Wajax Boosts Profits, Proving Resilience Amidst Revenue Decline

TORONTO, ON – May 04, 2026 – Wajax Corporation (TSX: WJX) today demonstrated a striking feat of operational discipline, reporting a significant jump in profitability and cash flow for the first quarter of 2026, even as overall revenues declined in a mixed Canadian industrial market. The results mark the first quarter under the leadership of new President and CEO George McClean, showcasing a company adept at navigating economic headwinds through stringent cost controls and margin enhancement.

The industrial products and services provider saw its revenue dip 9.5% to $502.1 million from $555.0 million in the same period last year. However, net earnings surged by an impressive 35.9% to $17.8 million, or $0.82 per share, up from $13.1 million, or $0.60 per share, in Q1 2025. This performance highlights a successful strategic focus on profitability over pure volume.

A Tale of Two Metrics: Revenue vs. Profitability

Wajax's first-quarter story is one of strategic trade-offs. While the top line shrank, key indicators of financial health showed marked improvement. The company’s gross profit margin expanded by 150 basis points to 20.6%, a direct result of what the company calls "margin improvement initiatives and sales mix." This suggests a deliberate shift towards higher-margin activities, even at the expense of some lower-margin equipment sales.

The disciplined approach was further reflected in the company's cash generation and balance sheet. Wajax generated $46.8 million in cash from operations, a substantial increase from the $25.7 million in the prior-year quarter. This robust cash flow helped the company reduce its leverage ratio to 1.51 times, an improvement from 1.62 times at the end of 2025 and comfortably within its target range.

"Our first quarter results reflect continued progress against our operational priorities, with improved margins, strong operating cash flow and further reduced leverage, despite lower year-over-year revenue," said George McClean, President and Chief Executive Officer. "We maintained a strong balance sheet and delivered meaningful improvements in gross profit margin and working capital efficiency, reflecting the benefits of our ongoing operational focus."

Navigating a Fragmented Industrial Landscape

The 9.5% revenue decline was not uniform, revealing a Canadian industrial economy operating at different speeds. The drop was most pronounced in Western Canada, where revenue fell 14.0% due to softer construction and forestry equipment sales. The region's results were also impacted by the delivery of only one large mining shovel compared to two in the same quarter last year, a significant factor given the high value of such equipment.

Central Canada saw a 9.5% revenue decrease driven by weakness in the material handling and industrial parts categories, while Eastern Canada experienced a more modest 3.3% dip. This regional breakdown aligns with broader economic trends, including persistent challenges in the forestry sector, which is grappling with U.S. tariffs exceeding 45%, and a construction industry facing high costs and uncertainty.

Despite these pockets of weakness, Wajax reported "solid customer demand in the mining and energy sectors." The company's backlog, a key indicator of future revenue, stood firm at $521.7 million, slightly up from the end of 2025, and includes an order for another large mining shovel scheduled for delivery within the next year. This diversification appears to be a key element of its strategy to weather sector-specific downturns.

The Margin Enhancement Playbook

The significant improvement in profitability metrics is the quarter's standout achievement. While the company did not detail every initiative, the results point to a successful execution of a multi-faceted strategy. The expansion in gross margin was attributed to higher-margin sales in industrial parts and Engineered Repair Services (ERS), coupled with a sales mix that featured a lower proportion of traditionally lower-margin equipment sales.

Furthermore, selling and administrative expenses decreased by $5.1 million compared to the prior year, signaling tight cost control across the organization. This combination of optimizing the sales mix for profitability and rigorously managing expenses allowed Wajax to grow its bottom line even as its top line contracted.

This performance contrasts with some competitors but also reflects an industry trend. Toromont Industries, for example, reported a strong 13% revenue increase in its first quarter, largely propelled by its equipment group and a booming data center enclosure business. However, like Wajax, Toromont also saw significant margin expansion, with its gross profit margin rising 340 basis points. This suggests that while top-line performance varies based on specific market exposures, a sharp focus on operational efficiency and profitability is a common and successful strategy among Canada's industrial leaders.

A New CEO's Steady Hand

These results were delivered under the new stewardship of George McClean, who took the CEO role on March 3, 2026. Rather than signaling a radical strategic shift, the quarter's performance suggests a doubling down on the disciplined approach that has characterized Wajax's recent strategy. The focus on margin improvement, cost control, and strengthening the balance sheet appears to be the core playbook for navigating the current economic climate.

Mr. McClean acknowledged the challenges ahead, noting that "customer uncertainty persists, with increased caution across certain sectors." He affirmed the company's direction, stating, "our focus remains on disciplined execution. We continue to prioritize cost control and margin improvement, supported by prudent capital allocation."

Reinforcing this message of stability and confidence, Wajax announced it will pay a dividend of $0.35 per share for the second quarter. This commitment to shareholder returns, backed by strong cash flow and a fortified balance sheet, sends a clear signal that management believes its strategy can deliver sustainable value, even as it navigates a complex and uncertain market. The company's focused execution will be closely watched as it manages near-term variability while aiming to strengthen its foundation for long-term performance.