Rona Inc tops estimates in potentially last report as Canadian-controlled retailer

MONTREAL – Home reno retailer Rona Inc. wrapped up what could be its this past year as a Canadian-controlled company by beating expectations on higher sales in the fourth quarter, though one analyst says this matters little to shareholders because the clients are poised to simply accept an ample takeover offer from U.S. Lowe’s Cos Inc.

“We are on the right track and we still improve our network in strategic places where individuals are not well served by the local offer where we see chance of market consolidation and strong growth,” said Rona CEO Robert Sawyer in an analyst conference call Tuesday.

“Having said this, until the expected closing of the announced transaction with Lowe’s, we’ll still focus on the execution in our business plan and the realization of our financial objectives.” 

The Boucherville, Que.-based firm said it had a net gain of $21.2 million or 20 cents per be part of the 13 weeks ended Dec. 27, when compared with $17.3 million or 15 cents per share a year earlier. Rona also boasted its sixth consecutive quarterly increase in same-store sales.

For the entire year, net profits decreased to $68.05 million from $78.25 million. Excluding restructuring and other costs, adjusted net income grew to $261.7 million from $235.4 million in 2014.

Rona said a good performance in Ontario and British Columbia together with warmer weather conditions prolonged your building and renovation season in a number of regions of the nation, offsetting challenging economic conditions in Alberta and also the Atlantic provinces.

“The disciplined execution in our merchandising plans and strategic network expansion yielded good results, regardless of the uncertain economy, ongoing competition and hard market conditions in some regions,” said Rona CEO Robert Sawyer.

BMO Nesbitt Burns Inc. analyst Peter Sklar said that, as the performance slightly exceeded expectations, the outcomes aren’t relevant given the $3.2-billion friendly takeover offer in the U.S. do it yourself giant Lowe’s.

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In Feb. 3, Rona applied for an deal to which Lowe’s agreed to acquire all the issued and outstanding common shares at a cost of $24, representing a premium of 104-per-cent premium towards the closing share price a day earlier.

It can also be 38 per cent above Rona’s 52-week high cost of $17.36 per share.

Sklar rated the results as “slightly positive,” having a target cost of $24 to mirror the Lowe’s offer.

“We continue to anticipate the transaction will proceed at the $24.00 per share offer price,” he explained inside a note to clients.

On the Toronto Stock market, the outcomes hardly moved the needle: Rona increased just 0.17 percent to $23.47 by 12:14 p.m. Tuesday.

When the Lowe’s offer was announced, however, the stock rocketed from $11.77 to $23.30.  

The transaction continues to be authorized by the boards of both companies, although it is susceptible to shareholder approval.

Shareholders will be asked to vote on the transaction between Lowe’s and Rona during a special meeting on March 31, and will require approval of 66.66 percent of common shareholders.

After the meeting, if the vote passes Rona will require the approval of Canada’s Competition Bureau and meet the requirements set out under the Investment Canada Act governing foreign ownership.

Dvanderlinde@nationalpost.com
Twitter.com/DamonVDL