AutoCanada Inc.’s net income fell in the ultimate three months of 2022 as the corporate took a writedown on its used-vehicle inventory and saw floorplan financing costs climb with rates of interest.
Canada’s only publicly traded dealership group reported net income of $14.8 million for the fourth quarter on March 1, in comparison with $69.4 million the 12 months before.
Used-vehicle writedown provisions cost the corporate $12.4 million throughout the quarter, while added floorplan financing costs amounted to $13.3 million.
“These recent hits to profitability impacted what was otherwise a historic quarter for AutoCanada,” said the corporate’s Executive Chairman Paul Antony on a conference call with financial analysts March 2.
Despite the lower net income, AutoCanada revenue hit a fourth quarter record of $1.4 billion, up from $1.2 billion in the identical quarter of 2021. For the 12 months, AutoCanada reported revenue of $6 billion for 2022, up from $4.6 billion for 2021.
Antony said “continued fluctuations” in used vehicle pricing prompted the writedown, before adding that the revaluation positions the corporate’s used inventory properly heading into the spring selling season. On Jan. 1, AutoCanada also implemented recent measures to raised address changes in used-vehicle prices, rolling back a change it had enacted because the used market accelerated throughout the pandemic.
After rising steeply in 2020 and 2021 to a peak in March 2022, used-vehicle prices in Canada declined within the second half of 2022, in accordance with the Canadian Black Book Used Vehicle Retention Index. Used-vehicle values declined about 5.4 per cent between March and December of 2022, the index shows.
AutoCanada’s gross profits on used vehicles were lower in the ultimate three months of 2022, though its used sales climbed 21.2 per cent throughout the quarter to achieve 14,418 vehicles.
This compares to a 1.3-per-cent decline in new-vehicle sales for the period across AutoCanada’s 82 new-vehicle dealerships in Canada and the USA.
Despite the present challenges, Antony said the corporate continues to maneuver further into the used market in pursuit of growth.
“We see ourselves as being a hybrid of numerous the biggest auto retailers within the U.S., and CarMax. … We would like a bunch of new-car dealerships and a bunch of used-car dealerships that sell each online and in-store.”
Within the fourth quarter, the corporate sold 1.78 used vehicles for every recent vehicle sale. This compares to a used-to-new ratio of 1.45 in the identical period of 2021, and a ratio of 0.88 within the fourth quarter of pre-pandemic 2019.
The corporate can also be expanding its presence within the collision centre and vehicle repair business.
On Feb. 27, it announced the acquisition of DCCHail, a paintless dent repair company specializing within the insurance claim management process and repairing hail damaged vehicles, with a national presence, including Canada’s largest hail repair facility in Calgary, Alta.
DCCHail generates greater than $15 million in annual revenue, AutoCanada said.
“The present management team will proceed to operate the business going forward,” the corporate said. “Aside from continuing to strengthen the operation’s performance, the acquisition unlocks additional growth opportunities, including the potential to expand the business by leveraging AutoCanada’s dealership, parts and repair and collision platforms.”