Wajax (TSE:WJX) reported what management described as a steady fourth quarter for 2025, highlighting higher earnings, improved leverage, and gross margin expansion despite a modest decline in revenue. On the company’s webcast discussing Q4 and full-year results, President and CEO Iggy Domagalski and CFO Tania S. Casadinho emphasized inventory optimization, cost discipline, and margin improvement as key drivers of stronger cash generation and balance sheet metrics entering 2026.
Fourth-quarter results: modest revenue decline, stronger profitability
For the fourth quarter, Wajax reported revenue of CAD 560 million, down CAD 5.9 million, or 1%, year over year. Domagalski said the decrease was driven primarily by lower product support sales in Western and Eastern Canada, lower industrial parts sales in Central Canada, and lower equipment sales across all regions, partially offset by higher engineered repair services (ERS) revenue in all regions, particularly Eastern Canada.
Adjusted EBITDA was CAD 44 million, an increase of CAD 8.9 million, or 25.2%, from Q4 2024. Management cited higher gross profit margin and lower finance costs as the primary factors. Adjusted EBITDA margin was 7.9% in Q4 2025, up from 6.2% in Q4 2024, though down from 9.3% in Q3 2025.
Adjusted net earnings were CAD 0.71 per share, up CAD 0.36 per share, or 104.1%, from the prior-year quarter. Domagalski also noted the company’s total recordable injury frequency (TRIF) rate was 0.93 at the end of Q4, slightly lower than a year earlier, reiterating that safety remains the company’s top priority.
Regional and category performance: ERS growth offsets equipment and support softness
By region, Western Canada sales were CAD 261 million, down 4.9% year over year, due mainly to lower equipment and forestry sales, partially offset by higher mining equipment sales and higher ERS. Central Canada sales were CAD 95 million, down 4.4%, reflecting lower material handling equipment sales and lower industrial parts sales, partially offset by higher construction and forestry equipment sales and ERS. Eastern Canada sales increased 6.2% to CAD 203 million, driven primarily by higher ERS and higher equipment sales in power systems and construction and forestry, partially offset by lower material handling equipment sales.
Category detail for the quarter included:
- Equipment sales: CAD 206 million, down CAD 2.6 million (1.2%) year over year, with declines in material handling (Central and Eastern Canada) and construction and forestry (Western Canada), partly offset by higher power systems sales (Eastern Canada), higher construction and forestry sales (Central and Eastern Canada), and higher mining sales (Western Canada).
- Product support sales: CAD 124 million, down CAD 8.5 million (6.4%), primarily due to lower power systems revenue in Western and Eastern Canada and lower construction and forestry revenue in Western Canada.
- Industrial parts sales: about CAD 131 million, down CAD 3 million (2.3%), driven mainly by lower sales in Central Canada.
- ERS sales: about CAD 88 million, up CAD 9 million (11%), reflecting higher revenue in all regions, especially Eastern Canada, which management said was largely due to timing of larger projects.
On the call’s Q&A, Domagalski said product support was “just a kind of a regular quarter,” and framed improved margins as a result of the company’s internal margin enhancement initiatives rather than a change in demand dynamics.
Backlog, inventory, and leverage: destocking drives balance sheet improvement
Casadinho said Q4 backlog was CAD 516.6 million, down CAD 10.1 million sequentially from Q3 and down CAD 47.8 million year over year. She attributed the sequential change to an increase in power systems backlog driven by the River-class destroyers subcontract entered into with Irving Shipbuilding Inc., partially offset by lower backlog across other categories—most notably in mining—following the sale of two large mining shovels that had been in backlog at September 30, 2025.
The year-over-year backlog decline was primarily due to lower mining backlog—driven by the sale of six large mining shovels since December 31, 2024—and lower material handling backlog, partially offset by increased power systems backlog associated with the long-term River-class destroyers contract and higher ERS orders. Backlog at December 31, 2025 included two large mining shovels.
Inventory declined CAD 58.2 million from Q3 2025 and fell CAD 126.4 million from Q4 2024. Casadinho said inventory optimization initiatives have reduced inventory by more than CAD 200 million from peak levels at March 31, 2024. Inventory turns improved to 2.5x, up from 2.0x in Q4 2024, which management attributed primarily to lower average inventory levels.
Cash flows generated from operating activities were CAD 81.5 million in Q4, essentially flat with CAD 81.4 million in the prior-year quarter. For full-year 2025, operating cash flow rose to CAD 194 million versus CAD 75.1 million in 2024. Casadinho said the improvement was mainly due to decreased inventory and lower rental equipment additions, partially offset by lower accounts payable and accrued liabilities.
Leverage improved to 1.62x at the end of Q4 from 2.28x in Q3, which management linked to lower debt driven by operating cash flow. Casadinho said leverage was back within the company’s target range of 1.5x to 2.0x.
The company also amended its bank credit facility on October 24, 2025, extending maturity to October 24, 2029 from October 1, 2027, with no change to the credit limit. Available credit capacity was CAD 266.9 million at quarter-end, which management said was sufficient for working capital, maintenance capital, and planned strategic initiatives.
Wajax’s board approved a Q1 2026 dividend of $0.35 per share, payable April 2, 2026 to shareholders of record on March 16, 2026.
Full-year 2025 and 2026 outlook: mixed markets, continued focus on costs and margins
For the full year, Domagalski said Wajax generated revenue of CAD 2.145 billion, up from CAD 2.097 billion in 2024. Adjusted basic EPS was CAD 2.90 versus CAD 2.44 in 2024, while operating cash flow increased to CAD 194 million from CAD 75.1 million. Inventory ended the year at CAD 547.6 million, down CAD 126.4 million year over year.
Looking to 2026, management said it will continue focusing on disciplined cost control, inventory optimization, and margin improvement. Domagalski added that Wajax continues to see strong customer demand in mining and energy, with mining demand reflected in two large mining shovels in backlog for delivery over the next five quarters. He also described conditions in other sectors as mixed across regions, citing macroeconomic softness and uncertainty related to Canada-U.S. tariffs and trade dynamics.
In Q&A, management addressed several operating themes:
- SG&A efficiency: Domagalski said the company aims to operate “within that lower end of the range,” indicating the lower end is now about 14% of revenue on a full-year basis, while noting quarterly results will vary with revenue volume.
- Gross margin dynamics: Management said Q4 margin softness versus Q3 was partly mix-driven, while reiterating focus on continuing improvements seen in the latter half of 2025.
- River-class destroyers contract: Domagalski said Wajax had pursued the opportunity for seven years and expects the majority of the revenue to be recognized between now and 2029. He also confirmed the full value is included in backlog.
- Capital allocation: Domagalski said Wajax typically spends about CAD 15 million annually on facility maintenance and about CAD 15 million on its material handling rental fleet, and noted the company may be “opportunistic” on acquisitions while continuing to integrate prior deals.
Leadership transition: new CEO effective immediately
Domagalski said the board and he agreed in October to initiate a CEO succession process, which has now concluded. He announced George McClean as Wajax’s new President and CEO, effective later that day, with McClean also joining the board. Domagalski said he would remain with the company until March 20 to support the transition.
About Wajax (TSE:WJX)
Wajax Corp is a Canadian distributor of industrial components. The company’s core business is the sale of parts and service support of equipment, power systems, and industrial components through a network of branches in Canada. Most of its revenue is generated from the sale of equipment which includes machinery and components used for construction purposes and its industrial components find utility in businesses like mining, forestry, and material handling for other industrial purposes. It sells to leading manufacturer brands such as Hitachi, JCB, Bell, Hyster, Palfinger and other similar industries.
