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Strong Q1 results: Revenue rose 13% and operating income increased 44% with operating margin up to 11.6%; net earnings were up 25% (EPS CAD 1.14), bookings jumped 44% and backlog reached CAD 1.7 billion.
AVL stake and ramp-up: Toromont bought an additional stake to reach 80% ownership for CAD 71m in cash and expects an approximate CAD 45m Q2 expense; AVL revenue surged to CAD 129m (from CAD 22.1m), is rapidly scaling capacity (Hamilton ~100%, Charlotte ramping) and contributed CAD 0.19 to EPS.
Operational strength and balance sheet: The Equipment Group led growth with 14% revenue gains, a 400-basis-point gross margin improvement and strong power-system bookings, while Toromont finished the quarter with CAD 1.2bn cash, net debt-to-capitalization of -12%, a CAD 0.56 quarterly dividend and reiterated CAD 400–450m CapEx guidance for 2026.
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Toromont Industries (TSE:TIH) reported higher revenue and earnings in the first quarter of 2026, citing strong execution across most areas of the business despite what President and CEO Mike McMillan described as “ongoing uncertainty in global trade markets.”
Executive Vice President and CFO John Doolittle said consolidated revenue increased 13% year-over-year in Q1, driven by a 14% increase in the Equipment Group and a 3% increase at CIMCO. Operating income rose 44% as higher revenue and gross profit margins more than offset higher expenses, with operating income margin improving to 11.6% versus 9.1% a year earlier.
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SG&A expenses increased 21% year-over-year. Doolittle attributed the change primarily to the inclusion of AVL, mark-to-market adjustments on DSUs, and other spending tied to growth investments including compensation, travel, and training. He also noted the provision for expected credit losses rose versus last year “reflecting certain exposures.”
Net earnings increased 25% (up CAD 18.3 million), and basic EPS was CAD 1.14. Doolittle said bookings increased 44% versus Q1 2025, while backlog ended the quarter at CAD 1.7 billion, up 30% year-over-year.
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McMillan said Toromont increased its ownership in AVL to 80% “by advancing the purchase of half of the shares that we did not currently own.” He emphasized the shares were held by a passive investor and did not affect the ownership position of Vince DiCristofaro, AVL’s president.
McMillan said Toromont paid CAD 71 million in cash for the additional stake and expects “an expense of approximately CAD 45 million to be recorded in the Q2 of 2026.” In the Q&A, Doolittle explained the CAD 45 million reflects the difference between the previously recorded purchase obligation and the negotiated price for the accelerated purchase, adding it will be presented as a separate purchase commitment expense and “does that reduce your taxable income or no?”—to which he responded, “No.”
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Operationally, management highlighted rapid scaling. McMillan said AVL continued to increase production to support data center requirements primarily in the Eastern U.S. Doolittle told analysts the Hamilton facility is operating at roughly “100% capacity,” while the Charlotte site “got up and running faster than we thought it might,” with margins improving versus Q4 2025. He said Charlotte exited Q1 at “slightly less than 50%” of its capacity and management expects Charlotte to “double the capacity by the end of the year, maybe sooner.”
AVL revenue was CAD 129 million in Q1 2026 versus CAD 22.1 million in Q1 2025. McMillan said the business contributed CAD 0.19 per share to basic EPS versus breakeven a year ago. He added Q1 results were net of approximately CAD 13.9 million of purchase commitment expenses, including a dividend paid to minority shareholders tied to fiscal 2025 earnings and cash.
Asked about potential U.S. Section 232 tariffs, Doolittle said that based on what the company knows, it does not expect 232 tariffs to have a material impact on AVL shipments out of Hamilton, while acknowledging tariff conditions can change day-to-day.
Doolittle said the Equipment Group posted 14% revenue growth, supported by equipment deliveries—“led by the significant growth in power systems”—as well as improved rental and product support revenue. Equipment sales (new and used) increased 18% year-over-year, with new equipment sales up 18% and used equipment sales up 21%.
Rental revenue increased 11% as the fleet grew and activity improved across markets and regions. Doolittle broke out rental trends including heavy equipment rentals up 38%, light equipment rentals up 8%, and power rentals up 52%, while material handling rentals were largely unchanged. Product support revenue rose 10% on higher parts and service activity.
Gross profit margins increased 400 basis points in the quarter, with equipment margins up 370 basis points on favorable sales mix, rental margins up 60 basis points on improved utilization, and product support margins up 10 basis points. Operating income increased 52% versus Q1 2025, though selling and administrative expenses rose CAD 27.9 million (up 22%), which Doolittle again attributed mainly to AVL, DSU mark-to-market impacts, and growth investments.
Bookings in the Equipment Group increased 45% year-over-year, led by power systems orders including enclosures, which Doolittle said were up 231% on strong demand and expanding capacity. He described mining as “lumpy,” with mining bookings up 96%, while construction bookings were down 1%.
CIMCO revenue rose 3% year-over-year. Package revenue increased 10%, supported by higher activity in recreational and industrial markets, but product support revenue declined 3% due to lower activity in the U.S. that more than offset higher activity in Canada.
Profitability declined as gross profit margins decreased 180 basis points, with package margins down 230 basis points due to the “nature and timing” of projects in process. Operating income fell CAD 3 million (down 36%) as lower margins and higher expenses outweighed the modest revenue growth.
CIMCO bookings increased 34% (up CAD 16 million), with industrial orders up 51% and recreational orders up 24%. Backlog increased 4% to CAD 360 million, and Doolittle said approximately 75% is expected to be realized over the next 12 months, subject to construction schedules.
On a question about CIMCO’s potential role in data centers, McMillan said opportunities exist but are evolving, noting the need to be involved early in cooling system selection, and adding the “largest opportunity at this stage is probably more in the Canadian marketplace.”
McMillan said non-cash working capital investment decreased 4% year-over-year, with lower inventory partly offset by higher accounts receivable and lower accounts payable driven by delivery timing. DSO decreased by three days to 40 days, and management said it continues to manage receivables and credit metrics closely.
Toromont ended Q1 with CAD 1.2 billion in cash and CAD 452 million available under existing credit facilities. Net debt to total capitalization was -12%, which management said positions the company to support operations amid changing economic conditions.
McMillan said return on equity was 17.3% in Q1, slightly below the company’s 18% target over the business cycle, and noted return on capital employed was 24.4%.
The company also announced a quarterly dividend of CAD 0.56 per share, payable July 2, 2026, to shareholders of record as of June 5, 2026.
Looking ahead, McMillan said Toromont is monitoring evolving U.S.-Canada trade developments, foreign exchange volatility, and broader macro trends. He also pointed to technician workforce investment as a strategic priority to support aftermarket services. On capital spending, Doolittle reiterated prior expectations for CAD 400 million to CAD 450 million of CapEx in 2026 and said projects including the Bradford distribution center and a new Toronto branch/head office are progressing, with additional investments discussed in the GTA, Quebec City, and remanufacturing expansion to serve eastern regions.
Toromont Industries Ltd is a Canadian industrial company. The company operates two business segments: Equipment Group and CIMCO. The larger segment by revenue, Equipment Group includes a Caterpillar dealership and rental operation of construction equipment. CIMCO offers solutions for the design, engineering, fabrication, and installation of industrial and recreational refrigeration systems. The company operates primarily in Canada and derives a smaller portion of sales from the United States of America.
The article "Toromont Industries Q1 Earnings Call Highlights" was originally published by MarketBeat.