Uni-Select's Q4 profit cut nearly in half to US$4.65M on economic, IT challenges

MONTREAL - Auto-parts company Uni-Select Inc. missed expectations after its fourth-quarter profit was cut nearly in half, impacted by a weak economy that saw more owners delaying their vehicle repairs, particularly in the northeastern U.S. and Eastern Canada.

The Quebec-based company, which reports in U.S. dollars, earned $4.65 million or 22 cents per share, compared to $9 million or 42 cents per share a year earlier.

Adjusting for one-time items, net income plummeted to $5.9 million or 27 cents per share, from $10.2 million or 47 cents per share in the year-ago period.

Analysts had expected Uni-Select would earn 39 cents per share in adjusted profits on $422 million of sales.

Revenues decreased to $424.3 million from $436.6 million a year ago.

Uni-Select (TSX:UNS) said the 2.8 per cent drop in quarterly sales was mainly due a temporary slowdown in the aftermarket business in the northeastern U.S. and in Eastern Canada, partially offset by acquisition-related sales in Florida and an extra day of activity.

U.S. sales were $298 million while revenues in Canada totalled $126 million.

The company said its results were hurt by economic conditions and delays in implementing enterprise resource planning software forced it to incur double the amount of IT costs by operating two systems at the same time.

"These (IT) problems were resolved in the first quarter of 2013 but we expect lingering effects during the first half of 2013," CEO Richard Roy said in a news release.

Uni-Select said it remains committed to making itself more efficient and effective by implementing a plan to reduce fixed costs and working capital.

"We will continue to focus our efforts on improving service and increasing recruitment of independent wholesalers and shops under Uni-Select's banner programs to increase sales and profitability," said Roy.

Leon Aghazarian of National Bank Financial said Uni-Select's large earnings miss in the quarter was caused mainly by softness facing the auto repair industry.

"While industry weakness is not a surprise to us, the magnitude of the impact on Uni-Select certainly was," he wrote in a report.

Benoit Poirier of Desjardins Capital Markets had forecast a weak quarter for Uni-Select based on the results of its peers.

"Consumer spending dwindled amid a wintry global economic climate, as demonstrated by the minimal spending on failure-related parts and continued willingness to defer vehicle maintenance," he wrote ahead of the results.

Poirier said he doesn't expect to see an improvement until later in 2013 and 2014.

Last year, the company converted 30 warehouses and 190 stores to the new IT system. It also closed 24 corporate stores, one warehouse and converted five warehouses to hub centres. Ten stores were added and about 200 support positions were eliminated.

For the full year, the company earned $30 million or $1.39 per share on $1.8 billion of sales. That compared to $53.3 million or $2.47 per share on $1.78 billion revenues in 2011.

Adjusted profits decreased 19 per cent to $46.5 million or $2.15 per share.

Sales in the United States increased nearly five per cent to $1.3 billion, while Canadian sales decreased to $520 million from $538 million in 2011.

Adverse economic conditions that had prevailed since the second quarter were not as significant for the full year.

On the Toronto Stock Exchange, Uni-Select's shares were down 39 cents at C$23.40 in early afternoon trading on Thursday.