AutoCanada Inc. swung to a loss in the fourth quarter of 2023, as higher interest rates added to floorplan costs and a large, one-time charge pushed the company into the red.
The Edmonton-based dealership group reported a loss of $22.6 million or 81 cents per share for the final three months of the year on March 7, compared to earnings of 52 cents per share in the same quarter a year earlier.
Company CFO Azim Lalani said nearly $40 million in one-time expenses were the main driver of the quarterly loss. The charges, equating to $1.5 per share, were tied to AutoCanada’s consolidation of ownership in its Used Digital Division as part of a deal disclosed Dec. 27.
Without these share-based compensation and transaction costs, the company would have posted earnings of 69 cents per share for the quarter, Lalani told financial analysts on a conference call March 7.
But heightened borrowing costs also took their toll on company earnings, said AutoCanada’s Executive Chair Paul Antony.
“Higher interest rates were a headwind during the fourth quarter and last year, resulting in greater floorplan and finance costs, and impacting consumer affordability and financing preferences,” he told analysts.
Floorplan interest expenses doubled year-over-year, he added, rising to $68.6 million in 2023 from $33.6 million the previous year.
Despite the negative quarterly earnings, the company’s revenue remained positive, rising in the final three months of 2023 to $1.48 billion from $1.39 billion in the same period of 2022. That's up 6.9 per cent. For the full year, AutoCanada posted revenue of $6.44 billion, up from $6.04 billion in 2022.
Canada’s only publicly traded dealership group owns 66 franchised dealerships in Canada, as well as 18 in the United States.
CORRECTION: A previous version of this report understated AutoCanada's fourth-quarter revenue. The dealership group's revenue rose to $1.48 billion from $1.39 billion.
