Rocky Mountain Equipment

Mar 11, 2020

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Rocky Mountain Equipment (TSX:RME) is the largest independent dealer in Canada, for Case IH and Case Construction equipment. Indeed, the scale of Rocky Mountain makes it one of the largest such CaseIH dealerships in the world.
 
As such, the recently released annual financial results of Rocky Mountain provide an interesting look into the status of the farming community in western Canada. For the year ended December 31, 2019 RME had
  • Total revenues for the year were down by 26% from $1.051 billion in 2018 to $0.775 billion in 2019
  • However, the Gross profit on these sales was UP from 13.5% of sales in 2018 to 14.3% of sales of Sales in 2019,
  • The business was able to manage the selling, general and administrative expenses down from $99 million in 2018 to less than $91 million in 2019 – a drop of 8.5% over the year.
  • Despite the tough sales year, EBITA in 2019 held strong at $18.449 million in 2019, down from the level of $43.052 in 2018.
In the company’s annual report, it noted the tough cropping year in 2019 for producers in western Canada – Alberta reporting 10% unharvested acres, Saskatchewan with 7% unharvested acres and Manitoba with 9% unharvested acres.
 
This tough year was reflected in the Q4 results with a larger drop in new equipment sales- which dropped 34% to $108 million in 2019 – in comparison used equipment sales only dropped 21% from 2019 levels to $78 million. Likewise, service revenue only dropped by 4% and part sales only dropped by 1%.
 
Over the past year, the company has paid $0.49 per share in dividends – which represents a current yield of approximately 8.5%. Furthermore, the company has purchased 231,000 of its own outstanding shares for cancellation under the normal course issuer bid (NCIB).
 
Selling new and used farm equipment in Canada has been a tougher business in the last few years. However, the main equipment dealerships, such as Rocky Mountain
 
Equipment provide critical sales and support services to the farming community. As the scale of farms increases and the investment in equipment and other capital items intensifies, the role of the dealership should become a more and more strategic supplier relationship.
Source : RME