Ritchie Bros. Auctioneers Q3 2011 results: Net earnings down 9 percent from last year
Ritchie Bros. Auctioneers Inc. net earnings for the nine months ended Sept. 30, 2011 were $49.9 million, or $0.47 per diluted share, and adjusted net earnings were $46.9 million, or $0.44 per diluted share.
This compares to net earnings of $52.1 million and adjusted net earnings of $51.4 million, or $0.48 per diluted share for the nine months ended Sept. 30, 2010, representing a 9 percent decrease in adjusted net earnings. Adjusted net earnings is a non-GAAP financial measure and is defined below. The company’s auction revenues for the first nine months of 2011 grew 5 percent to $282.7 million compared to $269.1 million for the same period in 2010. The company conducted 157 unreserved industrial auctions in 13 countries throughout North America, Europe, the Middle East, Central America and Australia during the first nine months of 2011.
“We are pleased with the successful launch of our new services and early reviews from our customers are very encouraging,” Peter Blake, the company’s CEO, said in a written statement about the earnings results. “Our third quarter earnings came in well below last year’s earnings, however our outlook for our full year results remains unchanged and we believe we are on track to achieve our targets for the year. During the third quarter, market conditions became more challenging due to economic uncertainty and the sudden erosion of confidence, particularly in the US market. This exacerbated the already tight supply of equipment, which reflects reduced manufacturer production over the last couple of years, inhibiting the velocity of transactions in the used equipment market.
The company also announces the declaration of its quarterly cash dividend of $0.1125 per common share payable on Dec. 9, 2011 to shareholders of record on Nov. 18, 2011.
Gross auction proceeds and auction revenues
For the nine months ended Sept. 30, 2011, gross auction proceeds were $2.7 billion, 8 percent higher than the first nine months of 2010. Gross auction proceeds is a non-GAAP financial measure and is defined below.
The company’s auction revenue rate (auction revenues as a percentage of gross auction proceeds) was 10.57 percent during the first nine months of 2011 compared to 10.85 percent in the first nine months of 2010. The company’s at risk business, comprised of guarantee and purchase contracts, represented 35 percent of gross auction proceeds in the first nine months of 2011 (first nine months of 2010 – 22 percent).
The company achieved gross auction proceeds of $673 million for the third quarter of 2011, representing a 10 percent decrease compared to the third quarter of 2010. Auction revenues were $79.7 million for the three months ended Sept. 30, 2011, compared to $82.2 million for the third quarter of 2010, a decrease of 3 percent. The Company’s auction revenue rate was 11.84 percent for the third quarter of 2011 and 10.95 percent for the third quarter of 2010. The Company’s revised fee structure, which came into effect on July 1, 2011, contributed $9 million to auction revenues during the quarter.
Net earnings for the quarter
Net earnings and adjusted net earnings for the quarter ended September 30, 2011 were $6.5 million, or $0.06 per diluted share, which is a 51 percent decrease compared to net earnings and adjusted net earnings of $13.4 million, or $0.13 per diluted share, for the three months ended September 30, 2010.
Online bidding statistics
Ritchie Bros. sold over $770 million of equipment, trucks and other assets to online bidders during the first nine months of 2011, representing a 24 percent increase compared to the same period in 2010 (first nine months of 2010 – $620 million). Internet bidders comprised approximately 50 percent of the total bidder registrations at Ritchie Bros. industrial auctions in the first nine months of 2011. Since launching its real-time online bidding service in 2002, the Company has now sold over $4.9 billion worth of trucks, equipment, and other assets to online bidders, confirming Ritchie Bros.’ position as the world’s largest seller of used equipment and trucks to online buyers.
There was a 23 percent increase in the number of visitors to rbauction.com for the nine months ended Sept. 30, 2011, compared to the same period in 2010. More than 3 million visitors made 8.0 million visits to the website during the nine months ended Sept. 30, 2011 compared to 2.4 million visitors and 7.2 million visits, respectively, in the same period in 2010.
New Services and Fee Structure
On July 1, 2011, as previously announced, the company launched a range of value-added services for its customers in the United States and Canada, with many of these services also available at other auctions around the world. These value-added services include the Detailed Equipment Information program, Insurance Services and Powertrain Service Warranty.
In addition, Ritchie Bros. Financial Services (RBFS) began providing financing options for customers who purchase equipment at Ritchie Bros. auctions. The company expects to complete the roll out of these services to its remaining auction locations around the world in the future. The company’s value-added services are designed to extend the appeal of its auctions, thereby enhancing the Company’s ability to retain existing customers and attract new customers. In addition, Ritchie Bros.’ revised administrative fee structure took effect on July 1, 2011.
Blake notes that it’s “important to remember that our auctions are not fixed in a quarter and this was evident in this quarter as a number of auctions that occurred in quarter three 2010 will take place in quarter four 2011.”
He says that in the third quarter, 30 percent of the compnay’s gross auction proceeds were at risk, which is more in line with historical levels compared to the second quarter, though the company still intends to use it as an effective tool to compete for the limited supply of late model equipment.
“These market conditions had an effect on our business in the third quarter; however, the pricing environment for late model equipment remains firm and our fourth quarter auctions are building strongly ahead of the equivalent period in 2010,” Blake said. “Our gross auction proceeds for October 2011 were approximately $280 million compared to $180 million achieved during the same month in 2010.”