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AutoCanada Inc. (ACQ.TO) is holding its quarterly dividend at 25 cents a share, but plans to cut capital spending and trim costs by $15-million.
The largest publicly owned auto dealership group in the country is being buffeted by the collapse in oil prices, which has devastated the Alberta economy and sent vehicle sales plunging in the province, where the company has its largest single concentration of dealerships.
“We continue to closely monitor the economic environment in our key markets, and the automotive environment in the Canadian economy, generally, and Alberta in particular, suggests that fiscal 2016 will be more challenging than the previous year from a retail perspective,” Tom Orysiuk, AutoCanada’s chief executive officer, said in a statement.
Capital spending will be cut by $34-million from the previous forecast of about $83-million made last November, when the company announced its third-quarter financial results.
That reduction could come in the form of deferral of construction on new dealerships or delays in spending money to upgrade outlets to meet requirements imposed on dealers by auto manufacturers, AltaCorp Capital analyst Chris Murray said in a research note.
All of AutoCanada’s dealerships except two were profitable last year, Mr. Orysiuk said, “though in the case of our Western Canada dealerships, some were at significantly reduced levels as compared to previous years.”
Vehicle sales fell by 12 per cent in Alberta from 2014 levels. Residents of Saskatchewan bought 5 per cent fewer vehicles last year than a year earlier.
Consumer credit firm TransUnion said last week that delinquency rates on auto loans rose almost 10 per cent last year, led mainly by increases in Alberta and Saskatchewan.
Delinquency rates on auto loans and leases rose to 2.42 per cent in Alberta in the fourth quarter of 2015 from 1.8 per cent a year earlier. Saskatchewan’s delinquency rate was the highest in the country in the fourth quarter at 2.66 per cent.
Nonetheless, Mr. Orysiuk said the challenging environment is likely to provide good acquisition opportunities. Cutting capital spending and costs will make sure AutoCanada has the ability to take advantage of potential opportunities, he noted.
The company raised $75-million in December through an equity financing.