Cervus Equipment, one of John Deere’s largest dealership groups, posted a 6% drop in consolidated revenues for the first quarter of 2019, ended March 31. Overall, revenue declined to C$234.8 million from $248.7 million in the first quarter of 2018. Revenues from its equipment sales during the first 3 months of 2019 were down nearly 10% compared to the same period in 2018.
Used equipment revenue in the dealership group’s Agriculture segment set a record for the first quarter, increasing 21% compared to the first quarter of 2018. The increased Canadian dollar cost of new equipment was a significant factor in the 19% reduction in new equipment sales from record high sales in the first quarter of 2018.
Overall, the company reported a loss of $2.7 million during the first quarter of 2019 vs. a loss of $0.1 million in the first 3 months of the previous year. The initial adoption of IFRS 16 increased the net loss by $1.5 million in the first quarter of 2019, according to Cervus.
Adjusted loss before income tax expense increased by $2.4 million in the first quarter of 2019, comprised of $0.7 million in Agriculture, $0.8 million in Transportation, and $0.9 million in our Industrial segment. Of the total increase, $0.8 million related to the adoption of IFRS 16, and $0.7 million is due to the non-continuance of the construction dealerships in the current quarter. On a segment basis, for the Agriculture segment there was no difference between adjusted net loss before income tax expense and loss before income tax expense in the quarter. The $0.7 million increase in Agriculture loss before income tax expense was primarily due to the $0.6 million impact of adopting IFRS 16.
Operationally, a weaker Canadian dollar has increased the cost of new equipment, reducing first quarter new equipment demand following the record new sales of 2018. “We have been successful in continuing to market the value proposition of well conditioned used equipment, with sales revenue increasing 21% from the first quarter of 2018. Further, following the difficult Canadian harvest in 2018, parts and service revenue increased 18%, compared to the first quarter of 2018.
Cervus Equipment — Selected Financial Information 1Q19 vs. 1Q18
|(C$ 000s)||3 Months Ended March 31, 2019||% Change vs. 2018||3 Months Ended March 31, 2018|
|Cost of sales||$(192,076)||(7%)||$(206,913)|
|Unrealized foreign exchange gain (loss)||$598||194%||$(635)|
|Total other income||$1,105||83%||$603|
|Selling, general and administrative expense||$(43,121)||3%||$(41,687)|
|Income from operating activities||$706||(0%)||$709|
|Loss for the period||$(2,714)||$(145)|