Cervus Equipment, John Deere’s largest ag equipment dealership group in Canada, posted strong results for the first quarter of 2020 ended March 31. In addition to farm machinery sales, Cervus also operates a transportation division (trucks) and an industrial equipment division (forklifts, etc.)
The company reported new equipment revenue increased 21% in the first quarter of 2020 compared to the same quarter of 2019. The growth in new equipment sales was supported by stable used equipment sales and product support revenue, leading to a total revenue increase of 9% in the quarter, compared to the same period of 2019.
Cervus generated a $3.2 million increase in adjusted income before tax in the current quarter, a significant improvement compared to the $2.7 million adjusted loss in the first quarter of 2019. "Despite the challenging market and additional uncertainty presented late in the quarter by the COVID-19 pandemic, we achieved a 9% increase in revenue and a 7% decrease in general and administrative expenses quarter over quarter. The continued focus in advancing toward our 2024 targets has Cervus well positioned to navigate through the current unprecedented broader market conditions,” said Angela Lekatsas, president and CEO of Cervus.
Agriculture new equipment revenue increased 15%, as customers accelerated planned purchases to avoid price increases, tied to the weakening Canadian dollar. Used equipment revenue in the quarter matched the record first quarter revenue reported in 2019. The company’s used equipment inventory turnover for the trailing 12 month period ended March 31, 2020, improved to 1.89 times compared to 1.78 times at Dec. 31, 2019.
Product support revenues in the ag segment increased 5% in the quarter as producers prepare for a difficult spring season following and incomplete harvest in 2019.
Ag’s gross profit increased 3% in the quarter resulting from the increase in new equipment revenue and growth in product support. The company said the decrease in gross profit margin, as a percent of revenue, reflects the sales mix impact of equipment sales comprising a larger percentage of overall revenue in the quarter.
Cervus’ agriculture segment also reported income before income tax increased $2.6 million in the quarter, primarily the result of increased equipment revenue, combined with the decrease in G&A expenses. Un realized foreign exchange did not impact the company’s agricultural segment. Of the $2.6 million increase, $2 million relates to Cervus’ Canadian agriculture operations, while $0.6 came from the company’s Australia and New Zealand ag operations.