Wajax Corporation ((TSE:WJX)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Wajax Corporation painted a mixed picture of the company’s current standing and future prospects. While there was a commendable surge in revenue growth, driven by robust equipment sales and improved cost efficiencies, the call also highlighted some significant challenges. These included a decline in gross margins, reduced sales in industrial parts and ERS, and an alarming increase in the TRIF rate. The company is facing external pressures from market conditions and tariff uncertainties, but it is actively pursuing strategic priorities to mitigate these challenges.
Revenue Growth
Wajax Corporation reported a notable increase in revenue, reaching $555 million, which marks a 15.1% rise compared to the first quarter of 2024. This growth was primarily fueled by higher equipment sales in the construction and forestry sectors across all regions, as well as increased mining equipment sales.
Increased Adjusted EBITDA
The company saw an improvement in its adjusted EBITDA, which rose by 6.2% to $43.2 million. This increase was mainly attributed to higher sales volumes and effective cost-saving initiatives.
Selling and Administrative Expense Reduction
Wajax successfully reduced its selling and administrative expenses as a percentage of revenue to 14.1%, down from 16.7% in the same period of 2024. This reduction was achieved through lower spending on personnel, travel, entertainment, and marketing.
Significant Equipment Sales Increase
Equipment sales experienced a substantial increase of $73 million, or 74%, compared to the previous year. This surge was driven by higher sales in construction and forestry and the delivery of two large mining shovels.
Cash Flow Improvement
The company reported a significant improvement in cash flows from operating activities, generating $31.4 million compared to the $7.3 million used in the same quarter of the prior year.
Reduced Gross Profit Margin
Despite the revenue growth, Wajax faced a decrease in its gross profit margin, which fell to 19.1% from 22% in the first quarter of 2024. This decline was primarily due to lower margins on equipment, industrial parts, and ERS revenue.
Decrease in Industrial Parts Sales
Sales of industrial parts decreased by $10 million, or 7%, mainly due to lower sales in Western and Eastern Canada.
ERS Sales Decline
ERS sales saw a decline of $3 million, or 3%, indicating either a drop in demand or increased competitive pressures in this segment.
Backlog Decrease
The company’s backlog at the end of Q1 decreased by $25.8 million year-over-year, primarily due to lower orders in material handling, ERS, and industrial parts.
Increased TRIF Rate
The TRIF rate, a key safety metric, increased by 141% to 1.30 from the first quarter of 2024, signaling a deterioration in safety performance.
Forward-Looking Guidance
Looking ahead, Wajax Corporation remains committed to advancing its strategic priorities while navigating the challenges posed by broader market uncertainties and tariff concerns. The company highlighted its focus on maintaining revenue growth, supported by a competitive financing program with Hitachi Construction Machinery Americas. Despite a decline in gross profit margin, there was a sequential improvement from the last quarter of 2024. The company also announced a dividend of $0.35 per share for the second quarter of 2025.
In summary, the earnings call for Wajax Corporation highlighted a mixed outlook, with strong revenue growth and cost efficiency improvements being offset by challenges such as reduced gross margins and increased safety concerns. The company is actively working on strategic initiatives to address these issues and navigate the uncertain market conditions.