Hammond Power Solutions Reports Fourth Quarter 2023 Financial Results

Hammond Power Solutions Rebrand

March 28, 2024

Hammond Power Solutions Inc. has recently announced its financial results for the fourth quarter 2023.


  • Record sales of $187 million in the quarter, a 29.6% increase versus 2022. Year-to-date sales of $710 million, a 27.1% increase versus 2022.
  • Net Income of $19.9 million in the quarter, a 9.2% increase versus 2022. Year-to-date net income of $63.4 million, a 41.4% increase versus 2022.
  • Earnings per share of $1.68 for the quarter and $5.33 year-to-date.
  • Gross margin of 32.5% for the year.

“Hammond Power Solutions continued to deliver exceptional results with 2023 showing robust growth across all geographies and channels. Financially, the fourth quarter ended with record shipments of $187 million globally. This represents a 30% increase over the fourth quarter last year and a 27% increase on a year-to-date basis. This is a new record top line also helped us to achieve our margin and profit targets,” said Adrian Thomas, CEO of HPS.

Adrian continues, “In late 2022, we embarked on the largest capital program in our company’s history, allocating $52 million to growing manufacturing capacity at our facilities in Mexico, Guelph, and our Mesta location in Pennsylvania. Through 2023, our efforts to build capacity to support demand growth have paid off, as inventory levels recovered and lead times for many facilties came back in line with customer expectations. In 2024, the bulk of our announced capital expenditures will be spent and will provide us with more than $900 million in yearly manufacturing capacity by 2025.”

Geography Q4 2023Q4 2022$ Change% Change 2023 2022$ Change% Change
US & Mexico $123,703 $102,122 21,58121.1% $489,579 383,137106,44227.8%
Canada  51,694  36,869 14,82540.2%  175,619 151,05824,56116.3%
India  11,561  5,262 6,299119.7%  44,866 24,26920,59784.9%
Total $186,958 $144,253 42,70529.6%  710,064 558,464151,60027.1%

U.S. and Mexico sales were positively impacted by the strengthening of the U.S. dollar relative to the Canadian dollar versus 2022. The U.S. market experienced significant increases in the OEM channel, with higher sales supporting data centres, warehousing, industrial manufacturing, mining, electric vehicle charging, renewable energy and oil and gas production. Sales in the U.S. distributor channel also improved due to strong market activity and resulting growth within Hammond’s established distributors. The Canadian market experienced increases in commercial construction, EV charging, and data centre projects. A significant part of the growth in India is through both domestic sales and exports to other Southeast Asian countries.

The Company’s December 31, 2023 backlog increased by 19.9% as compared to December 31, 2022 and has decreased 3.2% from Quarter 3, 2023. During the second half of the year, commercial construction and industrial markets began to moderate in their growth profile, while Hammond’s capacity additions allowed the company to ship more backlog than previous quarters.

“The backlog contracted in the fourth quarter versus the third as a result of both our ability to ship more product but also flattening bookings in certain areas, mainly in commercial and industrial applications. While growh rates are moderating in some areas, demand in certain sectors, such as EV charging and data centres remains strong,” said Richard Vollering, CFO of HPS.

“While margins in the quarter are higher than normal due to year end adjustments,” Richard followed up, “we are very pleased with our gross margin rate of 32.5% for the year, which is at the high end of our recent range. The margins for the year are the result of strong operating leverage, higher Mesta and power quality sales, product and channel mix, and improved margins in India. Our balance sheet remains strong even with higher working capital requirements and increased capex for the year of over $20 million.”

The consolidated gross margin in 2023 increased to 32.5% versus 29.6% in 2022, an increase of 2.9% of sales. The improvement in gross margin is the result of better operating leverage due to high factory throughput, stabilizing cost inputs, a higher proportion of Mesta and power quality sales, and margin improvements in India. Higher gross margins were achieved in all channels and regions. Margins in the fourth quarter were higher than the previous three quarters due to inventory adjustments resulting from the annual physical count in conjunction with adjustments to inventory reserves.

Total selling and distribution expenses were $76,283 for 2023 versus $62,263 in 2022, an increase of $14,020 or 22.5%. On a percentage-of-sales basis, total selling and distribution expenses decreased to 10.7% of sales for 2023 from 11.1% in 2022. The year-over-year increase in selling and distribution expenses is a result of higher variable freight and commission expenses attributed to the large increase in sales.

General and administrative expenses in 2023 were $68,007 compared to $43,481 for 2022, an increase of $24,526 or 56.4%. On a percentage-of-sales basis these costs have increased from 7.8% in 2022 to 9.6% in 2023. The increase is mainly due to higher share-based compensation costs, but also due to the company’s ongoing strategic investments in people and resources to support its growth strategies with respect to Mesta, Mexico, and power quality, as well as supporting higher levels of general business activity.

2023 earnings before income taxes were $83,994 as compared to earnings of $57,169 in 2022 – growing by $26,825 or 46.9%. The main contributors to the higher current year earnings before income tax were higher sales and additional gross margin dollars. These gains were offset by increases in selling, distribution, general and administration expenses.

EBITDA for the year-ended December 31, 2023 was $95,995 versus $69,746 in 2022 – an increase of $26,249 or 37.6%. Adjusted for foreign exchange loss/gain, share based compensation expenses adjusted EBITDA for 2023 was $117,229 versus $73,435 in 2022 – an increase of $43,794 or 59.6%.

Basic earnings per share were $1.68 for Quarter 4, 2023 versus $1.55 in Quarter 4, 2022, an increase of $0.13. Year-to-date the basic earnings per share were $5.33 in 2023 compared to $3.79 in 2022, an increase of $1.54.

The Board of Directors of HPS declared a quarterly cash dividend of fifteen cents ($0.15) per Class A Subordinate Voting Share of HPS and a quarterly cash dividend of fifteen cents ($0.15) per Class B Common Share of HPS paid on December 15, 2023 to shareholders of record at the close of business on December 8, 2023. The ex-dividend date was December 7, 2023. The Company has paid a cash dividend of fifty-five cents ($0.55) per Class A Subordinate Voting Share and fifty-five cents ($0.55) per Class B Common Shares year-to-date.

(dollars in thousands)

  December 31, 2023   December 31, 2022  Change 
Sales  $186,958  $144,253   $42,705 
Earnings from operations  $24,661  $20,369   $4,292 
Exchange loss (gain)  $1,593  $(847)  $2,440 
Net earnings  $19,903  $18,223   $1,680 
Earnings per share
Cash generated by operations  $21,053  $5,352   $15,701 
EBITDA  $26,749  $24,093   $2,656 
Capital Spending  $4,619  $2,640   $1,979 


(dollars in thousands)

  December 31, 2023   December 31, 2022 Change 
Sales  $710,064  $558,464  $ 151,600 
Earnings from operations  $86,721  $59,441  $ 27,280 
Exchange loss (gain)  $1,280  $(96) $ 1,376 
Net earnings  $63,399  $44,828  $ 18,571 
Earnings per share
Cash generated by operations  $44,108  $37,013  $ 7,095 
EBITDA  $95,995  $69,746  $ 26,249 
Capital Spending  $20,169  $8,646  $ 11,523 

Visit the Hammond Power Solutions website HERE for more information.

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