AutoCanada rises on dealership purchases, sounds caution for '15
Dealership group added 17 stores, ends year with 48
AutoCanada Inc., the nation’s largest publicly traded dealership group, said earnings and revenue soared in the latest quarter and the full year, driven by the addition of 17 stores.
But the company cautioned that 2015 might be a more difficult year, as falling oil prices contribute to an expected weakening in the Canadian economy.
Fourth-quarter revenue nearly doubled to 653.5 million Canadian dollars ($516.6 million U.S.), the company said in a statement today, while net income jumped 55 percent to C$14.9 million.
It was the company’s most profitable fourth quarter to date.
CFO Chris Burrows, in a conference call, said the profit gains were driven by rising vehicle sales and increased revenue from parts and service along with finance and insurance.
In the fourth quarter, the Edmonton, Alberta, company sold 10,570 new units, including fleet, up 74 percent from a year earlier. Used-vehicle sales nearly doubled to 4,845 from 2,562 a year earlier.
On a same-store basis, revenue improved 11 percent in the quarter. New-vehicle revenue was up 8 percent, the result of a 4 percent rise in retail new-vehicle revenue plus a 48 percent jump in fleet new-vehicle revenue.
In other departments, used-vehicle retail revenue rose 12 percent, used-vehicle wholesale revenue increased 38 percent, finance, insurance and other revenue gained 6 percent and parts, service and collision repair revenue rose 11 percent.
AutoCanada’s acquisition of 16 stores and one open point drove the increases, Patrick Priestner, executive chairman, said in a statement.
“We are pleased with the dealerships we acquired this past year as they are integrating well into AutoCanada and we believe they will provide long-term value for our stakeholders,” Priestner said.
AutoCanada sold 36,422 new vehicles last year, including 6,076 fleet units, a 30 percent increase from 2013. Used-vehicle retail sales soared 52 percent to 15,725. On a same-store basis, retail new-vehicle sales increased 3 percent to 19,229. Used retail vehicles sold jumped 5 percent to 9,888 units.
The retailer now has 48 dealerships, up from 28 a year at the end of 2013, representing 56 franchises in eight provinces.
After a successful 2014, AutoCanada’s sales have decreased so far in 2015, in part because of western Canada’s suffering economy.
“The outlook for the Canadian economy has softened with economists revising their previous estimates downward, especially affecting the West in general and Alberta in particular, much as a result of falling oil prices,” the company’s statement said.
The first two months of this year and the second half of December 2014 were challenging, Priestner said during the conference call. The company’s vehicle sales have been significantly lower than forecasted, and dealership profitability has declined.
“Sometimes change can throw you a short-term curve,” CEO Tom Orysiuk said during the conference call.
There is “much uncertainty about oil prices in Canada,” he said. Unprecedented weather, including 2 meters (6.5 feet) of snow in February, affected business, he added.
First-quarter 2015 results will not match first quarter 2014 earnings, he said.
Priestner believes that the Alberta and western Canadian economy is facing only a “short-term blip.”
“Alberta is one of the most stable vehicle markets in Canada,” he said, adding that he would not hesitate to purchase dealerships in the area.
“Am I happy about January and February? No,” Priestner said. But “I love being in Alberta. I don’t think we should change our strategy at all.”
AutoCanada plans to continue expanding despite the declining economic outlook.
During 2015 and 2016, it plans to fill open points with a series of new stores: a Nissan dealership in Calgary, a Volkswagen dealership in Sherwood Park, Edmonton, and a Kia dealership in North Winnipeg.
In the second half of 2014, AutoCanada opened its first Kia Canada store, an open point in Edmonton, Alberta.
By the end of May, the company will announce three to five more acquisitions, Priestner said. “We think there will be some opportunities. We are very confident with our acquisitions and where we’re going in the next couple years.”
The company also said it expects that the Canadian dollar’s weakness relative to the U.S. dollar will have minimal impact its business. All of its vehicle and most of its parts purchases are conducted in Canadian dollars, reducing foreign exchange risk.
Early this year, AutoCanada filed for a normal course issuer bid to repurchase its shares. Orysiuk said no shares have been purchased to date, but the company can buy up to 2 percent of its outstanding shares.
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