GUELPH, Ontario — Hammond Power Solutions Inc. (“HPS”) today announced its financial results for the fourth quarter 2024.
“We are very pleased that we completed the year with record sales of $208 million. Strong shipments in the quarter were seen in Canada, India, and the United States. Significant Mesta projects also shipped in the quarter, and we reported nearly a full quarter of Micron sales, on track with our expectations” said Adrian Thomas, CEO of Hammond Power Solutions. “As with the previous quarter, there was a notable shift in product mix towards custom and configured products. On a year-to-date basis, sales were up 11%, and backlog remained steady from Q3 to Q4 as we shortened our lead times on custom power products while at the same time shipping more products overall in the quarter. Gross margins remained strong in the quarter and for the year. The high volume drove a record earnings per share of $1.99 for the quarter and $6.01 for the year. 2024 closed as another record year for HPS in terms of profitability, but just as importantly, we were successful at continuing to build a stronger company to continue growth into the future.”
The U.S. market experienced its strongest growth in the distributor channel with growth primarily driven by increasing sales in custom and configured products. General economic conditions in the U.S. deteriorated mid-year with slower industrial and commercial construction markets. The lower sales primarily affected standard stock and flow product, while shipments of custom product remained resilient. The Original Equipment Manufacturer (“OEM”) and private label channels grew moderately year-over-year, led by stronger sales to private label, capital equipment, mining and data centres.
The Canadian market was very strong in the year. It continued to achieve year-over-year growth through distribution channels in both stock and flow product and large projects in commercial construction, data centres, public infrastructure, mining and utilities.
The Company’s December 31, 2024 backlog decreased by 0.3% as compared to December 31, 2023 and has decreased 0.1% from Quarter 3, 2024. During the second half of the year, commercial construction and industrial markets began to moderate in their growth profile, while our capacity additions allowed us to ship more backlog than previous quarters.
“By most metrics, the fourth quarter was positive,” said Richard Vollering, CFO of Hammond Power Solutions. “Favourable sales and margins resulted in record profitability. Offsetting this, there were some late-year charges relating to the Micron acquisition and other investment initiatives that increased general and administrative expenses late in the quarter. Many of these expenses were project specific and we expect that SG&A will moderate to previous levels going forward. Working capital increased significantly, primarily due to a continued build-out of inventory to support our new warehousing initiatives. These levels will remain elevated until the transition is completed in 2025. Capital expenditures were $41 million for the year, related to our capacity expansion projects. The remainder of our program should be completed by the end of 2025, and will bring our total capacity to over $1.1 billion.”
The consolidated gross margin in 2024 increased to 32.8% versus 32.5% in 2023, an increase of 30 basis points. The improvement in gross margin was the result of higher volume that resulted in better operating leverage and a higher margin product mix as a result of relatively more custom and configured product sales. These areas of improvement were offset by slightly higher commodity costs and start-up costs at the new factory in Mexico.
Total selling and distribution expenses were $83,412 for 2024 versus $76,283 in 2023, an increase of $7,129 or 9.3%. On a percentage-of-sales basis, total selling and distribution expenses decreased to 10.6% of sales for 2024 from 10.7% in 2023. The year-over-year increase in selling and distribution expenses is a result of higher variable freight and commission expenses attributed to the increase in sales.
General and administrative expenses in 2024 were $76,106 compared to $68,007 for 2023, an increase of $8,099 or 11.9%. On a percentage-of-sales basis these costs have increased from 9.6% in 2023 to 9.7% in 2024. The increase is mainly due to ongoing strategic investments in people and resources to support our growth strategies as well as supporting higher levels of general business activity, offset by lower share-based compensation expenses.
Net earnings for 2024 finished at $71,531 compared to net earnings of $63,399 in 2023, an increase of $8,132 or 12.8%. The main contributors to the higher current year net earnings were higher sales and additional gross margin dollars. These gains were offset by increases in selling, distribution, general and administration expenses.
EBITDA for the year-ended December 31, 2024 was $112,873 versus $95,995 in 2023 – an increase of $16,878 or 17.6%. Adjusted EBITDA for 2024 was $130,484 versus $117,229 in 2023 – an increase of $13,255 or 11.3 %. Adjusted EBITDA excludes foreign exchange loss/gain and share based compensation expenses.
Basic earnings per share were $1.99 for Quarter 4, 2024 versus $1.68 in Quarter 4, 2023, an increase of $0.31. Year-to-date the basic earnings per share were $6.01 in 2024 compared to $5.33 in 2023, an increase of $0.68.
The Board of Directors of HPS declared a quarterly cash dividend of twenty-seven and a half cents ($0.275) per Class A Subordinate Voting Share of HPS and a quarterly cash dividend of twenty-seven and a half cents ($0.275) per Class B Common Share of HPS paid on December 20, 2024 to shareholders of record at the close of business on December 13, 2024 – the ex-dividend date was December 13, 2024. the Company has paid a total cash dividend of ninety-seven and a half cents ($0.975) per Class A Subordinate Voting Share and ninety-seven and half cents ($0.975) per Class B Common Share.
