Uni-Select on hunt for U.S. acquisitions
MONTREAL - Auto parts company Uni-Select Inc. is on the hunt for acquisitions in the improving American automotive market while Canada continues to lag behind.
"We'll pursue growth through acquisitions mainly in the United States where development opportunities exist due to relative market fragmentation," CEO Richard Roy said Wednesday during a conference call.
Recent signs point to modestly improving market conditions south of the border that should also drive profit growth in coming quarters. Miles driven in the U.S. grew by 1.8 per cent in August and fuel costs have remained stable.
"Fundamentals remain very supportive of growth and enhanced profitability," Roy told analysts.
While sales of new cars remains low, the average age of cars is increasing and there are fewer new car dealerships leaving jobbers more opportunities to do auto repairs.
Uni-Select earned $13.2 million in the third quarter despite a three per cent drop in revenue due to the weaker U.S. dollar and store closures.
The Quebec-based company earned 67 cents per share for the period ended Sept. 30, compared with 40 cents a year earlier when losses from its Palmar heavy duty subsidiary depressed profits to $7.9 million.
Excluding Palmar, earnings from continuing operations last year were $13 million, or 66 cents per share.
Revenues fell to $348.6 million in the third quarter from $359.3 million in the year-ago period.
Analysts expected adjusted earnings would increase to 69 cents and revenues would decrease by five per cent, according to Thomson Reuters.
The appreciation of the Canadian dollar reduced sales by $12.1 million, while the closure of corporate stores in previous quarters trimmed sales by $5 million.
Adjusting for these factors, earnings from continuing operations reached $14.6 million, or 74 cents per share, compared with $14.1 million, or 71 cents last year.
U.S. sales decreased to $213 million from $220 million, but organic growth was 3.5 per cent when excluding foreign exchange variations.
Sales for the Canadian operations decreased $3 million to $136 million. The decrease was exclusively due to store closures.
Roy said Uni-Select is gaining market share in Canada even though conditions haven't been very positive so far this year.
Demand has been dampened because of hits absorbed by workers in Canada's battered manufacturing sectors and a new vehicle inspection policy in Nova Scotia. Annual inspections have given way to checks every two years, but this year is an off-year.
"After a very strong year of growth last year, quite frankly we don't see it this year."
Hugues Bourgeois of National Bank Financial called the results average.
"A beat but organic growth remains modest," he said in a report.
The automotive parts company was founded by 12 businessmen in 1968 who joined forces to form a purchasing group for after market parts.
It has grown to become the Canadian leader and the seventh-largest parts distributor in North America with sales in 2008 exceeding $1.3 billion.
Uni-Select has 65 distribution centres, 271 stores and 4,823 employees. It has one of the largest networks of independent automotive parts wholesalers with 2,500 jobbers and 3,500 points of sale, and offers more than 350,000 different part numbers.
Uni-Select recently locked out 90 workers at its Boucherville, Que., warehouse on the south shore of Montreal.
The company and the union representing the employees have been in negotiations with the help of a mediator. Their collective agreement expired Sept. 30. At issue are the group insurance plan and salaries.
On the Toronto Stock Exchange, Uni-Select's shares closed at $26.50, up 46 cents or 1.77 per cent in Wednesday trading.