Wajax Corporation (TSX Symbol: WJX) has reported its third quarter results for 2024, highlighting both challenges and achievements amidst fluctuating market conditions. Despite a reduction in overall revenue to $481.0 million from $509.7 million in the previous year's third quarter, equipment sales have shown resilience by increasing 4.5% compared to last year. This uptick was achieved despite the absence of a significant mining shovel delivery experienced last year.
The corporation's gross profit margin experienced a decline to 19.2% from 22.2%, primarily due to a shift towards a higher proportion of equipment sales and encountering increased competition and market pressures impacting margins on product support and industrial parts. However, these challenges were somewhat balanced by stronger margins in the Engineered Repair Services (ERS) segment. Adjusted EBITDA margin also dipped to 7.8% from 9.8% in the previous year, influenced by decreased sales volumes and gross margins, though partially offset by a reduction in selling and administrative expenses.
The company's backlog has risen to $588.1 million as of September 30, 2024, up by $43.3 million since June of this year. This growth is credited to an increase in orders within the construction, forestry, and mining sectors, and includes significant mining projects scheduled for future quarters. Inventory reduction is another key focus, resulting in a decrease of $27.9 million in inventories since March 2024. Efforts to improve operational efficiency and reduce costs have led to lowered selling and administrative expenses by $10.8 million as opposed to the previous quarter, and by $5.0 million when compared to the same period in 2023.
This strategic focus on cost containment is expected to further enhance leverage ratios and operational efficiencies. Alongside the financial performance, Wajax is facing a leadership transition with the planned retirement of Chief Financial Officer Stuart Auld in March 2025. Tania Casadinho, the current Vice President and Corporate Controller, will succeed Auld. Casadinho brings over 16 years of experience in finance and is expected to lead Wajax on a path of continued financial discipline and strategic growth.
Underpinned by an ongoing commitment to enhance operational efficiency, Wajax remains dedicated to addressing current market challenges through strategic measures such as focusing on the core areas of parts, services, and margin improvement. The corporation's management has also announced cost-saving initiatives to counter softer market conditions and reduced industrial and forestry activity. Key priorities remain the expansion of businesses, leveraging the direct relationship with Hitachi, and pursuing acquisitions in industrial parts and ERS sectors.
As part of their financial strategy, the company is contemplating repayment or refinancing options for its senior unsecured debentures maturing in early 2025. A dividend of $0.35 per share has been declared for the fourth quarter, signifying Wajax's ongoing commitment to returning value to shareholders. In summary, Wajax's strategic initiatives are guided by a recalibrated focus on operational efficiencies, cost containment, and business expansions despite the challenges posed by current market conditions. The company continues to navigate complexity through robust planning and directional focus aligned with its strategic objectives.
