Rocky Mountain Dealerships (RME) reported on March 11 that its fourth quarter 2019 sales declined 26%, which was just slightly better than full year results that saw sales drop by 26.3%.
“By all measures, 2019 was a tough year. The Assn. of Equipment Manufacturers, Canada, show deliveries of new agriculture equipment units in 2019 were at the lowest levels since 2004," said Garrett Ganden, RME’s president and CEO. “However, despite low overall sales in 2019, we brought total equipment inventories back in line with year-end 2018. Product support revenues improved in 2019 to $151.5 million, contributing approximately $7.9 million more than in 2018 on a full year basis leading to improved sales mix and improved gross margins."
“Looking forward to 2020, we are positioned to operate in what may continue to be an uncertain environment,” Ganden said. “We will focus on managing what is manageable and continue to be responsive to external forces while proactively empowering our branches to serve and meet the needs of our customers.”
RME company managers reported that “Unresolved trade disputes surrounding Canadian agriculture commodities continued to weigh on crop prices and farmer sentiment during the fourth quarter of 2019. The quarter also saw the continuation of the challenging and difficult harvest, which began in the later part of the third quarter, resulting in a portion of crops being left in the fields until spring. These factors continued to weigh negatively on customer equipment demand, while, on a positive note, both parts and service revenues were able to remain consistent with the prior year.”
- Sales decreased 26% or $76,673 to $218,748 compared with $295,421 for the same period in 2018 due primarily to declines in new and used equipment sales of $55,042 and $21,071, respectively. These declines reflect the continued weaker 2019 demand and the overall negative farmer sentiment across the Canadian prairies.
- Gross margin percentage decreased by 1% to 12.6% from 13.6% in the same period in 2018 as a result of lower margins realized on used equipment sales combined with a reduction in manufacturer incentives.
- Gross profit dollars decreased by 31.5% or $12,649 to $27,515 from $40,164 for the same period in 2018 on reduced sales levels.
Full Year 2019 Summary
In their remarks summarizing results for all of 2019, RME management said, “The Canadian agriculture equipment industry experienced significant declines in equipment sales in 2019, as unresolved trade disputes surrounding Canadian agriculture commodities weighed heavily on crop prices and farmer sentiment.
“In addition, poor weather conditions resulted in a challenging harvest, which limited yield and quality of our customers’ crops. On a positive note, our parts and service sales (which are less susceptible to macro-economic factors) positively contributed to our revenues as farmers choose to repair their equipment, rather than replace it.”
- Sales decreased 26.3% or $276,018 to $775,070 compared with $1,051,088 for the same period in 2018 due primarily to negative customer sentiment driven by unresolved trade disputes.
- Gross margin percentage increased by 0.8% to 14.3% from 13.5% in the same period in 2018 as sales mix shifted towards higher margin parts and service sales.
- Gross profit dollars decreased by 21.9% or $30,925, to $110,537 from $141,462 for the same period in 2018 on reduced sales.