Robust Cash Flow and Improved Leverage Driven by Inventory Optimization and Strong Cost Discipline
TSX Symbol: WJX
Wajax Corporation (“Wajax” or the “Corporation”) today announced its 2025 second quarter results. All monetary amounts are in Canadian dollars unless otherwise noted.
Selected Highlights for the Second Quarter
— Revenue of $547.1 million, and adjusted basic earnings per share of $0.77, down from $568.3 million and $1.06, respectively, in the same quarter of the prior year, due primarily to increased market pressures;(1)
— Gross profit margin of 19.1% decreased from 20.9% in the same period of 2024, remained flat versus the first quarter of 2025 and increased by 200 basis points from 17.1% in the fourth quarter of 2024;(1)
— Selling and administrative expenses as a percentage of revenue improved to 13.8% from 13.9% in the same period of 2024, excluding the unrealized loss/gain on total return swaps in both periods;(1)
— Inventory of $602.5 million decreased by $56.0 million over the prior quarter and by $147.5 million from peak levels at March 31, 2024;
— Cash flow generated from operations of $67.4 million compared to cash generated of $35.8 million in the second quarter of 2024; and
— Leverage ratio improved to 2.35 times compared to 2.53 times at March 31, 2025.(1)
“Inventory optimization and strong cost discipline generated robust second quarter cash flows from operations of $67.4 million, alongside another sequential quarterly improvement in our leverage ratio,” said Iggy Domagalski, President and Chief Executive Officer. “Inventory has decreased $147.5 million from its peak at March 31, 2024, resulting in an improved leverage ratio of 2.35 times. Management continues to execute initiatives aimed at right-sizing inventory, streamlining costs and enhancing margins.”(1)
Mr. Domagalski continued, “While we experienced some year-over-year margin compression due to increased market pressures, our gross profit margin of 19.1% remained flat versus the first quarter of 2025 and improved 200 basis points from 17.1% in the fourth quarter of 2024. Overall profitability continues to improve, with adjusted earnings per share, adjusted EBIT and adjusted EBITDA improving compared to both the first quarter of 2025 and the fourth quarter of 2024. Looking ahead, business and economic uncertainty, particularly in relation to Canada-U.S. trade relations, remains a significant headwind. While tariffs have had a minimal direct impact on our business, they have affected some of our customers more significantly. We continue to closely monitor changing tariff policies and are proactively taking steps to ensure any direct effects on our business remain limited.”(1)
Outlook
Looking ahead to the second half of 2025, Wajax continues to see strong customer demand in the mining and energy sectors, with the former supported by robust equipment backlog. The broader end market environment remains challenging, with macroeconomic softness and ongoing uncertainty related to Canada-U.S. tariff dynamics.
In this environment, management remains sharply focused on optimizing inventory, managing costs and improving margins. Management believes that strong performance in these areas of focus, supported by prudent capital allocation and a solid balance sheet, will enable Wajax to generate sustainable long-term value and capitalize on future opportunities.
Dividend
The Corporation has declared a dividend of $0.35 per share for the third quarter of 2025, payable on October2, 2025, to shareholders of record on September15, 2025.
Second Quarter Highlights
— Revenue in the second quarter of 2025 decreased $21.2 million, or 3.7%, to $547.1 million, from $568.3 million in the second quarter of 2024. Regionally:
— Revenue in western Canada of $249.3 million increased 3.7% from the same period in the prior year due primarily to higher mining equipment sales, including the delivery of a large mining shovel in the second quarter of 2025 with no such delivery in the second quarter of the prior year. This increase was partially offset by reduced equipment and product support sales in the construction and forestry category.
— Revenue in central Canada of $95.3 million decreased 1.3% from the same period in the prior year due primarily to lower equipment and product support revenue in the material handling category.
— Revenue in eastern Canada of $202.5 million decreased 12.5% from the same period in the prior year due primarily to lower equipment sales in the construction and forestry, and power systems categories, and reduced industrial parts and ERS sales.
— Gross profit margin of 19.1% in the second quarter of 2025 decreased 180 basis points (“bps”) compared with gross profit margin of 20.9% in the same period of 2024.(1) The decrease was driven primarily by reduced margins realized on equipment, industrial parts and ERS revenue due to increased market pressures. This was offset partially by higher product support margins given management's focus on margin improvement initiatives in this area of the business. Gross profit margin remained flat versus the first quarter of 2025 and increased by 200 bps from 17.1% in the fourth quarter of 2024.
— Selling and administrative expenses as a percentage of revenue decreased to 13.4% in the second quarter of 2025 from 14.4% in the same period of 2024.(1) Excluding the $2.2 million unrealized gain on total return swaps (2024 – $2.6 million unrealized loss), selling and administrative expenses decreased $3.5 million compared with the same period in the prior year, due primarily to lower spending on personnel, travel and entertainment, and supplies and marketing, driven by ongoing cost saving initiatives. Excluding the unrealized gain/loss on total return swaps in both periods, selling and administrative expenses as a percentage of revenue decreased to 13.8% in the second quarter of 2025, from 13.9% in the same quarter of 2024.(1)
— During the second quarter of 2025, the Corporation implemented a workforce reduction in response to economic conditions. A restructuring cost of $3.8 million was recognized in the quarter relating primarily to severance. This cost was recorded to the restructuring and other related costs line in the statement of earnings in the unaudited condensed consolidated interim financial statements for the period ended June 30, 2025.
— EBIT of $27.1 million in the second quarter of 2025 decreased $10.1 million, or 27.1%, from $37.2 million in the same period of 2024. The year-over-year decrease in EBIT resulted primarily from lower gross profit margin, lower sales volume, and a $3.8 million restructuring cost for the workforce reduction implemented during the quarter. These decreases were partially offset by cost saving initiatives. Adjusted EBIT decreased $9.9 million, or 25.2%, to $29.4 million in the second quarter of 2025 from $39.3 million in the second quarter of 2024, and adjusted EBIT margin decreased to 5.4% in the second quarter of 2025 from 6.9% in the same quarter of 2024.(1) Adjusted EBIT margin of 5.4% in the second quarter of 2025 improved from 5.0% in the first quarter of 2025 and 3.4% in the fourth quarter of 2024.(1)
— Finance costs of $6.3 million in the second quarter of 2025 decreased $3.5 million compared with the same quarter last year. Excluding the unrealized gain on interest rate swaps of $0.6 million in the quarter and the unrealized loss of $1.0 million in the same period of the prior year, finance costs decreased $1.9 million compared with the same quarter of 2024 due primarily to lower interest rates and lower average borrowings when considering both Wajax's bank credit facility and any outstanding debentures combined. Wajax repaid its senior unsecured debentures on January 15, 2025.
— The Corporation generated net earnings of $15.5 million, or $0.71 per share, in the second quarter of 2025 versus $20.6 million, or $0.95 per share, in the same period of 2024. The Corporation generated adjusted net earnings of $16.7 million, or $0.77 per share, in the second quarter of 2025 versus $22.9 million, or $1.06 per share, in the same period of 2024.(1) Adjusted net earnings in the second quarter of 2025 excludes facility closure, restructuring, and other related costs of $2.8 million after tax, or $0.13 per share (2024 – nil), and non-cash gains on mark to market of derivative instruments of $1.6 million after tax, or $0.07 per share (2024 – losses of $2.3 million after tax, or $0.11 per share).(1) Adjusted earnings per share of $0.77 in the second quarter of 2025 improved from $0.69 in the first quarter of 2025 and $0.35 in the fourth quarter of 2024.(1)
— Adjusted EBITDA margin decreased to 8.2% in the second quarter of 2025 from 9.6% in the second quarter of 2024 due primarily to lower gross profit margin, partially offset by lower selling and administrative expenses resulting from cost saving initiatives.(1) Adjusted EBITDA margin of 8.2% in the second quarter of 2025 improved from 7.8% in the first quarter of 2025 and 6.2% in the fourth quarter of 2024.(1)
— Cash flows generated from operating activities amounted to $67.4 million in the second quarter of 2025, compared with cash generated of $35.8 million in the same quarter of the prior year. The increase in cash generated of $31.5 million was mainly attributable to a decrease in inventory of $56.0 million compared to a decrease of $26.8 million in the same quarter of the prior year, and a decrease in trade and other receivables of $33.3 million in the quarter compared to a decrease of $9.0 million in the same quarter of the previous year. These increases in cash generated were offset partially by a decrease in accounts payable and accrued liabilities of $48.6 million as the Corporation continued to optimize inventory levels during the quarter, compared to a decrease of $14.1 million in the same quarter of the prior year.
— The Corporation's backlog of $524.3 million at June 30, 2025 decreased $37.0 million, or 6.6%, compared to March 31, 2025 backlog of $561.3 million. This was due primarily to lower construction and forestry orders, and lower mining backlog, driven largely by the sale of a large mining shovel in the quarter, which was in backlog at March 31, 2025.(1) These decreases were partially offset by higher ERS orders. Backlog decreased $20.6 million, or 3.8%, compared to June 30, 2024 backlog of $544.9 million due primarily to lower material handling and industrial parts orders; this was partially offset by higher construction and forestry, and mining orders.(1) Backlog at June 30, 2025 included five large mining shovels.
— Working capital of $530.7 million at June 30, 2025 decreased $45.8 million, from $576.5 million at March 31, 2025 due primarily to lower trade and other receivables, and lower inventory levels, offset partially by lower accounts payable and accrued liabilities.(1) Working capital efficiency was 25.7%, a slight decline in efficiency of 20 bps from 25.5% at March 31, 2025 due to lower trailing 12-month revenue.(1) Excluding the Corporation's senior unsecured debentures, which were repaid on January 15, 2025, working capital efficiency was 27.1%, an improvement of 40 bps from 27.5% at March 31, 2025.(1)
— The Corporation's leverage ratio improved to 2.35 times at June 30, 2025, from 2.53 times at March 31, 2025.(1) The improvement in leverage ratio was due to the lower debt level driven largely by cash generated from operating activities during the quarter.
— Effective June 2, 2025, Michael Hachey was appointed to the role of Chief Operating Officer. Mr. Hachey is an experienced senior executive with a strong background in operations and leadership across various sectors, including industrial and food services, automotive and retail. Most recently, he was Chief Operating Officer, Food Service and Hospitality, for Compass Group Canada (“CGC”) and previously served as its Chief Innovation Officer and as President, Eurest Support Services (ESS) North America, a division of CGC. Between 2006 and 2014, Mr. Hachey held progressively senior operating roles at Mr. Lube, including Vice President of Retail Operations, Vice President of Operations, and Executive Vice President.
Conference Call Details
Wajax will webcast its Second Quarter Financial Results Conference Call. You are invited to listen to the live webcast on Friday, August 8, 2025 at 2:00 p.m. EDT. To access the webcast, please visit our website wajax.com, under “Investor Relations”,”Events and Presentations”, “Q2 2025 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.
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:
Non-GAAP financial measures are identified and defined below:
Non-GAAP ratios are identified and defined below:
Supplementary financial measures are identified and defined below:
Reconciliationof the Corporation's net earnings to adjusted net earnings, adjusted basic earnings per share and adjusted diluted earnings per share is as follows:
Reconciliation of the Corporation's EBIT to EBITDA, Adjusted EBIT, Adjusted EBITDA and Pro-forma adjusted EBITDA is as follows:
Calculation of the Corporation's funded net debt, debt, leverage ratio and senior secured leverage ratio is as follows:
Calculation of total capital and funded net debt to total capital is as follows:
Calculation of the Corporation's working capital and other working capital amounts is as follows:
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: our continued execution of initiatives aimed at right-sizing inventory, streamlining costs and enhancing margins; our belief that business and economic uncertainty, particularly in relation to Canada-U.S. trade relations, remains a significant headwind; our close monitoring of changing tariff policies and proactive taking of steps to ensure any direct effects on our business remain limited; our outlook for the second half of 2025, including (i) our continuing expectation of strong customer demand in the mining and energy sectors, and our belief that our expectation for the former is supported by robust equipment backlog, and (ii) our view that the broader end market environment remains challenging, with macroeconomic softness and ongoing uncertainty related to Canada-U.S. tariff dynamics; our sharp focus on optimizing inventory, managing costs and improving margins – together with our belief that strong performance in these areas of focus, supported by prudent capital allocation and a solid balance sheet, will enable Wajax to generate sustainable long-term value and capitalize on future opportunities; 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 ongoing uncertainty related to Canada-U.S. trade dynamics, including 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 Construction Machinery Americas Inc. (“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 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; continued or prolonged uncertainty related to Canada-U.S. tariff dynamics; new tariffs and/or 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
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