Cervus expects chip shortages may continue into fall

The semiconductor chip shortage plaguing automotive and equipment manufacturers may last into the second and even third quarters of the year, farm equipment retailer Cervus Group says.

Calgary-based Cervus — which operates 64 dealerships in Canada, Australia and New Zealand, including 38 devoted mainly to Deere farm equipment — expects increased demand to run up against “supply chain constraints” in its first-quarter financial report on Thursday.

“Strong industry demand, compounded by supply chain constraints related to the pandemic and severe weather events, impacted the availability and timing of equipment from our manufacturers in the quarter,” Cervus CEO Angela Lekatsas said in the company’s release.

“We expect manufacturer supply chain issues, including semiconductor shortages, may continue into the second and third quarters of the year, and are working in partnership with our manufacturers to minimize the impact to our customers and our business.”

While major automakers’ difficulties in sourcing chips to complete new vehicles are well known, major farm equipment manufacturers including Deere, CNH and Agco have also taken a hit.

While semiconductor makers have said they plan to boost production, chips are currently harder to come by as demand for consumer electronics such as smartphones and gaming systems is amped up by the COVID-19 pandemic.

An Agco official last month told Reuters the company is informing farmer customers they may have to wait as long as six months for their new machinery, putting delivery well past harvest in markets such as the U.S.

However, Lekatsas said Thursday, “despite a decrease in equipment and service revenues from continued impacts of the global pandemic, we achieved a five per cent increase in gross profit quarter over quarter, from this change in the proportion of revenue from product support.”

Lekatsas noted the company’s “successful execution on initiatives to grow parts sales, which increased 11 per cent in the quarter, driving a seven per cent increase in overall product support revenue.”

Cervus booked net income of $2.987 million on $253.93 million in revenue for the quarter ending March 31, up from a $2.703 million net loss on $256.88 million in revenues for the year-earlier period.

The dealer chain’s revenue in 2021 Q1 included $174.63 million from equipment and $79.31 million from “product support.” — Glacier FarmMedia Network