Message to Shareholders

Fellow Shareholders:

The world changed in 2020, and Toromont rose to meet the challenges. To protect our employees and customers from COVID-19 and address the essential requirements of the customers and communities we serve, we implemented rigorous measures to keep our stores, branches and warehouses operating safely. We also applied technology in new ways to respond to opportunity, more deeply entrench our financial disciplines and increase competitiveness. These changes served us well in 2020, and in some cases, will support better ways of doing business in the years to come.

Toromont earned $3.09 per diluted share in 2020 as we worked hard to address customer needs and responded to volatile market conditions without sacrificing service.

We also succeeded in remaining a safe and essential contributor to our customers’ successes in the markets we serve, completed high-priority business improvement and integration tasks and maintained a strong financial position. Leverage, as represented by our net debt to total capitalization ratio was 3% at year end, compared to 15% at December 2019, and 40% at December 2017, the year we made the largest acquisition in our history.

Toromont ended 2020 with substantial liquidity provided by a $500 million revolving credit facility and a $250 million one-year syndicated facility arranged in April 2020 as a precautionary measure. These facilities were undrawn at December 31, 2020.

While revenue of $3.5 billion was down 5% from the record achieved in 2019, the advantages of market diversification and coverage, along with the steadying business model effects of selling, renting and supporting leading brands, served us well in a challenging environment. Re-investment amounted to $133 million for rental fleets, branches and plants. This was lower than our three-year annual average of $208 million as we scaled rental inventory investment to demand signals.

We measure the efficiency and effectiveness of our use of capital through return on opening shareholders’ equity (“ROE”) and pre-tax return on capital employed (“ROCE”). In 2020, ROE was 16.6%, compared to our long-term goal of 18% after-tax over a business cycle. ROCE was 20.4% at December 31, 2020 compared to 22.9% at year-end 2019.

In February 2020, the Board announced a 14.8% yearover-year increase in Toromont’s dividend per common share on the strength of cash generation. Since 1968, Toromont has paid a dividend uninterrupted and has consistently grown the dividend annually for 31 years.

Teamwork at Its Finest

Each year, Toromont’s success is the result of the commitment, teamwork and tenacity of our employees. In 2020, the pandemic required even more, in the form of quick thinking and the courage to break habits formed over years in favour of physically distant ways of working. Team sacrifices were made at every level and in many ways. Many employees shared hours – a move that protected jobs and Toromont’s ability to respond to future opportunity. Technicians along with store, parts and remanufacturing personnel served as front-line responders, enabling Toromont to perform as an essential business for customers. Additional shifts in many locations provided the means for physical distancing. In the months following March, those who could work from home did so, and as 2020 ended, many employees continued to balance work and family obligations without the usual separation between the two. The Board of Directors, executives and senior leaders voluntarily reduced their compensation. Many specific safety measures and new protocols were introduced under the guidance of our Critical Incident Executive Response Team. Over the past few years, our mantra has been Building Together. As Toromont demonstrated in 2020, together is not defined in a physical sense but in the cohesion and collaboration that come from a shared sense of purpose.

2020 Revenues
New & used equipment - 42%
Refrigeration equipment - 5%
Rentals -10%
Product support – 43%
16.6% Return on opening shareholders’ equity.

Integration Progress

In late 2017, Toromont began a multi-year effort to integrate the Caterpillar territories of Québec and the Maritimes (“QM”) we acquired. This effort focused on elevating the performance of new and existing operations by sharing best practices and leveraging the talents of the combined organization. In 2018, the first stages were completed. Toromont brands were introduced across QM, key management appointments were made, Toromont’s branch model was embedded in Atlantic Canada and we invested to bring our full-service rental model to QM. In 2019, technology integration brought all Battlefield Equipment Rentals stores on the same management system and the Toromont Cat branch model was activated in Québec.

The key integration event of 2020 was the implementation of the Toromont Dealer Management System (“TDMS”) at Toromont Cat in QM, as well as the Québec operations of Toromont Material Handling. For our decentralized organization, TDMS has long been an indispensable tool for reporting, monitoring and benchmarking branch performance against system-wide key performance indicators. It also allows for greater working capital visibility and teamwork. While branch staff in new territories received training in our business approach since acquisition, TDMS creates the visibility they need to entrench Toromont’s customer service and financial disciplines. It is an enabler of alignment, authority and accountability execute and forms part of the backbone of customer-facing digital services and business analytics.

Operating with a unified technology platform cleared a path for two operational changes at Toromont Cat on January 1, 2021: the consolidation of our working practices for construction and mining businesses each under dedicated leadership. These changes eliminated the last regional silo that impeded full Eastern Canada alignment and represent the next step in achieving business excellence through tight integration.

Much more work is needed to unlock the full value of our larger scale, but 2020’s performance demonstrated that we can execute and leverage our strengths through technology.

Toromont Connect, an android-compatible application available free with every new Cat machine, was introduced in 2020 pre-COVID-19. Toromont feeds the application with machine information such as service hours and physical location and uses it to proactively advise customers of upcoming preventative maintenance events.

2020 Business Unit Highlights

Toromont Cat’s customers remained active in 2020. Although construction machine monitoring showed hours worked fell in the spring due to COVID-19 restrictions, some lost ground was recovered by late summer. Similarly, over 20 mines moved to care and maintenance rather than production at the outset of the pandemic. To conserve cash in response to uncertain economic conditions, many customers opted to buy used equipment instead of new machines and reduced their use of Toromont’s heavy rental fleet. We responded by increasing our used equipment supply and moving to match rental inventory with demand. Late in the year, some large construction accounts returned to the market to augment their fleets with new equipment purchases and most mines returned to production. The 52/48 revenue split in our mining business between precious metals and base metals/other resulting from the addition of QM territories improved our risk profile. Power Systems was a steady performer, completing several noteworthy projects and experiencing relatively healthy demand for customers, particularly data centres. The deployment of Power Systems proprietary IMACS+ project management software in QM enabled efficient project sharing using common methodologies. Dealership product support revenue was down from 2019. This reflected a cautious customer tone with decisions to defer maintenance and certified rebuilds, partly offset by Customer Value Agreements (“CVAs”) and relative strength in remanufacturing. Consistent with Caterpillar’s objective to offer clients additional value-added services and capitalize on aftermarket opportunities, we improved the attach rate of CVAs on new machine sales. Pre-scheduled mining fleet rebuilds and the expansion of Toromont Cat’s component exchange program in Québec were important contributors to the year’s results.

Battlefield Equipment Rentals made good use of its broad Eastern Canada footprint, augmented by a new store in Terrebonne, Québec, diverse product offering and digitally enabled marketing and sales capabilities to serve customers in 2020. These advantages, and sales of Cat machines to landscapers partially mitigated the Province of Québec’s decision to shutter construction sites for eight weeks at the beginning of the pandemic. After installing its fleet management and reporting system in QM in 2019, much attention was focused on improving the efficiency of service and delivery processes and maximizing returns per dollar invested in the regional fleet. Rental equipment coming back from job sites was returned to ready status faster than it was in the prior year as a result of better service disciplines and as technicians grew familiar with maintaining the expanded fleet. This meant better product availability for customers. The ongoing maturation of the inventory aging and product disposition cycle should contribute to improved performance over time.

Toromont Material Handling (“TMH”) continued where it left off in 2019 by embedding new business and financial disciplines with the help of TDMS. Another key highlight was the expansion of TMH’s customer base through new product offerings including Kalmar container handlers in Manitoba and Saskatchewan, Landoll and Bendi forklifts in Ontario and AUSA rough terrain forklifts throughout Eastern Canada. Broadening its range of products fits with TMH’s goal as a single-source supplier. TMH also brought greater focus to its rental business by clearing inventory of unpopular machines and replacing them with high-demand equipment. Growth in its workforce of mechanics, centralized quoting, and a new telephony system for its parts business were among efforts made to improve product support and market coverage. Due to its alignment with Caterpillar, Jungheinrich and Rocla, TMH is well equipped to meet demand for electric propulsion and autonomous lift vehicles. For environmental reasons, more customers are turning to these equipment styles and TMH’s related product support capabilities.

Jobsite Industrial Rental Services counted a joint win with Battlefield Equipment Rentals in securing a five-year labour, tooling and equipment agreement with a lubricants manufacturer and the opening of a new location in Vars, Ontario to serve customers in the Ottawa region and Québec, among its 2020 achievements. SITECH had a solid year on the strength of customer demand for its productivity and efficiency-enhancing machine control software, hardware and technology expertise. Silver Top Supply, acquired in 2019, introduced new cloud-based technology to help waste disposal customers capture weights and measures for faster invoicing and more precise environmental management.

AgWest made good progress in representing new combine machines. Specialization in the sales force brought greater focus to AGCO and CLAAS products. Reflecting the importance of product support to customer and business performance, more emphasis was placed on proactive machine inspections that led to maintenance work and parts sales. To more quickly respond to customer orders and more efficiently use internal resources, all parts counters were connected to a central phone system. Improved results over 2019 reflected good execution by the team and a better harvest.

CIMCO performed essential services for many industrial customers in 2020, including those in the food, beverage, energy and pharmaceutical markets. Fortunately, project backlog entering the pandemic was sizeable, which created a good base of business for a challenging year. Notable project wins included the first cold storage facility in Canada to use 100% CO2 refrigeration – 700 tonnes of it supplied by six rooftop refrigeration packages – and the design/build of a central refrigeration system that supplies three cooling temperatures as well as heat recovery for a large poultry plant. For CIMCO’s engineers, the poultry plant requires extensive and complex 3D modelling, while CIMCO’s automation group is creating control, data logging and alarm systems. Scheduled completion is June 2022. CIMCO’s prefabricating capabilities served as a safety control and cost advantage by reducing time on site at customer locations. Recreational markets struggled due to COVID-19 safety restrictions. However, CIMCO booked nine CO2 U.S. ice rink projects, including one in California. Product support revenue was effectively flat compared to 2019 as growth in industrial markets, driven by the presence of additional service technicians particularly in the United States, offset lower activity levels in recreational markets.

Sustainability at Toromont

Toromont operates with a long-term sustainability mindset. Our focus areas include workplace safety, workforce development and environmental management. In each area, our Board of Directors ensures we set realistic goals, create effective strategies, measure performance and account for our results.

Our Environmental, Social and Governance framework along with our principles and priorities are described here, while our 2020 activities are profiled in our Sustainability Report. To highlight a few developments:

  • The core measure of safety performance – Total Recordable Injury Frequency Rate – has declined 9% over the past five years with the help of 110,000 hours of safety training and continued vigilance
  • Efforts to foster a culture of diversity and inclusion continued with 22% of all senior leadership roles held by women
  • Toromont remanufacturing operations rebuilt three million tonnes of used equipment parts and components in 2020 as part of our circular economy effort
  • For 2020, emissions from Scope 1, Scope 2 and limited Scope 3 – those that include business air travel and upstream fossil fuel and electricity use – were 75,454 CO2 equivalent tonnes
  • Customers using CIMCO’s ECO CHILL® have cumulatively offset approximately one million CO2- equivalent tonnes by our estimate compared to traditional refrigeration and saved 19.7 billion cubic feet of natural gas since we introduced this product some 15 years ago

We actively participate in the introduction of electric battery and dual-fuel powered equipment in our territories. As a dealer, we are well aligned with OEMs including Caterpillar that are innovating to create alternatives to the internal combustion engine and developing ever-lower emission machines.


On February 10, 2021, we welcomed a new independent director, Ben Cherniavsky. Mr. Cherniavsky brings deep capital markets, infrastructure, construction and transportation sector expertise to our deliberations. During his 25-year career, he served as a senior investment analyst at a global investment bank, at Canada’s Department of Finance and at the University of Toronto’s International Centre for Tax Studies at the Rotman School of Management. With this addition, our Board of Directors will consist of 11 members, of whom ten are independent.

Looking Ahead

At the time of writing, COVID-19 remains a health threat and Toromont remains an essential service provider. Accordingly, we continue to marshal the company’s considerable resources to protect what is important to us as we pursue growth and improvement.

While safely adapting to and navigating the current health crisis, some workarounds have led to efficiency and effectiveness gains, particularly in how we communicate and interact with customers and each other. We will take what we learn and leverage it for future advantage. As always, people development, cost and working capital management will remain critical priorities.

Building Tomorrow

While Toromont changed in many ways in 2020 and unlocked new benefits from the integration of operations in our new territories that began in 2017, our values and strategies did not. This steady approach provides predictability and certainty in an uncertain world. It enables employees to act with confidence in addressing new challenges and always with the knowledge of what is expected of them as customer service providers and shareholder value creators. It allows us to work together in Building Tomorrow for the benefit of all stakeholders.

Our Thanks

Times like these test the business IQ of every company. Toromont is led by dedicated and experienced people at all levels. We sincerely thank the members of our Board of Directors for continuing to oversee the strategic direction, offer independent perspectives, and act in the best interests of the company as a whole in performing their duties. Special thanks to our customers and shareholders for their loyalty. We reserve our utmost gratitude to our valued employees who delivered our products and services in this unprecedented and challenging environment. We look forward to working with our partners to emerge stronger so we can build a better tomorrow.

Yours sincerely,

Robert M. Ogilvie
Chair of the Board 

Scott J. Medhurst
President and Chief Executive Officer

March 29, 2021