August 5, 2011 / 11:50 AM / 7 years ago

UPDATE 3-Competition hampers Ritchie Bros' auction rev, shares fall

* Q2 EPS $0.25 vs est $0.27

* Q2 auction rev up 100 pct at $114 mln vs est $120.3 mln

* Auction revenue rate 9.96 pct vs 10.9 pct yr-ago

* Shares down as much as 15 pct (Adds conference call details)

BANGALORE, Aug 5 (Reuters) - Ritchie Bros Auctioneers Inc , which auctions industrial equipment, warned that a weak construction market would trigger stiff competition and hamper selling prices for used equipment for the rest of the year, and its shares fell 15 percent.

However, the company, which auctions used and unused trucks and cranes from Caterpillar , Komatsu and Liebherr, expects gross auction proceeds to be at the higher end of its forecast of $3.4-$3.8 billion at the end of the year.

The Vancouver, British Columbia-based company said a shortage of new and near new equipment had led to stiff competition by dealers and other auctioneers in the used equipment market.

Dealers like Wajax and Toromont Industries , online auctioneers like IronPlanet and Liquidity Services and assets valuers like GoIndustry DoveBid are all competing in a weak economy, pressuring prices.

“It seems like the used equipment pricing has levelled off somewhat compared to the increases we saw in early 2011,” a Ritchie Bros executive said on a call with analysts.

As price rises start to taper off, auction revenue rate — a key performance measure — will suffer. The company’s auction revenue rate fell in the first two quarters of fiscal 2011.

Auction revenue rate — which is auction revenue as a percentage of gross auction proceeds — slipped to 9.96 percent from 10.86 percent in the second quarter.

The fall was steeper-than-expected according to analysts at William Blair.

The company, which began more than half a century ago as a family-run business in British Columbia, started offering services like insurance and financing aid in July, to retain clients and attract new ones.

Ritchie’s profit in the April-June quarter rose 3 percent to $26.8 million, or 25 cents per share — two cents short of analysts’ estimates, according to Thomson Reuters I/B/E/S.

Gross auction proceeds rose by 21 percent. Auction revenue rose 11 percent to $114 million, but fell short of analysts’ estimates of $120.3 million.

The company’s shares were trading down about 10 percent at C$23.05, in a weak broader market. The stock touched a low of C$21.68 earlier on the Toronto Stock Exchange. (Reporting by Aftab Ahmed and Bhaswati Mukhopadhyay in Bangalore; Editing by Saumyadeb Chakrabarty and Savio D’Souza)

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