Cervus Equipment (TSX: CRV) expects truck sales to rebound its Canadian Peterbilt dealerships as an order backlog improves during 2019.
“The order backlog is a North American backlog,” CEO Graham Drake said during a call with analysts on May 9, a day after the company released its first quarter 2019 results. “Getting the right trucks at the right time, it’s a scheduling issue more than a sales issue.”
Revenue from the sales of trucks declined by 22 percent to C$28.8 million (the Canadian dollar equals US$0.74), compared to the first quarter of 2018. Parts revenue increased by 10 percent to C$25.4 million, while sales of used trucks increased by 55 percent to C$2.5 million.
Overall revenue from the Cervus transportation segment, dominated by its 16 Peterbilt dealerships, declined by 8 percent to C$65.9 million, generating a loss of C$657,000 in the first quarter of 2019, compared to a C$170,000 profit a year earlier.
The Canadian firm’s Peterbilt business is part of a larger portfolio of heavy equipment dealers, serving agriculture and industrial customers. The company had a soft quarter overall, incurring a loss of C$2.7 million compared to C$0.1 million a year earlier, on revenue of C$234.8 million, a 6 percent decline.
Cervus blamed the higher loss on the implication of the International Financial Reporting Standard (IFRS) accounting standard and said its core businesses remained solid. Gross profit rose by 2 percent to 42.7 million.
Cervus had weakness in other parts of its underlying business. Sales of agricultural equipment declined by 19 percent to C$73.4 million. Drake noted that China’s ban on Canadian canola exports had made farmers more cautious.
“Farmers are exercising more caution,” Drake said.
Analysts seemed unimpressed with Cervus’s performance.
“I feel like the company is a bit lost right now,” Ben Cherniavsky, an analyst with Raymond James told Drake, who retires on May 15.