Summary:
Uni-Select claim that the deadly Japanese earthquake won’t limit its access to automotive parts, since less than 10% of the auto parts distributors originate from the part of Japan that is hit by an earthquake and tsunami. Most of its parts come from south of Tokyo, which wasn’t dramatically impacted. The company’s profit surged to $10.8 million in the 4th quarter though sales slipped by 2%. Its dividend increased to 12 cents per share, up from 11.65 cents in the 3rd quarter. Earnings from continued operations more than doubled during the quarter; but it didn’t meet the expectation of analysts due to pressures of the loonies being near parity with the U.S. dollar. To reduce currency fluctuation, Uni-Select is switching its reporting currency to U.S. dollar following the acquisition of FinishMaster.
Connection:
Though sales slipped during the fourth quarter, Uni-Select’s profit surged to $10.8 million. This increase in net income will have a positive effect on its operating activity, which will increase the amount of cash in the cash flow statement. Uni-Select also increases its dividend by 3%; this will affect its financing activities. The increase in dividend will decrease the amount of cash available to the company. The article also mentions that Uni-Select acquired FinishMaster, a painting company, for $217 million. This will have a negative affect on investing activities; thus less cash will be available.
Reflection:
I believe that the Japanese earthquake will curtail Uni-Select’s access to automotive parts in Japan. After the earthquake, access to electricity in Japan has become a huge issue to the whole country. Areas that were not hit by the earthquake were limited to the access of electricity, as the Japanese ran into an electricity shortage. With the shortage of electricity, automaker will have a difficult time producing automotive parts for companies such as Uni-Select. In addition to that, as the Canadian dollar reached a 3-year high on April, Uni-Select is likely to experience another slip in sales due to currency fluctuations.
