Message to Shareholders

In 2021, as waves of the coronavirus passed over our markets, Toromont stood its ground. Relying on lessons learned from year one of the pandemic and in alignment with core operating disciplines, we responded to business – and market-altering conditions with a clear sense of purpose and an unwavering focus on protecting the health, safety and livelihoods of our employees and customers. The annual result was favourable; the longer-run implications of the year’s advancements are encouraging; the impact COVID-19, supply chain disruptions and macro-economic factors such as interest rates and inflation will have in 2022 is unknown.

For the year, Toromont earned $4.00 per diluted share, a 29% improvement over 2020 on revenue of $3.9 billion, 12% higher than the prior year.

Context is important. At the outset of the pandemic, customers displayed caution in committing to capital purchases. Provincial lockdowns through the spring of 2020 took a toll on equipment utilization and site access. Late in 2020 and through the early part of 2021 as local pandemic restrictions ebbed and flowed, equipment demand picked up as business confidence returned. In some cases, customers placed large orders for multi-year delivery. The popularity of rent with a purchase option declined in favour of outright buying. Rental activity snapped back. Product support grew on higher machine utilization and more open access to customer sites. However, progression was not of a straight-line variety. Neither was the path taken by COVID-19 and its Delta and Omicron variants.

In the fourth quarter of 2021, the journey to recovery took yet another turn. Global logistics bottlenecks and component shortages disrupted supply chains, somewhat inflating year-end order backlogs. Supply shortages led to a rise in the costs of some components. Toromont’s countermeasures included advanced purchasing of long-lead items, proactive factory demand planning, as well as sourcing used equipment to augment customer fleets and remanufacturing components to extend machine life.

The strength of our balance sheet and willingness to deploy it made a difference. Net reinvestment in rental fleets, branches and other capital assets amounted to $136 million – $67 million (97%) higher than in 2020. Toromont ended 2021 with $917 million of cash on hand, over $470 million of available credit on existing lines, and leverage, represented by net debt to total capitalization ratio of minus 16%, compared to 3% at December 2020, and 40% at December 2017, the year we made the largest acquisition in our history. Our financial position bodes well for ongoing investments and provides stability in a volatile environment where industry wide supply chain challenges and cost inflation have yet to normalize and may not for some time.

2021 Revenues – New & used equipment: 45%; Refrigeration equipment: 5%; Rentals: 10%; Product support: 40%

Shareholder Value

Return on Opening Shareholders’ Equity – 2017: 19.3%; 2018: 22.3%; 2019: 21.4%; 2020: 16.6%; 2021: 19.6%
Dividends per Share, 5 year CAGR = 13.6% – 2017: $0.76; 2018: $0.92; 2019: $1.08; 2020: $1.24; 2021: $1.36
Cumulative Value of $100 Invested (Assuming Reinvestment of Dividends) – 2021 TSX: $195.36; 2021 TIH: $292.03

Capital deployment in the year was efficient. Return on opening shareholders’ equity was 19.6% compared to Toromont’s long-term goal of 18% after tax over a business cycle. Pre-tax return on capital employed was 26.6% compared to 20.4% in 2020.

In July 2021, Toromont increased the quarterly dividend by 12.9%, the 32nd consecutive year of increases. At its February 2022 meeting, our Board of Directors made it 33 years by increasing the dividend, effective with the April 2022 payment, by 4 cents to $0.39 per share per quarter or $1.56 annualized. With this latest declaration, Toromont will have paid dividends for 54 uninterrupted years.

A strong balance sheet allowed Toromont to introduce a Normal Course Issuer Bid in September 2021. Under this bid, the company purchased and cancelled 470,600 common shares. At an average price paid of $106.25 per share, including transaction costs, this represented an investment of $50.0 million.

Lessons Learned

Responding to the pandemic taught us valuable lessons but also reinforced the importance of adhering to our long-term operating disciplines. In a year of significant and unpredictable change, Toromont’s decentralized management approach was a decisive factor in allowing a quick and focused response. With local empowerment, our branches adjusted well to shifting customer priorities. Adapting to the year’s unique challenges strengthened our team and allowed Toromont leaders to gain valuable experience.

Health and safety are the most critical components of our operating disciplines. Here, the pandemic taught us that it is possible to function effectively even while adding necessary layers to safety protocols. With the evolving threat posed by different variants, our Critical Incident Executive Response team provided real-time guidance to our operations. Ongoing vigilance meant Toromont branches and facilities stayed safe and open for employees and customers.

Focus on traditional safety fundamentals – including hazard identification, proper use of PPE (personal protective equipment), daily safety talks and branch safety audits – continued. Even here, lessons learned over the past year were valuable. In particular, the use of virtual inspections enabled our safety specialists to cover more territory, faster and will remain in our toolkit beyond COVID-19.

Virtual training (for customers and employees), online product demonstrations and roadshows, podcasts, social media advertising, interactive webinars and touchless purchasing and service demonstrated the importance of technology in overcoming pandemic restrictions. What we learned in each area will make Toromont more effective in the future.

Technology Integration: Speaking the Same Language

A cultural turning point was reached in 2021, as all Toromont Cat facilities operated with the Toromont Dealer Management System (“TDMS”). TDMS is an enabler of decentralization that brings real-time visibility to branch, department and product performance including indicators such as orders, inventory, work in process, accounts receivable and working capital. It is purpose built for management empowerment in our heavy equipment sales and service business.

Putting TDMS in the hands of the operators in our acquired territories was a key deliverable in Toromont’s business integration plan and culminated with the onboarding of Toromont Material Handling’s Ontario operations in November. (Battlefield Equipment Rentals achieved technology integration in 2019.) Now that we speak the same language using standardized data sets, our teams can more readily benchmark to spot variances and take targeted actions to improve performance. The stage is set to unlock more value over time through rigorously applied operating disciplines aided by TDMS.

Data Science in the Driver’s Seat

Increasingly, competition for business will be fought with digital tools and artificial intelligence. Accordingly, Toromont operates with digital strategy goals that include increasing customer service, growing sales and market reach, improving efficiencies and using data predictively to plan and align resources. More than 150 skilled professionals, including an analytics and data science team, lead our concerted efforts.

Connectivity is a foundational component of our approach. In 2021, Toromont Cat established over 5,000 new equipment asset connections, including new deliveries and retrofits. What we do for customers with the resulting data is critical. Simply put, we must use the insights we capture wisely to add value to our offerings.

Ecommerce capabilities continued to advance with functionality upgrades and pilot programs such as Toromont Equip and Toromont Connect. At full flight, Toromont Equip will put all Equipment Group operations on the same end-to-end ecommerce process. In 2021, the site focused on used and restored inventory. Toromont Connect is designed to be our primary portal to engage with customers across many aspects of our business.

Strategies to Action: Operating Highlights

Applying Toromont’s core strategies – expand markets, strengthen product support, broaden service offerings, invest in resources and maintain a strong financial position – led to profitable growth in 2021 and better positioning for the future.

Toromont Cat construction, mining, power systems and remanufacturing operations were more active in 2021 than in 2020. Construction and mining customers placed fleet orders to prepare for work now and in the future. Several mines will open in our territories in the next few years utilizing Cat production equipment and beforehand, earthmoving machines are on task for road and infrastructure construction.

Toromont continues to gain competitive advantage from Caterpillar’s leadership in important areas such as autonomous vehicle technology, as well as battery electric systems that contribute to our customers’ low carbon emissions goals. Power Systems was selected to supply new equipment to the Combined Heat and Power plant at Hamilton Health Sciences as part of actions the customer is taking to reduce its carbon dioxide emissions by 50%.

Organizational changes made at the beginning of 2021 brought together product support, heavy rents, used equipment and remanufacturing operations for better strategic coordination of these go-to-market services and product solutions. Utilization of heavy rental equipment was the highest in our history. A rental inventory review at midyear led to an enhanced product mix. Used equipment sales were strong, although trade-ins, a traditional source of supply, were lower.

Toromont Cat added dedicated branch managers in Val-d’Or and Chicoutimi, Québec to enhance asset management and sales and product support coverage in those resource-intensive markets. Product support improved as the year progressed on higher machine utilization. With greater focus on promoting the value of Customer Value Agreements (“CVAs”), two Québec-based construction customers attached CVAs to their fleet purchases. Measures taken to improve remanufacturing effectiveness included automated powertrain testing, redesign of a cylinder head workstream and centralized tool lockers.

2 new stores

Battlefield is expanding

Battlefield Equipment Rentals was busy helping customers across our territories with every-day projects including road building, bridge repair, factory maintenance and landscaping, augmented by special public transit construction projects in Montréal, Toronto and Ottawa. Two new Ontario stores opened in 2021 to serve Collingwood and Mississauga. Sales of Cat Compact Construction Equipment (CCE) exceeded the record set in 2020, and all units were covered with CVAs for maintenance.

Toromont provides specialized equipment for civil infrastructure projects and road building on customer mine sites.

Efforts to grow our Québec customer base continued with a focus on small to medium-sized landscape, mechanical and electrical contractors. Rental fleet mix expanded to include additional light compaction, and concrete construction-related equipment used by these customer segments. Returning equipment to ready status following rental improved against the goal of having no more than 7% of the rental fleet in repair at any time. Faster turnaround means more optimal asset utilization. Battlefield Equipment Rentals piloted scheduling technology to better manage in-shop repairs. An integrated account payment option was added to our customer-focused web and mobile technology known as InsideTRAC. In 2022, third-party carriers delivering our rental machines will use this app, creating a consistent customer experience.

Jobsite Industrial Rental Services outgrew its shared (with Battlefield Equipment Rentals) Sarnia location and opened a standalone facility to service local refineries. Multi-month provision of specialized tool cribs and rental services for plant turnarounds and maintenance shutdowns added to Jobsite’s results.

SITECH launched TPaaS, a software as a service that enables customers to subscribe to Trimble machine control systems and automatically receive new technology releases. For customers, the offering eliminates the risk of obsolescence and reduces capital requirements.

Toromont Material Handling (“TMH”) found success in growing and improving its rental business, a key opportunity area. Larger units (up to 72,000 pounds) were added to the rental fleet, low utilization units were sold and customer enquiry management processes were enhanced. Product support activities gradually recovered and TMH gained advantage by adopting an Eastern Canada-wide structure for service operations. Used equipment strategies were applied including value selling, increased promotion and work order cost controls. The late-year adoption of TDMS in Ontario required an all hands-on-deck approach that resulted in a smooth transition for customer-facing activities and will provide greater visibility to KPIs across TMH’s operations.

AgWest grew market shares for both CLAAS and AGCO brands, a key accomplishment that expands its future product support opportunity.

CIMCO continued to realize competitive advantage by providing natural refrigerants and energy-efficient packages. What began with the introduction of ECO CHILL® heat recovery systems for ice rinks in 2004 has evolved into a Net Zero Naturally line-up of refrigeration equipment for all markets – so named to reflect CIMCO’s ability to help customers achieve their net zero goals by eliminating climate-polluting synthetic refrigerants and achieving optimal energy performance.

Natural carbon dioxide (CO2) refrigeration systems for industrial applications grew in popularity in 2021. The year’s bookings included CO2 projects for food, seafood, cold storage  and distribution facilities, as well as a large natural refrigerant  (ammonia) system for a plant-based consumer brand. Markham District Energy ordered a CIMCO ammonia heat pump that is nearly four times more energy efficient than a gas boiler and will remove tonnes of greenhouse gases in the process of heating over 8,500 residents and offices. Although pandemic conditions dragged on in recreational markets, positioning for the future continued. The Federation of Canadian Municipalities named CIMCO an official Net Zero Solutions provider, a welcome endorsement as most ice rinks in Canada are municipally owned. CIMCO also secured its place on the Sourcewell ecommerce buying platform used by municipalities in their tendering processes.

Sales, engineering, project management and service operations were clustered together in Lancaster, Pennsylvania and Raleigh, North Carolina for more effective U.S. market coverage, with positive results. In the first half of 2022, CIMCO’s first Western Canadian packaging and assembly facility will open in Edmonton, Alberta followed by CIMCO’s new main manufacturing plant in Burlington, Ontario. Mass standardization of components is an ongoing goal that will support manufacturing efficiency.

Sustainability Matters

Like Toromont, customers, shareholders, our employees and partners also care about Toromont’s Environmental, Social and Governance (“ESG”) practices. In recognition of the importance of sustainability at all levels of our company as well as our desire to provide additional information on our ESG framework, strategies and outcomes, we produce an annual Sustainability Report. Our focus on sustainability remains unwavering and we are pleased to highlight some of our important focus areas. As this year’s report notes, we view sustainability as a journey and work to continuously improve our approach to drive stakeholder returns and value. We believe this aligns well with the anticipated introduction of ESG reporting standards that will provide a reporting framework that is transparent and comparable.

Safety: Every year, Toromont invests heavily to build and maintain a safety-first culture and we are succeeding. In 2021, over 80% of our facilities achieved a Total Recordable Injury Rate (“TRIR”) of zero. Over the past five years, TRIR declined by 36% and we noted a 50% reduction in lost workdays over the same period. While the trends are moving in the right direction, continuous improvement is a must for us to reach our zero-harm goal. To ensure this remains a strategic imperative, we continue to tie the variable compensation of our employees and in particular our senior leaders to safety outcomes.

Recruitment and Retention: Toromont needs to add skilled people to our team, particularly technicians who are in short supply, to maintain and grow the business. We use a variety of recruitment strategies that take us deep into our territories and beyond, promote technical careers with students, offer apprenticeships and create ongoing career development opportunities. We are pleased to note that 2021 was a record year for technician recruitment and we increased our technician apprenticeship positions by 31% from 2020. Retaining our skilled workforce is equally critical and here again we are making headway. Despite retirements, our average workforce tenure is greater than 10 years.


Decrease in Total Recordable Injury Rate over last 5 years

Equity, Diversity and Inclusion (“EDI”): Toromont’s Code of Conduct, Employment Equity as well as Board and Leadership Diversity policies recognize the benefits of EDI and we follow through with actions that are aligned. Leading by example is important which is why women comprise 30% of our Board of Directors and 31% of our senior management team. Moreover, persons with disabilities and visible minorities represented 15% and 8% of our senior management team, respectively. We are also committed to our partnerships with Indigenous communities and businesses, which are described in our Sustainability Report.

Response to Climate Change: Under Toromont’s Environmental Management program, Toromont seeks to continually improve its conservation of resources and responsibly manage our environmental footprint as we grow.

However, we believe our greatest contribution to environmental sustainability is through the provision of products, services and technologies that help our customers achieve their goals for low carbon emissions and resource conservation. We are proud to work with Caterpillar to introduce battery electric and autonomous vehicles in our markets. Expertly reconditioning used equipment components, rather than scrapping them, is another area of contribution. Under the purview of Toromont remanufacturing, we rebuilt 90 machines and almost 4,400 components for customers in 2021. CIMCO Refrigeration also did its part. This past year, CIMCO eliminated the manufacture of ice rink packages that use high Global Warming Potential refrigerants, which puts our business at the leading edge of the refrigeration industry’s efforts to align with the Montréal Protocol. With CIMCO’s new Pathway to Net Zero program introduced in 2021, we help customers identify and implement opportunities to apply measures to eliminate refrigerant emissions, optimize energy consumption and harness green power including district energy sources.


Reduction in lost work days over last 5 years

CIMCO’s powerful, energy-efficient refrigeration packages help customers meet their sustainability objectives.

Special Thanks to James Gill

This spring will mark the retirement of Dr. James Gill from our Board of Directors as he has reached the age for retiring under our Board policy. Jim served with distinction for the past six years, generously sharing his sage advice, extensive knowledge, sound business philosophies and business acumen along with his Canadian Hall of Fame Mining expertise through general Board deliberations and as a member of two Board committees. His leadership was beneficial to all Toromont businesses. We sincerely thank him for his dedication to helping build the Toromont business of today.

Special Thanks to Wayne Hill and Robert Ogilvie

This spring will also mark the retirement of Wayne Hill as a Director. Wayne joined our Board in 1988 but his contributions to our business run far deeper. He held the position of Toromont Chief Financial Officer from 1985 to 2005 and from 2006 to 2008, he was Toromont’s Executive Vice President. Along with our past Chairman Robert Ogilvie, Mr. Hill created the Toromont business model that we rely on today and through his professional stewardship, played a leading role in organizational growth, continuous improvement and the pursuit of business excellence. His contributions to our long-term financial success cannot be understated.

It’s true that a company this size is bigger than any one person but it’s also true that Toromont owes much to Robert Ogilvie. Mr. Ogilvie retired in July 2021 after leading Toromont for 36 years, 34 years as Chair and the first 20 as Chief Executive Officer. During his impressive career, Robert not only forged many of the operating disciplines that serve us so well today, he was also an incredible leader and visionary. More than this, he taught generations of Toromont leaders the finer points of business as a mentor. We are better because of his guidance. Working together, Robert and Wayne devoted their distinguished careers to building a market-leading business through strategic investments complemented by several acquisitions. Their legacies and the operating disciplines they embedded will be felt for years to come. Our entire organization wishes Robert and Wayne well in their retirement years and thanks them for their significant contributions to Toromont’s success and steadfast commitment to our employees, customers and shareholders.

Equipped for Today and Tomorrow

No doubt, 2022 will bring new opportunities but also new challenges as COVID-19 follows an unpredictable path and as factors such as supply chain disruptions and macro-economic factors add operating complexities. However, we do feel that Toromont is equipped to perform. Our products and services are essential in our markets. Our people are capable problem solvers dedicated to customer success. Our technologies and those of our partners are enabling a more efficient, productive and cleaner future. Our balance sheet is strong. We pledge to use these advantages today and tomorrow.

We are grateful to the people of Toromont for meeting the pandemic’s business and market-altering realities. We thank our customers for allowing Toromont to serve you while challenging us to do even better, and our shareholders for your support.

Yours sincerely,

Scott J. Medhurst
President and Chief Executive Officer

Richard G. Roy
Chair of the Board