Red Iron, the finance joint venture minority owned by power equipment manufacturer The Toro Co., reported a decline in net receivables in fiscal 2024, while the parent company’s net sales rose.
Bloomington, Minn.-based Toro benefited from increased infrastructure spending in its fiscal year, which ended Oct. 31, a trend expected to continue in 2025, Chief Executive and Chairman Richard Olson said during today’s earnings call.
“We have visibility into the compelling runway of projects to address global infrastructure needs, including communications, utilities and data centers,” he said. “Infrastructure spending remains a positive outlier in the broader construction industry, with consistent growth projected for the foreseeable future.”
While the company anticipates strong retail demand in 2025, it expects “some pockets of price sensitivity given the interest rate environment and field inventory that remains elevated in the industry,” Olson said.
BY THE NUMBERS: Red Iron, owned 45% by Toro and 55% by Huntington Distribution Finance, reported the following yearend numbers for fiscal 2024, according to Toro’s 10-K filing with the Securities and Exchange Commission:
- Net receivables financed for dealers and distributors under Red Iron totaled $2.6 billion, down 6.3% year over year;
- Total Red Iron outstandings stood at $979.6 million, down 3.9% YoY;
- Total receivables due from Red Iron to Toro were $26M, down 24.4% YoY;
- Net receivables financed for dealers and distributors by third-party financial institutions rose 12.2% YoY to $612.1 million;
- Total third-party financial institutions’ outstandings reached $272.2 million, up 16% YoY; and
- Toro’s total investment in Red Iron totaled $49.2 million, down 2.8% YoY.
Meanwhile, Toro reported the following year-end sales figures:
- Net sales increased 0.7% YoY to $4.6 billion;
- Professional segment net sales fell 3.2% YoY to $3.6 billion;
- The professional segment’s earnings rate as a percentage of net sales rose to 18% from 13.9% in fiscal 2023; and
- Operating earnings jumped 23.8% YoY to $533.3 million.
FLASHBACK: Toro’s partnership with home improvement retailer Lowe’s, announced in September 2023, is “off to a fantastic start,” Olson said during the call.
The partnership bolstered Toro’s distribution network and contributed to a 12.8% YoY increase in accounts receivable to $459.7 million as of Oct. 31, Angela Drake, vice president and chief financial officer, said during the call.
NOTEWORTHY: Toro refinanced a $600 million revolving credit facility and a $270 million term loan in its fourth quarter. Both were set to expire in October 2026, with a $900 million revolver and a $200 million term loan, Drake said.
The move will allow the company to “reduce future refinancing risk and easily accommodate modestly sized acquisitions,” she said.
FUTURE LOOK: Toro plans to launch a line of autonomous products in 2025, including “residential, commercial and golf applications,” Olson said.
MARKET REACTION: Shares of The Toro Co. (NYSE: TTC) were down 4.5% from market open to $81.44 as of market close today. The company has a market capitalization of $8.4 billion.
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