Ritchie Bros. Auctioneers Inc. (RBA), the world’s largest auctioneer of industrial equipment, dropped to its lowest in six years as more competition for resale equipment brought second-quarter profit below estimates.
The stock plunged as much as 13 percent to C$17.88, the lowest since February 2006, in Toronto today. It was the biggest intra-day drop in a year. The stock fell 6.5 percent at C$19.20 at 12:28 p.m. and has lost 14 percent this year.
The company, based in Burnaby, British Columbia, reported adjusted earnings for the second quarter of 30 cents a share compared with 25 cents a year ago. The median estimate of 16 analysts surveyed by Bloomberg was for 36 cents a share. Profit was C$31.3 million this quarter compared with C$26.8 million the year before.
“People were expecting greater volume in Ritchie’s system and that didn’t happen,” said Hamzah Mazari, an analyst with Credit Suisse by telephone from New York. “Historically, Ritchie, in an economic recovery or a slow recovery, should be able to do close to double-digit gross auction proceeds growth, which they didn’t do this quarter.” Mazari has a neutral rating on the stock.
Increased competition in the sale of used equipment cut into the company’s profits, forcing it to offer people looking to sell their equipment price guarantees. On a conference call with analysts, Chief Executive Officer Peter Blake said these guarantees hurt margins when prices came down in the second half of the quarter.
“In general, we did see some softening for some equipment in the latter half of the quarter, particularly older model equipment,” he said in a conference call.
Ritchie had to guarantee 36 percent of its sales this quarter as equipment sellers looked elsewhere to find buyers, Stephen Volkmann, an analyst with Jefferies & Co. Inc., wrote in a note to clients.
“They are competing for used equipment with dealers who want to sell it, with brokers who want to sell it, with Craigslist and people selling things directly,” Volkmann said by phone from New York. “So they have to be a little bit more aggressive in going out and bidding for these lots of equipment.”
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