TOROMONT INDUSTRIES LTD. $22.86 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667- 5511; www.toromont.com; Shares outstanding: 76.6 million; Market cap: $1.8 billion; Dividend yield: 2.3%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. It also makes refrigeration systems through its CIMCO division.
The company completed the spinoff of Enerflex Ltd. (see right) in July 2011. Shareholders received shares of the new Toromont and shares of Enerflex.
In the three months ended June 30, 2013, Toromont’s revenue fell 1.3%, to $374.7 million from $379.6 million a year earlier. Record sales at the CIMCO division failed to offset lower equipment sales and rentals, particularly to mining customers.
Weaker sales don’t slow profit growth
Despite the lower sales, Toromont’s earnings per share rose 9.1%, to $0.36 from $0.33. Cost cuts pushed up profit margins, and Toromont continued to pay down its debt, which lowered its interest costs.
The company’s financial position is strong: its $169.4 million of long-term debt—down from $213.7 million a year ago—is just 9.4% of its market cap. The stock trades at 14.3 times Toromont’s forecast 2013 earnings of $1.60 a share.
Toromont raised its quarterly dividend by 8.3% with the April 2013 payment, to $0.13 a share from $0.12. The shares now yield 2.3%.
The company needs an improving global economy to fuel demand from its mining customers. But it’s well positioned to profit when those markets rebound.
Toromont is still a buy.
