Enerpac’s $13.2 Million Uncollectible Receivable is 825% of Net Income
Industrial tool maker’s cost to sell direct to certain overseas customers will likely rise as it cuts ties with reseller amid cost cutting initiative.
June 30, 2022
Enerpac Tool Group (EPAC), which manufactures high pressure hydraulic tools among others, has given up on being paid by what it calls its agent, or tool reseller in the Middle East- North Africa-Caspian (MENAC) region. The company increased its reserve by $10.8 million to $13.2 million in the quarter ending May 31, 2022.

Enerpac says the outstanding receivable is now fully reserved.

In its latest quarterly report, Enerpac approved a cost cutting plan while signaling the cost to sell into the MENAC region may rise:

“We have completely ceased our relationship with this agent and have transitioned to serving our regional customers through recently created direct operations within the region.”

The MENAC segment appears to be recently adopted. Though it doesn’t appear in the prior year’s annual report, Enerpac disclosed 35% of sales are generated in the Middle East, Asia, and Other most of which we believe is now included in MENAC.

The bad debt is the equivalent of:

—8.7% of the latest quarter’s sales
—200% of the quarter’s operating income
—825% of the quarter’s net income

For perspective, the bad debt is also equivalent to:

—2.5% of 2021 revenue
—22.6% of 2021 operating income
—34.7% of 2021 net income
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