Hardware & Lumber enjoyed moderate increase is sales for the March quarter of this year. Revenue amounted to $1,547.8 million, a mere 2.4% more than the $1,511.8 million reported in the same quarter in 2012. At the same time, net result for the quarter was a profit after tax of $9.9 million compared to a loss of $5.2 million in 2012. This translated to earnings per stock unit of $0.12.
Gross profit increased by 6.2% to $408.3 million, achieving an average margin of 26.4%, a full one percentage points higher than the comparative quarter. Management attributes the improved performance to increased sales, greater focus on margin management and the integration of the wholesale segment into the Rapid True Value operations. Effective January 1, 2013, the company re-organised its operations into two operating divisions, down from the previous three, which saw the wholesale segment subsumed into the retail segment.
While there was improvement in gross margin, operating expenses increased at a much faster pace than sales by increasing 8.5 percent to $394.3 million. Gains made from operational cost-saving initiatives and ongoing control of discretionary spending were not enough to offset the significant increase in the charges associated with the company’s pension scheme and other retirement benefits. In a release to shareholders, management stated that the revision of the accounting rules governing such benefits, which became effective January 2013 triggered a restatement of the expense recorded in 2012 and a significant increase in the carrying value of the liability in the Statement of Financial Position as at December 2012.
Working capital management continued to receive management’s focus. At March, inventory balances were $1,158.4 million or 13.9% lower than the balance at March 2012. Over the same period, improved credit management resulted in a 4.9% reduction in trade and other receivables balance to $459.9 million. At the end of the period, the amount owed to trade and other creditors was $913.2 million, being 3.1% lower than the balance at March 2012. Total cash generated from operating activities was $209 million with $57 million used to service loan commitments and pay dividends, leaving cash balance of $357.8 million at the end of the period.
Stock outlook | Earnings should pick up as the year progresses and IC Insider.com expects to see much higher earnings for the full year than in 2012.
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