prior‑year comparator. Both industrial and recreational orders fell for the year, down 9% and 14% respectively, highlighting some cooling in new project demand.

Mining Revenue Remains Lumpy

Mining equipment revenue declined 39% in Q4, reflecting the inherently uneven nature of large mining orders and delivery timing against a strong prior period. Management characterized the short‑term downturn as volatility rather than a structural shift, but it nonetheless contributed to quarterly revenue swings.

Revaluation of AVL Purchase Commitment

The obligation to purchase the remaining 40% of AVL generated a $7.9 million revaluation expense in 2025 as the liability increased from $42 million to $50 million. This mark‑to‑performance mechanism could lead to further adjustments, linking future noncash charges to AVL’s operational success.

Guidance and Outlook

Management expects AVL production to keep ramping through 2026, with most backlog‑related purchase‑price amortization ending in the first half of 2026 and dividends from AVL starting thereafter, depending on earnings and cash needs. With a $1.5 billion backlog, strong liquidity, improving working capital metrics and continuing rental growth, Toromont reiterated its focus on maintaining double‑digit operating margins and moving closer to its 18% return on equity target.

Toromont’s call balanced optimism about growth and backlog with transparency on the accounting and cost pressures affecting reported earnings. For investors, the key takeaway is that demand appears strong, the balance sheet is solid and AVL is emerging as a powerful growth driver, even as expenses, interest costs and segment volatility inject some near‑term noise into the numbers.