Toromont Industries Q2 Earnings Call Highlights

Key Points

• Toromont’s second-quarter revenue rose 16% and operating income increased 41%, driven primarily by the Equipment Group, while earnings per share were roughly unchanged because of CAD 54.3 million in AVL purchase-commitment expenses. Excluding those costs, net earnings increased 42% year over year.
• The Equipment Group delivered broad growth, including a 72% increase in mining revenue, a 43% rise in power-systems equipment revenue and a 47% increase in operating income. Bookings surged 196%, supported by a previously announced CAD 1 billion power-systems order expected to be largely delivered in 2027.
• AVL is expanding rapidly: quarterly revenue tripled to CAD 171 million, Toromont raised its ownership to 80% and plans a new Ontario facility expected to begin production in mid-2027 and add 40%–50% to overall AVL capacity. CIMCO was weaker in the quarter due to project timing, with operating income down 20%.

Toromont Industries TSE: TIH reported higher revenue and operating income in the second quarter of 2026, led by growth in its Equipment Group and expanding production at its AVL power-generation enclosure business. Net earnings were largely unchanged from the prior-year quarter, however, due largely to expenses associated with its commitment to acquire the remaining AVL shares.

“Revenue and earnings increased, reflecting solid execution across the business,” President and Chief Executive Officer Mike McMillan said on the company’s earnings call. The Equipment Group posted growth in new and used equipment, enclosures, rentals and product support, while CIMCO’s quarterly results were modestly lower due to project timing and investment spending.

Consolidated Results and Financial Position

Consolidated revenue increased 16% in the second quarter and 15% in the first half of 2026. Operating income rose 41% for the quarter and 42% for the first six months, supported by higher sales and improved gross margins, partly offset by increased selling, general and administrative expenses.

On a year-to-date basis, operating income represented 13.6% of revenue, compared with 11% a year earlier. Net earnings increased 9%, or CAD 18.4 million, in the first half. Basic earnings per share were CAD 1.53 in the second quarter, largely unchanged year over year, and CAD 2.66 for the first half.

Chief Financial Officer John Doolittle said the company recorded CAD 54.3 million of AVL purchase-commitment expenses in the second quarter, compared with CAD 1.7 million a year earlier. The expenses include the valuation of Toromont’s commitment to buy outstanding AVL shares, based on actual and expected results, as well as dividends paid to non-controlling interests.

Excluding those purchase-commitment expenses, net earnings increased 42% in both the quarter and first half from 2025, Doolittle said.

Toromont ended the first half with CAD 1.2 billion of cash and CAD 449 million available under existing credit facilities. Its net debt-to-total-capitalization ratio was negative 13%. The company’s return on equity was 17% in the second quarter, below its 18% target through the business cycle. McMillan said the AVL share purchase expenses reduced ROE by about 1.5 percentage points.

The board approved a quarterly dividend of CAD 0.56 per share, payable Oct. 2, 2026.

Equipment Group Drives Growth

The Equipment Group’s revenue rose 18% in the second quarter and 16% in the first half. Equipment sales, including new and used equipment, increased 27% during the quarter, with new-equipment sales up 31%, driven by mining deliveries and power-systems markets. Used-equipment sales increased 2%.

• Mining equipment revenue increased 72% in the quarter.
• Power systems equipment revenue increased 43%.
• Construction equipment revenue declined 1%.
• Material-handling equipment revenue declined 32%.
• Rental revenue rose 11%, including gains of 25% in heavy-equipment rentals and 18% in power rentals.
• Product-support revenue increased 8%, reflecting greater equipment utilization and a larger technician workforce.

Equipment Group gross profit margin increased 270 basis points in the quarter, helped by favorable equipment sales mix and higher rental utilization. Operating income increased 47%, while selling and administrative expenses rose CAD 20 million, or 13%, as the company continued to invest in staffing, training, travel and other growth initiatives.

Bookings increased 196%, primarily due to higher power-systems orders including AVL. The increase included a previously announced CAD 1 billion order expected to be delivered substantially during 2027. McMillan said the order covers multiple locations, largely on the U.S. East Coast, and consists of multiple purchase orders under a larger commitment. Doolittle said AVL continues to support the Caterpillar network, with most of the related activity in the U.S.

McMillan said construction activity has improved modestly, including in rentals, though residential-related demand remains subdued. He said road construction, repaving and other infrastructure work are contributing to activity, while federally announced large projects remain in early stages. Toromont expects potential tailwinds to build into 2028.

AVL Expansion and Capacity Plans

AVL revenue was CAD 171 million in the second quarter, compared with CAD 57 million in the prior-year period. First-half AVL revenue was CAD 300 million, compared with CAD 79 million in the first half of 2025.

Toromont increased its ownership interest in AVL to 80% during the quarter and purchased land north of Hamilton, Ontario, to support future manufacturing expansion. Doolittle said the land cost about CAD 20 million and that total investment in the project could be about CAD 75 million, including the eventual facility build-out.

The new site is not expected to begin production until mid-2027. Once fully ramped, it is expected to add approximately 40% to 50% of capacity across AVL’s overall business, including its Canadian and Charlotte, North Carolina, operations. Doolittle said the Charlotte facility is expected to reach full capacity exiting the third quarter and be near capacity in the fourth quarter.

Management said AVL’s margin profile has remained solid and does not expect a major change at existing facilities. However, the startup of the new Canadian facility could create some margin pressure from costs incurred ahead of revenue, similar to the Charlotte ramp.

CIMCO Revenue Edges Lower

CIMCO revenue declined 1% in the quarter but increased 1% in the first half, largely due to construction-project timing. Quarterly package revenue fell 5%, as a 50% decline in recreational activity was partly offset by a 32% increase in industrial-market revenue. Product-support revenue increased 6% in the quarter.

CIMCO’s gross profit margin declined 90 basis points in the quarter, reflecting the nature and timing of projects in process. Selling and administrative expenses increased CAD 2 million, or 10%, while operating income declined CAD 3 million, or 20%.

Bookings were essentially unchanged in the quarter but increased 11%, or CAD 16 million, in the first half. CIMCO’s backlog was CAD 375 million, up 7% from a year earlier, with about 75% expected to be realized over the next 12 months, subject to construction schedules.

Looking ahead, McMillan said Toromont’s total backlog of CAD 2.9 billion continues to grow and that equipment supply is positioned to support customer requirements. The company said it will continue to monitor trade negotiations between Canada and the U.S., foreign-exchange movements and broader economic conditions while maintaining investments in technician recruitment, digital capabilities and customer support.

About Toromont Industries (TSE:TIH)

Toromont operates through two business segments: The Equipment Group and CIMCO. The Equipment Group includes one of the larger Caterpillar dealerships by revenue and geographic territory - spanning the Canadian provinces of Newfoundland & Labrador, Nova Scotia, New Brunswick, Prince Edward Island, Québec, Ontario, and Manitoba in addition to most of the territory of Nunavut. In addition, the Equipment Group includes industry leading rental operations, and a complementary material handling business.

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