Rocky Mountain on a Roll!

Rocky Mountain provided a view into the health of agriculture in western Canada

Rocky Mountain Dealerships Inc. (RME )announced their financial results today, for the six months ended June 30, 2017.  The results should be seen as very positive news by the stock market, as Rocky Mountain reports both an increase in sales, but also a noticeable increase in Net Earnings and EBITA.

Sales for the 6 months ended June 2017 were higher by 5.9% over the same period in 2016 – however, the gross margin percentage was a little lower in the 2017 period – resulting in a relatively flat gross profit of $62.4M for both periods.  

However, lower selling, general and administrative costs – along with lower financing costs helped Rocky Mountain to increase net earnings from $3.63 M to $5.66 M for the 6 month period ended June 30, 2017 – this represents a 56% increase in Net Earnings.

Likewise, the EBITA for the 2017 6 month period came in at $13.3 M versus $11.2 M in 2016 – a sizeable increase in cashflow.

On the balance sheet – Rocky Mountain has been able to continue to reduce its level of inventory investment in equipment – by approximately $50M as compared to June 2016.  This has helped the company to reduce the floor plan financing from $340 million in June 2016 to $282 million in June 2017.  With an interest cost of approximately 5%, this reduction in investment and increase in efficiency does yield results for the shareholders.

Rocky Mountain is Canada’s largest agriculture equipment dealer with full-service equipment stores in locations across the Canadian prairies.  As such, Rocky Mountain can provide an interesting view into the health of agriculture in western Canada.  With continued warm and dry weather in much of the west, and the harvest season upon us – it will be interesting to see how the October-December quarter – the busiest for RME – does in 2017.