Finningpresentation uk sep 2011_final
- 1. Investor Presentation Mike Waites, President & CEO September 2011
- 2. Forward-Looking Information This report contains statements about the Company‟s business outlook, objectives, plans, strategic priorities and other statements that are not historical facts. A statement we make is forward-looking when it uses what we know and expect today to make a statement about the future. Forward-looking statements may include words such as aim, anticipate, assumption, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, project, seek, should, strategy, strive, target, and will. Forward-looking statements in this report include, but are not limited to, statements with respect to: expectations with respect to the economy and associated impact on the Company‟s financial results; expected revenue and SG&A levels and EBIT growth; anticipated generation of free cash flow (including projected net capital and rental expenditures), and its expected use; anticipated defined benefit plan contributions; the expected target range of Debt Ratio; the expected quantitative impact on the 2010 consolidated statements of financial position and statements of income and comprehensive income of the Company‟s transition to IFRS effective January 1, 2010; and the impact on new and revised IFRS that have been issued but are not yet effective. All such forward-looking statements are made pursuant to the „safe harbour‟ provisions of applicable Canadian securities laws. Unless otherwise indicated by us, forward-looking statements in this report describe our expectations at September 14, 2011. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans, strategic priorities and other statements that are not historical facts may not be achieved. As a result, we cannot guarantee that any forward-looking statement will materialize. Factors that could cause actual results or events to differ materially from those expressed in or implied by our forward-looking statements include: general economic and market conditions; foreign exchange rates; commodity prices; the level of customer confidence and spending, and the demand for, and prices of, our products and services; our dependence on the continued market acceptance of Caterpillar‟s products and Caterpillar‟s timely supply of parts and equipment; our ability to continue to improve productivity and operational efficiencies while continuing to maintain customer service; our ability to manage cost pressures as growth in revenues occur; our ability to attract sufficient skilled labour resources to meet growing product support demand; our ability to negotiate and renew collective bargaining agreements with satisfactory terms for our employees and the Company; the intensity of competitive activity; our ability to raise the capital we need to implement our business plan; regulatory initiatives or proceedings, litigation and changes in laws or regulations; stock market volatility; changes in political and economic environments for operations; the integrity, reliability, and availability of technology and the data processed by that technology; new or amended IFRS or interpretations that become effective prior to the inclusion of the Company‟s financial statement of position in its first annual audited IFRS financial statements. Forward-looking statements are provided in this report for the purpose of giving information about management‟s current expectations and plans and allowing investors and others to get a better understanding of our operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose. Forward-looking statements made in this report are based on a number of assumptions that we believed were reasonable on the day we made the forward-looking statements. Refer in particular to the Outlook section of the MD&A. Some of the assumptions, risks, and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this report are discussed in the Company‟s current Annual Information Form (AIF) in Section 4. We caution readers that the risks described in the AIF are not the only ones that could impact us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition, or results of operations. Except as otherwise indicated by us, forward-looking statements do not reflect the potential impact of any non-recurring or other unusual items or of any dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date hereof. The financial impact of these transactions and non-recurring and other unusual items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business All amounts in this presentation are in Canadian dollars unless otherwise noted
- 3. Finning International Inc. (TSX:FTT) Exclusive Caterpillar dealer in some of most resource-rich territories Finning Canada Unmatched products support capability and customer relationships Focused on operational excellence Well-positioned for growth Finning South America Fort McMurray Industries served Edmonton Mining (including oil sands) Vancouver Construction Antofagasta Power systems Other: petroleum, forestry, pipelines Santiago Finning UK Market cap ~ $4 billion and Ireland FY 2010 revenue = $4.6 billion YTD ended Jun 30, 2011 revenue = $2.8 billion Cannock 12,900 employees, including ~ 5,700 skilled technicians 3
- 4. Solid Foundation Revenue and earnings growing at a higher rate than invested capital Streamlined, more efficient cost structure Improved operating leverage driving more revenue to the bottom line Solid free cash flow over the business cycle Strong balance sheet High performance culture 4
- 5. Creating Our Future Mining Solutions Power Systems Vision Ultimate Providing unrivalled services that (2015) earn customer loyalty, we will be S CAT‟s best global business partner Global T Solutions Provider R A Core/BCP Acquisition(s) Leadership T E Safety Operating G Sales & Solutions Leverage Intermediate 10% EBIT (2012-2014) I Operational Service & Parts C Excellence 5 x S Operational Supply Chain Excellence G Systems R Panorama Short-term O Implementation (2011) W Solidify T Foundation H High Performance / Disciplined Growth FCF EBIT Improvement Engagement 5
- 6. Investing in Our Future Drive product support growth – truly differentiated service Implement new ERP system (launched in Canada in July) Disciplined capital spending Fort McKay oil sands service facility – on track Mining product support infrastructure in FINSA Technical training High performance culture – creativity, agility, resilience World class safety and engagement Strong Caterpillar relationships Margin expansion – “The Power of 10” – sustainability 6
- 7. Capturing Growth Growth within all our markets Mining • Oil sands: fleet replacement, capital spending on new projects • Chile mining investment • Mining equipment population expected to grow by ~50% over next 5 years Construction and power systems Growth with Caterpillar New businesses New products (e.g. 795F electric drive truck) Global power systems Technology New territories (e.g. Ireland) 7
- 8. Market Outlook In light of macro-economic uncertainty, keeping very close to customers and monitoring activity levels diligently Long-term business fundamentals remain strong Outlook into 2012 and 2013 positive Healthy demand for commodities from large market in Asia supports mining equipment and product support growth Infrastructure activity is robust, particularly in South America and Canada Demand for energy continues to be solid Oil & gas rebounding Electric power generation (EPG) demand is growing Expect softer Q3 due to short-term challenges with transition to our new ERP system in Canada and the impact of BC strike on product support revenues 8
- 9. Summary Great Q2 results: significant improvement in operating leverage drove new earnings record Investing in capabilities and capacity New ERP system launched in Canada, working through startup challenges Fort McKay on track; existing equipment and component rebuild facilities highly utilized Outlook remains strong Monitoring market activity levels closely and will act decisively to ensure our business activities match market demand Well-positioned: Limited fixed capital commitment Disciplined working capital spend Changed philosophy on rental „Permanent‟ portion of SG&A reduced Improved operating efficiencies Remain focused on disciplined execution of our strategy 9
- 10. Appendix
- 11. Q2 2011 Highlights Exceptionally strong Q2 New quarterly record for product support revenue Remarkable growth in new equipment sales in all regions Operating leverage drove record quarterly earnings Compared to first half of 2010, operating at twice the profitability level Managing demand-driven increase in working capital Expect positive free cash flow later in 2011 with moderating inventory additions FY 2011 free cash flow will be driven by working capital required; current forecast for negative annual FCF in 2011 Backlog up 14% from March 2011 to $1.7 billion, strong order intake continues On track to achieve EBIT margin targets in 2013 11
- 12. Focused on Generating Operating Leverage On Track to 10% EBIT Margin in 2013 Increase in Revenues / Gross Profits Strong market activity Market share growth EBIT Margin Targets – Solid Progress Margin improvements Canada 9 – 10% + FINSA 10 – 11% Streamlined Cost Structure UK 7 – 8% Cost reductions Improved productivity and efficiency ROE Target = 18% Operational excellence Efficient Asset Base Disciplined working capital management Selected net rental additions 12
- 13. Cash Engine for Growth Strong cash flow from operations EBITDA ~ $500 - 800M per year* Cash for Growth Disciplined capital spending Dividends Enhanced focus on ~ $100M per year* working capital Reduce debt management Acquisitions Strategic shift in rental: net adds ~ $100-$150M per year* * Averages over economic cycle 13
- 14. Outlook - Canada Machine order intake is solid and expected to continue in 2011 Parts and machine/component rebuild activity robust Rental activity strong Oil sands activity increasing Mine expansions (CNRL, Shell) and new players putting projects through the approval process (Total) Other mining (coal, copper, gold, silver) seeing solid demand and the outlook remains strong for 2011 and beyond Expect continued infrastructure activity Starting to see some modest signs of forestry improvement with new demand from Asia Expect softer Q3 due to short-term challenges with transition to our new ERP system in Canada and the impact of BC strike on product support revenues 14
- 15. Outlook - South America Strong mining growth opportunities Order intake solid Product support very robust Thriving construction & power systems Private and public investments in infrastructure and energy Mining contracts, expansions Actively managing cost pressures of strong growth environment Investing in service infrastructure Additional opportunities based on Caterpillar growth and expansions 15
- 16. Outlook - UK and Ireland Great turnaround in performance despite tough economic conditions Coal mining Mining equipment opportunities Strong product support driver Segmented approach working Focus on construction segments with large products support opportunities (quarrying, re-handling, industrials, plant hire) Successfully developing and rolling out low-cost distribution channels for smaller, building construction products Power systems strengthening UK renewables, mission critical, industrial and pleasure craft Global markets - oil & gas, international marine 16
- 17. Investor Presentation Mike Waites, President & CEO September 2011