Working Capital Management and Cost Controls Generate Strong Fourth Quarter Cash Flows as Weaker Market Conditions Drive Quarterly and Annual Earnings Decline
TORONTO, March 4, 2025 /CNW/ - Wajax Corporation ("Wajax" or the "Corporation") today announced its 2024 fourth quarter and annual results. All monetary amounts are in Canadian dollars unless otherwise noted.
Selected Highlights for the Fourth Quarter and Full Year
- Fourth quarter revenue of $565.9 million and full year revenue of $2,097.6 million, up 4.3% and down 2.6%, respectively, over 2023;
- Fourth quarter gross profit margin of 17.1% and full year gross profit margin of 19.7%, down 420 bps and 120 bps, respectively, over 2023, due to increased market pressures, primarily in the second half of the year as well as due to sales mix;
- Fourth quarter cash generated from operating activities of $75.9 million, as the Corporation prudently managed working capital and sequentially reduced its leverage ratio to 2.61 times compared to 2.78 times at September 30, 2024;
- Fourth quarter adjusted EBITDA margin of 6.2% and full year adjusted EBITDA margin of 8.0%, down 250 bps and 120 bps, respectively, over 2023, primarily due to lower margins driven by increased market pressures, and lower sales volume on a full year basis; and
- Ended 2024 with backlog of $564.4 million, an increase of $10.5 million over 2023. Backlog at December 31, 2024 included seven large mining shovels.(1)
"Following two years of robust market conditions, 2024 proved challenging as customer demand declined across several key segments and was further impacted by business and economic uncertainty as the year went on," said Iggy Domagalski, President and Chief Executive Officer. "As a result, 2024 revenue declined 2.6% from the record revenue achieved in 2023, while increased competitive pressures, mostly in the second half of the year, led to a gross profit margin decline of 120 basis points over 2023. Our adjusted basic earnings per share for 2024 declined to $2.44 from $3.88 in 2023."(1)
He continued, "In response to market conditions, cost saving initiatives implemented during the second half of 2024 helped to reduce selling and administrative expenses in the fourth quarter by $7.4 million compared to the same quarter of 2023. Ongoing inventory reduction initiatives have decreased inventory by $76.3 million from peak levels at March 31, 2024. These and other efforts led to strong fourth quarter cash flows from operating activities of $75.9 million. Looking ahead, in addition to executing our six strategic priorities, which have been refined for 2025, management will continue to execute initiatives to right-size inventory, reduce costs, and drive margin improvement."
(dollars in millions, except per share data) |
Three Months Ended |
Twelve Months Ended |
||||
2024 |
2023 |
% change |
2024 |
2023 |
% change |
|
CONSOLIDATED RESULTS |
||||||
Revenue |
$565.9 |
$542.6 |
4.3 % |
$2,097.6 |
$2,154.7 |
(2.6) % |
Equipment sales |
$208.4 |
$158.5 |
31.5 % |
$618.6 |
$607.1 |
1.9 % |
Product support |
$132.8 |
$132.8 |
(0.1) % |
$535.0 |
$543.3 |
(1.5) % |
Industrial parts |
$133.6 |
$136.0 |
(1.7) % |
$572.0 |
$605.1 |
(5.5) % |
Engineered repair services (ERS) |
$79.1 |
$103.6 |
(23.7) % |
$326.5 |
$354.3 |
(7.9) % |
Equipment rental |
$12.1 |
$11.7 |
3.2 % |
$45.5 |
$45.0 |
1.3 % |
Net earnings |
$1.0 |
$11.1 |
(90.7) % |
$42.8 |
$81.0 |
(47.2) % |
Basic earnings per share(2) |
$0.05 |
$0.52 |
(90.8) % |
$1.97 |
$3.77 |
(47.7) % |
Adjusted net earnings(1)(3) |
$7.5 |
$17.8 |
(57.8) % |
$52.9 |
$83.5 |
(36.6) % |
Adjusted basic earnings per share(1)(2)(3) |
$0.35 |
$0.83 |
(58.2) % |
$2.44 |
$3.88 |
(37.2) % |
Adjusted EBIT(1) |
$19.3 |
$31.7 |
(39.0) % |
$105.8 |
$138.9 |
(23.8) % |
Adjusted EBITDA(1) |
$35.1 |
$47.2 |
(25.6) % |
$168.0 |
$197.4 |
(14.9) % |
Adjusted EBIT margin(1) |
3.4 % |
5.8 % |
(41.5) % |
5.0 % |
6.4 % |
(21.7) % |
Adjusted EBITDA margin(1) |
6.2 % |
8.7 % |
(28.6) % |
8.0 % |
9.2 % |
(12.6) % |
Outlook
Looking ahead to the first half of 2025, Wajax continues to see strong customer demand in the mining and energy sectors, with the former supported by strong backlog.(1) Headwinds are expected, with broader market conditions remaining soft and uncertainty surrounding potential tariffs and counter-tariffs on Canada-U.S. trade; additional headwinds are expected should such tariffs materialize. Amid this backdrop, management remains committed to executing the Corporation's six strategic priorities, which will continue to support and position the business for future success, and which have been refined for 2025. As additional focus areas, management will execute initiatives to reduce inventory, improve margins and lower costs.
Wajax's six strategic priorities for 2025 are: continuing to build a people-first company; growing Wajax's existing business with a focus on parts, service and margin improvement; unlocking the potential of Wajax's enhanced direct relationship with Hitachi; acquiring and integrating industrial parts and ERS businesses; improving cost structure and processes; and continuing Wajax's ERP system roll-out and additional technology improvements. Please see Wajax's Management's Discussion and Analysis for the year-ended December 31, 2024, which has been filed under the Corporation's profile on SEDAR+ at www.sedarplus.ca, for further discussion regarding these priorities.
CFO Succession
As previously announced by the Corporation on November 4, 2024, Tania Casadinho has been appointed Chief Financial Officer effective March 4, 2025, following the planned retirement of Stuart Auld from that role. Mr. Auld has agreed to remain with the Corporation in the near term to support a series of operational efficiency initiatives.
"On behalf of the board and the management team, I would like to congratulate Tania on her appointment to the role of CFO," said Mr. Domagalski. "We look forward to further leveraging her expertise and disciplined approach to financial risk management." He continued, "I also want to thank Stuart for his many contributions to Wajax. His extensive operational knowledge positions him to remain a core contributor, and we appreciate the continued benefit of his expertise and leadership."
Dividend
The Corporation has declared a dividend of $0.35 per share for the first quarter of 2025, payable on April 2, 2025, to shareholders of record on March 14, 2025.
Fourth Quarter Highlights
- Revenue in the fourth quarter of 2024 increased $23.3 million, to $565.9 million, from $542.6 million in the fourth quarter of 2023. From a regional perspective:
- Revenue in western Canada of $274.9 million increased 16.7% from the same period in the prior year due primarily to higher industrial parts sales and higher mining equipment sales, including the delivery of two large mining shovels in the fourth quarter of 2024 with no such deliveries in the fourth quarter of the prior year. These increases were offset partially by lower ERS sales.
- Revenue in central Canada of $99.7 million decreased 5.4% from the same period in the prior year due primarily to lower equipment sales in the construction and forestry category, as well as lower ERS sales. The decrease was offset partially by higher equipment sales in the material handling category.
- Revenue in eastern Canada of $191.4 million decreased 5.1% from the same period in the prior year due primarily to lower equipment sales in the construction and forestry category, as well as lower industrial parts sales. The decrease was partially offset by higher equipment sales in the material handling category.
- Gross profit margin of 17.1% in the fourth quarter of 2024 decreased 420 bps compared with gross profit margin of 21.2% in the same period of 2023.(1) This decrease in margin was driven primarily by lower margins realized on equipment, ERS and rental revenue due to increased market pressures, as well as a lower proportion of ERS, product support, and industrial parts sales relative to equipment sales.
- Selling and administrative expenses as a percentage of revenue decreased to 14.1% in the fourth quarter of 2024 from 16.1% in the same period of 2023.(1) Selling and administrative expenses in the fourth quarter of 2024 decreased $7.4 million, or 8.5% compared to the fourth quarter of 2023. This decrease was due primarily to lower spending in multiple areas, including personnel, bonuses, travel and entertainment, and supplies and marketing, driven largely by cost saving initiatives. Excluding the $2.3 million of contingent consideration revaluation expense (2023 – $0.3 million), and the $1.8 million of unrealized loss on total return swaps (2023 – $0.8 million unrealized gain), selling and administrative expenses decreased $12.0 million compared with the same period in the prior year, and selling and administrative expenses as a percentage of revenue decreased to 13.4% in the fourth quarter of 2024, from 16.1% in the same quarter of 2023.(1)
- In the fourth quarter of 2024, the Corporation implemented workforce reductions in response to market conditions. A restructuring cost of $5.8 million was recognized in the fourth quarter relating primarily to severance costs.
- EBIT decreased $16.9 million, or 60.3%, to $11.1 million in the fourth quarter of 2024 from $28.1 million in the same period of 2023. The year-over-year decrease in EBIT resulted primarily from lower gross profit margin and a $5.8 million restructuring cost for workforce reductions, offset partially by reduced selling and administrative expenses.(1) Adjusted EBIT decreased $12.3 million, or 39.0%, to $19.3 million in the fourth quarter of 2024 from $31.7 million in the fourth quarter of 2023, and adjusted EBIT margin decreased to 3.4% in the fourth quarter of 2024 from 5.8% in the same quarter of 2023.(1)
- Finance costs of $8.4 million in the fourth quarter of 2024 decreased $4.9 million compared with the same quarter last year due primarily to an unrealized gain on interest rate swaps of $0.2 million in the quarter compared to a loss of $5.5 million in the same period of the prior year. Excluding the unrealized gain/loss on interest rate swaps in both periods, finance costs increased $0.8 million compared with the same quarter last year due primarily to higher average borrowings under the Corporation's bank credit facility.
- The Corporation generated net earnings of $1.0 million, or $0.05 per share, in the fourth quarter of 2024 versus $11.1 million, or $0.52 per share, in the same period of 2023. The Corporation generated adjusted net earnings of $7.5 million, or $0.35 per share, in the fourth quarter of 2024 versus $17.8 million, or $0.83 per share, in the fourth quarter of 2023.(1) Adjusted net earnings for the quarter excludes facility closure, restructuring, and other related costs of $4.3 million after tax, or $0.20 per share (2023 - $1.4 million after tax, or $0.07 per share), losses on the change in fair value of contingent consideration of $2.3 million after tax, or $0.10 per share (2023 - $0.2 million after tax, or $0.01 per share), and non-cash gains on mark to market of derivative instruments of less than $0.1 million after tax, or less than $0.01 per share (2023 – losses of $5.0 million after tax, or $0.23 per share).(1)
- Adjusted EBITDA margin decreased to 6.2% in the fourth quarter of 2024 from 8.7% in the fourth quarter of 2023.(1)
- Cash flows generated from operating activities amounted to $75.9 million in the fourth quarter of 2024, compared with cash generated of $48.5 million in the same quarter of the previous year. The increase in cash generated of $27.4 million was mainly attributable to an increase in accounts payable and accrued liabilities of $37.6 million compared to a decrease of $20.3 million in the same quarter of the prior year, and a decrease in inventory of $48.4 million compared to a decrease of $29.7 million in the same quarter of the prior year. This increase in cash generated was offset partially by an increase in accounts receivable of $36.0 million in the fourth quarter of 2024 compared to a decrease of $3.9 million in the same quarter of the previous year, and a decrease in net earnings excluding items not affecting cash flow of $17.2 million.
- The Corporation's backlog at December 31, 2024 of $564.4 million decreased $23.7 million, or 4.0%, compared to September 30, 2024 backlog of $588.1 million due primarily to lower material handling and mining orders. Backlog at December 31, 2024 included seven large mining shovels.(1)
- Working capital of $532.4 million at December 31, 2024 decreased $39.6 million, from $572.0 million at September 30, 2024 due primarily to lower inventory and higher accounts payable and accrued liabilities, offset partially by higher trade and other receivables.(1) Working capital efficiency was 26.0%, a decrease of 60 bps from 26.6% at September 30, 2024 due to the lower trailing four quarter average working capital and higher trailing 12-month revenue.(1) Excluding the Corporation's senior unsecured debentures, working capital of $589.4 million at December 31, 2024 decreased $39.4 million from $628.8 million at September 30, 2024, and working capital efficiency was 28.7% as at both December 31, 2024 and September 30, 2024.(1)
- The Corporation's leverage ratio decreased to 2.61 times at December 31, 2024, compared to 2.78 times at September 30, 2024.(1) The decrease in the leverage ratio was due to a lower debt level driven largely by cash generated from operating activities during the quarter. The Corporation's senior secured leverage ratio was 2.17 times at December 31, 2024, compared to 2.38 times at September 30, 2024.(1)
- Subsequent to year end, on January 15, 2025, Wajax announced the repayment in full of the $57.0 million in principal amount owed under its 6.00% senior unsecured debentures due January 15, 2025, along with accrued interest up to but excluding the maturity date. The Corporation's existing bank credit facility was used to complete the repayment.
Conference Call Details
Wajax will webcast its Fourth Quarter Financial Results Conference Call. You are invited to listen to the live webcast on Tuesday, March 4, 2025 at 2:00 p.m. EDT. To access the webcast, please visit our website wajax.com, under "Investor Relations", "Events and Presentations", "Q4 and Year-End 2024 Financial Results" and click on the "Listen to the Webcast" link. An archive of the webcast will be available following the live presentation.
About Wajax Corporation
Founded in 1858, Wajax (TSX: WJX) is one of Canada's longest-standing and most diversified industrial products and services providers. The Corporation operates an integrated distribution system providing sales, parts and services to a broad range of customers in diverse sectors of the Canadian economy, including: construction, forestry, mining, industrial and commercial, oil sands, transportation, metal processing, government and utilities, and oil and gas.
Notes: |
||
(1) |
"Backlog", "Working capital", "Gross profit margin", "Selling and administrative expenses as a percentage of revenue", "Working capital efficiency", "Leverage ratio", "Senior secured leverage ratio", "Adjusted net earnings", "Adjusted basic and diluted earnings per share", "Adjusted EBIT", "Adjusted EBIT margin", "Adjusted EBITDA" and "Adjusted EBITDA margin" do not have standardized meanings prescribed by generally accepted accounting principles ("GAAP"). See the Non-GAAP and Other Financial Measures section later in this press release. |
|
(2) |
Weighted average shares, net of shares held in trust, outstanding for calculation of basic and diluted earnings per share for the fourth quarter of 2024 were 21,774,451 (2023 – 21,570,005) and 22,210,260 (2023 – 22,319,062), respectively. |
|
(3) |
Net earnings excluding the following: |
|
a. |
after-tax facility closure, restructuring, and other related costs of $4.3 million (2023 – $1.4 million), or basic and diluted loss per share of $0.20 and $0.19, respectively (2023 – basic and diluted loss per share of $0.07 and $0.06, respectively) for the fourth quarter of 2024 and for the year ended December 31, 2024. |
|
b. |
after-tax losses on the change in fair value of contingent consideration of $2.3 million (2023 – $0.2 million), or basic and diluted loss per share of $0.10 (2023 – loss per share of $0.01) for the fourth quarter of 2024 and for the year ended December 31, 2024. |
|
c. |
after-tax non-cash gains on mark to market of derivative instruments of less than $0.1 million (2023 – losses of $5.0 million), or basic and diluted earnings per share of less than $0.01 (2023 – loss per share of $0.23) for the fourth quarter of 2024. |
|
d. |
after-tax non-cash losses on mark to market of derivative instruments of $3.6 million (2023 – losses of $0.9 million), or basic and diluted loss per share of $0.16 (2023 – loss per share of $0.04) for the year ended December 31, 2024. |
|
e. |
after-tax gains recorded on the sale of properties of nil (2023 – $0.1 million), or basic and diluted earnings per share of nil (2023 – earnings per share of less than $0.01) for the year ended December 31, 2024. |
|
Non-GAAP and Other Financial Measures
The press release contains certain non-GAAP and other financial measures that do not have a standardized meaning prescribed by GAAP. Therefore, these financial measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that these measures should not be construed as an alternative to net earnings or to cash flow from operating, investing, and financing activities determined in accordance with GAAP as indicators of the Corporation's performance. The Corporation's management believes that:
(i) |
these measures are commonly reported and widely used by investors and management; |
(ii) |
the non-GAAP measures are commonly used as an indicator of a company's cash operating performance, profitability and ability to raise and service debt; |
(iii) |
"Adjusted net earnings", "Adjusted basic earnings per share" and "Adjusted diluted earnings per share" provide indications of the results by the Corporation's principal business activities prior to recognizing non-recurring costs (recoveries) and non-cash losses (gains) on mark to market of derivative instruments. These adjustments to net earnings and basic and diluted earnings per share allow the Corporation's management to consistently compare periods by removing infrequent charges incurred outside of the Corporation's principal business activities and the impact of unrealized losses (gains) resulting from fluctuations in interest rates and the Corporation's share price; |
(iv) |
"Adjusted EBITDA" provides an indication of the results by the Corporation's principal business activities prior to recognizing non-recurring costs (recoveries) and non-cash losses (gains) on mark to market of derivative instruments. These adjustments to net earnings allow the Corporation's management to consistently compare periods by removing infrequent charges incurred outside of the Corporation's principal business activities, the impact of unrealized losses (gains) resulting from fluctuations in interest rates and the Corporation's share price, the impact of fluctuations in finance costs related to the Corporation's capital structure, the impact of tax rates, and the impact of depreciation and amortization of long-term assets; and |
(v) |
"Pro-forma adjusted EBITDA" provides the same utility as Adjusted EBITDA described above, however pursuant to the terms of the bank credit facility, is adjusted for the EBITDA of business acquisitions made during the period as if they were made at the beginning of the trailing 12-month period, and for the deduction of payments of lease liabilities. Pro-forma adjusted EBITDA is used in calculating the Leverage ratio and Senior secured leverage ratio. |
Non-GAAP financial measures are identified and defined below: |
|
Funded net debt |
Funded net debt includes bank indebtedness, debentures and total long-term debt, net of cash. Funded net debt is relevant in calculating the Corporation's funded net debt to total capital, which is a non-GAAP ratio commonly used as an indicator of a company's ability to raise and service debt. |
Debt |
Debt is funded net debt plus letters of credit. Debt is relevant in calculating the Corporation's leverage ratio, which is a non-GAAP ratio commonly used as an indicator of a company's ability to raise and service debt. |
Total capital |
Total capital is shareholders' equity plus funded net debt. |
EBITDA |
Net earnings (loss) before finance costs, income tax expense, depreciation and amortization. |
Adjusted net earnings (loss) |
Net earnings (loss) before any facility closure, restructuring, and other related costs, gains/losses recorded on sale of properties, non-cash gains/losses on mark to market of derivative instruments, and change in fair value of contingent consideration. |
Adjusted basic earnings (loss) per share and adjusted diluted earnings (loss) per share |
Basic and diluted earnings (loss) per share before any facility closure, restructuring, and other related costs, gains/losses recorded on sale of properties, non-cash gains/losses on mark to market of derivative instruments, and change in fair value of contingent consideration. |
Adjusted EBIT |
EBIT before any facility closure, restructuring, and other related costs, gains/losses recorded on sale of properties, non-cash gains/losses on mark to market of derivative instruments, and change in fair value of contingent consideration. |
Adjusted EBITDA |
EBITDA before any facility closure, restructuring, and other related costs, gains/losses recorded on sale of properties, non-cash gains/losses on mark to market of derivative instruments, and change in fair value of contingent consideration. |
Pro-forma adjusted EBITDA |
Defined as adjusted EBITDA adjusted for the EBITDA of business acquisitions made during the period as if they were made at the beginning of the trailing 12-month period pursuant to the terms of the bank credit facility and the deduction of payments of lease liabilities. Pro-forma adjusted EBITDA is used in calculating the Leverage ratio and Senior secured leverage ratio. |
Working capital |
Defined as current assets less current liabilities, as presented in the consolidated statements of financial position. |
Other working capital amounts |
Defined as working capital less trade and other receivables and inventory plus accounts payable and accrued liabilities and the current portion of debentures, as presented in the consolidated statements of financial position. |
Non-GAAP ratios are identified and defined below: |
|
Adjusted EBIT margin |
Defined as adjusted EBIT (defined above) divided by revenue, as presented in the consolidated statements of earnings. |
EBITDA margin |
Defined as EBITDA (defined above) divided by revenue, as presented in the consolidated statements of earnings. |
Adjusted EBITDA margin |
Defined as adjusted EBITDA (defined above) divided by revenue, as presented in the consolidated statements of earnings. |
Leverage ratio |
The leverage ratio is defined as debt (defined above) at the end of a particular quarter divided by trailing 12-month pro-forma adjusted EBITDA (defined above). The Corporation's objective is to maintain this ratio between 1.5 times and 2.0 times. |
Senior secured leverage ratio |
The senior secured leverage ratio is defined as debt (defined above) excluding debentures at the end of a particular quarter divided by trailing 12-month pro-forma adjusted EBITDA (defined above). |
Funded net debt to total capital |
Defined as funded net debt (defined above) divided by total capital (defined above). |
Working capital efficiency |
Defined as trailing four-quarter average working capital (defined above) as a percentage of the trailing 12-month revenue. |
Supplementary financial measures are identified and defined below: |
|
EBIT margin |
Defined as EBIT divided by revenue, as presented in the consolidated statements of earnings. |
Backlog |
Backlog is a management measure which includes the total sales value of customer purchase commitments for future delivery or commissioning of equipment, parts and related services, including ERS projects. There is no directly comparable GAAP financial measure for Backlog. |
Gross profit margin |
Defined as gross profit divided by revenue, as presented in the consolidated statements of earnings. |
Selling and administrative expenses as a percentage of revenue |
Defined as selling and administrative expenses divided by revenue, as presented in the consolidated statements of earnings. |
Reconciliation of the Corporation's net earnings to adjusted net earnings, adjusted basic earnings per share and adjusted diluted earnings per share is as follows:
Three months ended |
Year ended |
|||
December 31 |
December 31 |
|||
2024 |
2023 |
2024 |
2023 |
|
Net earnings |
$ 1.0 |
$ 11.1 |
$ 42.8 |
$ 81.0 |
Facility closure, restructuring, and other related costs, after tax |
4.3 |
1.4 |
4.3 |
1.4 |
Gain recorded on the sale of properties, after tax |
— |
— |
— |
(0.1) |
Non-cash losses on mark to market of derivative instruments, after tax |
— |
5.0 |
3.6 |
0.9 |
Change in fair value of contingent consideration, after tax |
2.3 |
0.2 |
2.3 |
0.2 |
Adjusted net earnings |
$ 7.5 |
$ 17.8 |
$ 52.9 |
$ 83.5 |
Adjusted basic earnings per share(1) |
$ 0.35 |
$ 0.83 |
$ 2.44 |
$ 3.88 |
Adjusted diluted earnings per share(1) |
$ 0.34 |
$ 0.80 |
$ 2.38 |
$ 3.75 |
(1) |
At December 31, 2024, the number of weighted average basic and diluted shares outstanding were 21,774,451 and 22,210,260, respectively for the three months ended, and 21,719,568 and 22,188,628, respectively for the year ended. |
Reconciliation of the Corporation's EBIT to EBITDA, Adjusted EBIT, Adjusted EBITDA and Pro-forma adjusted EBITDA is as follows:
Three months ended |
Year ended |
|||
December 31 |
December 31 |
December 31 |
December 31 |
|
EBIT |
$ 11.1 |
$ 28.1 |
$ 96.5 |
$ 136.7 |
Depreciation and amortization |
15.8 |
15.5 |
62.2 |
58.6 |
EBITDA |
$ 27.0 |
$ 43.6 |
$ 158.7 |
$ 195.3 |
EBIT |
$ 11.1 |
$ 28.1 |
$ 96.5 |
$ 136.7 |
Facility closure, restructuring, and other related costs(1) |
5.8 |
1.9 |
5.8 |
1.9 |
Gain recorded on the sale of properties |
— |
— |
— |
(0.1) |
Non-cash losses on mark to market of derivative instruments, excluding interest rate swaps(2) |
0.1 |
1.3 |
1.3 |
— |
Change in fair value of contingent consideration(3) |
2.3 |
0.3 |
2.3 |
0.3 |
Adjusted EBIT |
$ 19.3 |
$ 31.7 |
$ 105.8 |
$ 138.9 |
Depreciation and amortization |
15.8 |
15.5 |
62.2 |
58.6 |
Adjusted EBITDA |
$ 35.1 |
$ 47.2 |
$ 168.0 |
$ 197.4 |
Payment of lease liabilities(4) |
(39.2) |
(35.5) |
||
Polyphase acquisition pro-forma EBITDA(5) |
— |
3.2 |
||
Beta acquisition pro-forma EBITDA(5) |
— |
1.4 |
||
Pro-forma adjusted EBITDA |
$ 128.7 |
$ 166.7 |
||
(1) |
For 2024, facility closure, restructuring, and other related costs consists of costs relating to workforce reductions in response to market conditions, incurred during the fourth quarter of 2024. |
(2) |
Non-cash losses (gains) on mark to market of derivative instruments that are not effectively designated as hedging instruments under IFRS, excluding interest rate swaps as their fair value fluctuations impact finance costs. |
(3) |
The change in fair value of contingent consideration relates to changes in the estimated fair value of future performance-based earnout payments relating to business acquisitions. |
(4) |
Effective with the reporting period beginning on January 1, 2019 and the adoption of IFRS 16, the Corporation amended the definition of Funded net debt to exclude lease liabilities not considered part of debt. As a result, the corresponding lease costs must also be deducted from EBITDA for the purpose of calculating the leverage ratio. |
(5) |
Pro-forma EBITDA for business acquisitions made during the period as if they were made at the beginning of the trailing 12-month period pursuant to the terms of the bank credit facility, for the purpose of calculating the leverage ratio. "Polyphase" refers to Polyphase Engineered Controls (1977) Ltd., acquired effective July 4, 2023. "Beta" refers collectively to Beta Fluid Power Ltd. and Beta Industrial Ltd., which were acquired effective September 1, 2023. |
Calculation of the Corporation's funded net debt, debt, leverage ratio and senior secured leverage ratio is as follows:
December 31 |
December 31 |
|
(Cash) bank indebtedness |
$ (7.4) |
$ 1.4 |
Debentures |
57.0 |
56.3 |
Long-term debt |
283.0 |
267.8 |
Funded net debt |
$ 332.7 |
$ 325.5 |
Letters of credit |
3.7 |
4.8 |
Debt |
$ 336.3 |
$ 330.3 |
Pro-forma adjusted EBITDA(1) |
$ 128.7 |
$ 166.7 |
Leverage ratio(2) |
2.61 |
1.98 |
Senior secured leverage ratio(3) |
2.17 |
1.64 |
(1) |
For the year ended December 31, 2024 and December 31, 2023. |
(2) |
Calculation uses debt divided by the trailing four-quarter Pro-forma adjusted EBITDA. This leverage ratio is calculated for purposes of monitoring against the Corporation's target leverage ratio of between 1.5 times and 2.0 times, and is different from the leverage ratio calculated under the Corporation's bank credit facility agreement. |
(3) |
Calculation uses debt excluding debentures divided by the trailing four-quarter Pro-forma adjusted EBITDA. While the calculation contains some differences from the leverage ratio calculated under the Corporation's bank credit facility agreement, the resulting leverage ratio under the bank credit facility agreement is not significantly different. See the Liquidity and Capital Resources section. |
Calculation of total capital and funded net debt to total capital is as follows:
December 31 |
December 31 |
|
Shareholders' equity |
$ 512.3 |
$ 496.2 |
Funded net debt |
332.7 |
325.5 |
Total capital |
$ 844.9 |
$ 821.7 |
Funded net debt to total capital |
39.4 % |
39.6 % |
Calculation of the Corporation's working capital and other working capital amounts is as follows:
December 31 |
December 31 |
|
Total current assets |
$ 1,090.7 |
$ 1,043.6 |
Total current liabilities |
558.3 |
483.4 |
Working capital |
$ 532.4 |
$ 560.2 |
Trade and other receivables |
(303.5) |
(309.1) |
Inventory |
(673.1) |
(630.9) |
Debentures - current |
57.0 |
— |
Accounts payable and accrued liabilities |
417.8 |
407.1 |
Other working capital amounts |
$ 30.6 |
$ 27.3 |
Cautionary Statement Regarding Forward-Looking Information
This news release contains certain forward-looking statements and forward-looking information, as defined in applicable securities laws (collectively, "forward-looking statements"). These forward-looking statements relate to future events or the Corporation's future performance. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward looking statements can be identified by the use of words such as "plans", "anticipates", "intends", "predicts", "expects", "is expected", "scheduled", "believes", "estimates", "projects" or "forecasts", or variations of, or the negatives of, such words and phrases, or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors beyond the Corporation's ability to predict or control which may cause actual results, performance and achievements to differ materially from those anticipated or implied in such forward-looking statements. To the extent any forward-looking information in this news release constitutes future-oriented financial information or financial outlook within the meaning of applicable securities law, such information is being provided to demonstrate the potential of the Corporation and readers are cautioned that this information may not be appropriate for any other purpose. There can be no assurance that any forward-looking statement will materialize. Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements in this news release are made as of the date of this news release, reflect management's current beliefs and are based on information currently available to management. Although management believes that the expectations represented in such forward-looking statements are reasonable, there is no assurance that such expectations will prove to be correct. Specifically, this news release includes forward looking statements regarding, among other things: management's commitment to executing our six strategic priorities and our belief that such priorities will continue to support and position our business for future success; our additional focus on the execution of initiatives to reduce inventory, improve margins and lower costs; our outlook for the first half of 2025, including our expectation of strong customer demand in the mining and energy sectors, headwinds related to softer market conditions in the broader market and uncertainty surrounding potential tariffs and counter-tariffs on Canada-U.S. trade, and additional headwinds should such tariffs materialize; our six strategic priorities for 2025: continuing to build a people-first company, growing Wajax's existing business with a focus on parts, service and margin improvement, unlocking the potential of Wajax's enhanced direct relationship with Hitachi, acquiring and integrating industrial parts and ERS businesses, improving cost structure and processes, and continuing Wajax's ERP system roll-out and additional technology improvements; and our objective of managing our working capital and normal-course capital investment programs within a leverage range of 1.5 – 2.0 times. These statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions regarding: the absence of significant negative changes to general business and economic conditions; our ability to manage our business through the imposition of new or changing trade tariffs; limited negative fluctuations in the supply and demand for, and the level and volatility of prices for, oil, natural gas and other commodities; the stability of financial market conditions, including interest rates; the ability of Hitachi and Wajax to develop and execute successful sales, marketing and other plans related to the enhanced direct distribution relationship which took effect on March 1, 2022; our continued ability to execute our strategic priorities, including our ability to execute on our organic growth priorities, complete and effectively integrate industrial parts and ERS acquisitions, and successfully implement new information technology platforms, systems and software, such as our new ERP system; the future financial performance of the Corporation; limited fluctuations in our costs; the level of market competition; our continued ability to attract and retain skilled staff; our continued ability to procure quality products and inventory; and our ongoing maintenance of strong relationships with suppliers, employees and customers. The foregoing list of assumptions is not exhaustive. Factors that may cause actual results to vary materially include, but are not limited to: a continued or prolonged deterioration in general business and economic conditions; new tariffs and counter-tariffs imposed on cross-border trade, particularly between Canada and the U.S.; negative fluctuations in the supply and demand for, and the level of prices for, oil, natural gas and other commodities; a continued or prolonged decrease in the price of oil or natural gas; the inability of Hitachi and Wajax to develop and execute successful sales, marketing and other plans related to the enhanced direct distribution relationship which took effect on March 1, 2022; a decrease in levels of customer confidence and spending; supply chain disruptions and shortages; fluctuations in financial market conditions, including interest rates; the level of demand for, and prices of, the products and services we offer; decreased market acceptance of the products we offer; the termination of distribution or original equipment manufacturer agreements; unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalation, our inability to reduce costs in response to slow-downs in market activity, unavailability of quality products or inventory, supply disruptions, job action and unanticipated events related to health, safety and environmental matters); our inability to attract and retain skilled staff and our inability to maintain strong relationships with our suppliers, employees and customers. The foregoing list of factors is not exhaustive.
Further information concerning the risks and uncertainties associated with these forward-looking statements and the Corporation's business may be found in our MD&A for the year-ended December 31, 2024 (the "2024 MD&A"), which has been filed under the Corporation's profile on SEDAR+ at www.sedarplus.ca, under the heading "Risk Management and Uncertainties". The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. The Corporation does not undertake any obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.
Readers are cautioned that the risks described in the 2024 MD&A are not the only risks that could impact the Corporation. Risks and uncertainties not currently known to the Corporation, or currently deemed to be immaterial, may have a material effect on the Corporation's business, financial condition or results of operations.
Additional information, including Wajax's 2024 Annual Report, is available under the Corporation's profile on SEDAR+ at www.sedarplus.ca.
SOURCE Wajax Corporation
For further information, please contact: Iggy Domagalski, President and Chief Executive Officer, Email: [email protected]; Tania Casadinho, Chief Financial Officer, Email: [email protected]; Telephone #: (905) 212-3300
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