Auto parts and supplies distribution network Uni-Select Inc. has seen the impact of the U.S. slowdown on its financial results in the second quarter of 2012, and says it will be implementing a rationalization and consolidation plan it says will save $20 million annually.
Uni-Select generated sales of $483 million in the second quarter of 2012, compared to $475 million in the same period of 2011. Adjusted EBITDA amounted to $32 million this quarter compared to $33 million in the second quarter 2011. Net earnings stood at $15.1 million or $0.70 per share in the second quarter of 2012 compared to $18.5 million or $0.85 per share for the same quarter of the prior year.
All figures in U.S. dollars.
The increase in sales stems primarily from the addition of the purchased assets in Florida in the fourth quarter of 2011, which was partly offset by the temporary slowdown due to economic and climatic conditions that prevailed during the quarter in the United States. The effect of variations of the Canadian dollar relative to the US dollar had an unfavorable impact of $6 million on sales for the quarter. Canadian activities, with revenues of $145 million, generated organic sales growth of 0.4% in the second quarter. U.S. activities offset this increase with a decline in organic sales of 2.8% on revenues of $337 million.
The adjusted EBITDA margin stood at 6.6% in the second quarter of 2012 compared to 7.0% in the corresponding quarter of 2011. This decrease was mainly due to the pressures on operating margin from the rapid decrease in sales exceeding the rate of decrease in expenses and to an unfavourable change in the distribution channel mix.
Higher IT maintenance costs and support costs related to the ERP system transition also had an adverse effect on the adjusted EBITDA margin, while better purchasing conditions obtained on certain product lines have partly offset some of the previously mentioned items.
For the six month period ended June 30, 2012, sales grew 7.1% to reach $933 million compared to $871 million for the same period of the prior year. This increase is primarily attributable to the purchased assets in Florida, consolidated organic growth of nearly 1% and an additional billing day in the United States. These items were partly offset by the effect of variations of the Canadian dollar relative to the U.S. dollar which had a negative impact of $8 million on sales.
Sales in Canada totaled $261 million for the six month period ended June 30, 2012 compared to $265 million for the same period of 2011. For the six month period ended June 30, sales from the US activities increased from $606 million in 2011 to $672 million in 2012.
“The earning contributions from the acquisitions completed in 2011 combined with current initiatives to improve our performance were offset by the significant slowdown due to economic and climatic conditions which prevailed in the second quarter.” said Richard G. Roy, president and CEO of Uni-Select.
“The outlook for our industry remains positive; the fleet size and average age of vehicles, amongst others, are rising. We intend to capitalize on the benefits through the introduction of initiatives aimed at improving our performance and reducing our operational costs.” added Roy.
The Board of Directors approved a distribution network rationalization and consolidation plan which also includes a revision of the operational structure and the reduction of administrative expenses. The company expects cost savings of approximately $8 million in 2012 and of $20 million annually beginning in 2013. The total cost of implementing the consolidation plan will be approximately $22 million of which approximately $13 million represents an asset writedown.
A provision to this effect will be recorded in the third quarter of 2012 in the Corporation’s financial statements.
Finally, the Board of Directors of Uni-Select declared a dividend of CDN$0.13 per share payable on October 19, 2012 to shareholders of record on September 30, 2012. This dividend is an eligible dividend for tax purposes.