Source: Network

Predicting a “challenging environment” ahead for revenue growth as crop prices slip, Case IH dealership mega-chain Rocky Mountain Equipment is set to expand further into Manitoba.

Calgary-based RME on Tuesday announced its fourth-quarter and year-end results plus a deal to buy southern Manitoba dealership chain Chabot Implements for $6.8 million.

Family-owned Chabot includes dealerships at Elie, Steinbach and Portage la Prairie handling Case IH and other brands, and a site at Neepawa handling Kubota, Buhler and Bourgault lines among others. The dealerships also sell assorted residential, commercial and recreational product lines.

The four outlets together booked top-line revenues of about $68 million in fiscal 2014, RME said.

The deal, expected to close April 1, “represents a significant achievement for Rocky and will be immediately accretive to earnings,” RME CEO Garrett Ganden said in a release.

Set up in 1935 by Charlie Chabot at his farm at St. Eustache, Man., Chabot today “enjoy(s) a significant sales and service territory (and) customer base,” Ganden said.

The deal, he added, “allows us to more fully consolidate our Case IH distribution in Manitoba” and “will allow us to leverage our strengths as a dependable equipment partner to our customers, as we work to further enhance the market penetration of our Case IH offerings in the Manitoba region.”

RME already operates a separate Case IH dealership at Neepawa, having bought Mayor Equipment in 2009. The company began work there last summer on a new building for the Case dealership and expects to move in by the end of this month.

For RME, which already operates over three dozen equipment dealerships across the three Prairie provinces, the Chabot deal also “illustrates our continued intention to execute on our strategy of consolidating independent CNH dealers in the Canadian Prairies, where we continue to see opportunity.”

Product Support

Across its entire dealer network, RME on Tuesday reported fourth-quarter net earnings of $6.22 million on $294.09 million in equipment, parts and service revenue, up from $2.07 million on $290.58 million in the year-earlier Q4.

For the full year, RME booked $18.925 million in profit on $965.41 million in revenue, up from $15.31 million on $1.01 billion in 2013.

Market demand for farm equipment remained soft in 2014, the company said, but “product support” sales rose as farmers invested in fleet maintenance. Construction equipment sales and profits improved over 2013, RME added, despite “weakening demand” in the last half of 2014 on falling oil prices.

This year, Ganden said, “we expect that lower commodity prices combined with higher equipment pricing will continue to present a challenging environment for whole goods revenue growth.”

RME, he added, will keep its focus on its “higher-margin” product support business.

Ganden said the dealer chain remains “committed to reducing our current levels of inventory while continuing to serve our customers’ needs.” He also noted increased demand for used equipment from U.S. customers, due to the stronger U.S. dollar.