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Finning rj conference   june 15, 2010 final
 

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    Finning rj conference   june 15, 2010 final Finning rj conference june 15, 2010 final Presentation Transcript

    • June 15, 2010 Raymond James Infrastructure & Construction Conference Dave Smith EVP and CFO
    • 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; the estimated annualized cost savings and anticipated restructuring charges related to actions taken by the Company in response to the economic downturn; expected revenue levels and EBIT growth; anticipated effective tax rate; anticipated generation of free cash flow (including projected net capital and rental expenditures), and its expected use; anticipated defined benefit plan contributions; and expected target range of Debt Ratio. 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 June 15, 2010. 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 credit 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 implement our cost reduction initiatives while continuing to maintain customer service; 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 outside Canada. 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 Market 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
    • Finning International Inc. (TSX:FTT)
        • World’s largest Caterpillar dealer
          • Exclusive rights to distribute Caterpillar equipment and parts
          • Operate in some of the most resource- rich territories in the world
        • Industries served
          • Mining (including oil sands)
          • Construction
          • Power systems
          • Other: petroleum, forestry, pipelines
        • Market cap ~ $3.0 billion
        • 2009 revenue = $4.7 billion
        • 10,700 employees, including over 5,500 skilled technicians
      Cannock Vancouver Edmonton Fort McMurray Santiago Antofagasta Finning South America Finning UK Finning (Canada)
    • Value Proposition to Customers
        • Solutions to drive lowest owning and operating costs
        • Strong customer relationships
        • Large installed equipment fleet
        • Meeting customer need for maximum equipment uptime
      + = Caterpillar Equipment Proven Reliability Finning Service Unmatched Capabilities Customer Value First with Customers
    • Shaping Finning’s Future
        • Improving EBIT margin performance
          • Permanent SG&A cost reductions
          • Operational excellence driven by productivity improvements
        • Generating cash for growth
          • Strong EBITDA from operations
          • Focus on working capital management
          • Strategic shift to reduced rental expenditures
          • Maintain strong balance sheet
        • Investing in core competencies
          • Mining
          • Power systems
          • Product support
        • Delivering consistent 15% Return on Equity
    • Near-Term Priorities: Canada
        • Improve EBIT margin
          • Increase service labour profitability
          • Leverage earnings: revenue growth + disciplined cost control
        • Drive operational excellence
          • Implement new ERP system
          • Improve supply chain efficiencies
        • Capture growth opportunities
          • Oil sands – largest product support opportunity (COE, Fort McKay)
          • Elevate focus on training
          • Introduce new electric drive truck
    • Near-Term Priorities: United Kingdom
        • Improve EBIT margin
          • Reduce stranded costs post-Hewden
        • Grow heavy construction
          • Coal, waste & recycling, scrap & demolition
        • Grow advanced energy solutions
          • Petroleum, water & utilities, marine, renewables
        • Focus on profitable small machine business through various channels
    • Near-Term Priorities: South America
        • Capture growing market opportunities in mining, construction and power systems
        • Continue to invest in product support growth
          • Expand CRC and Truck Shop
          • Integrate 500 new employees
          • Build Training Centre
          • Build new branches
        • Introduce new series trucks
          • 795 electric drive truck
          • Technological enhancements
    • Summary
        • Shaping Finning’s Future
          • Improving EBIT margin performance
          • Generating strong free cash flow
          • Consistent 15% ROE
        • Investing in core competencies: mining, power systems, product support
        • Near-term priorities
          • Improve EBIT margin in Canada and UK
          • Drive operational excellence
          • Capture growing market opportunities in mining, construction and power systems
    • Appendix
    • Diversification by Industry New Equipment Sales ($ millions) FY 2009 = $1,985 FY 2008 = $2,929 Other includes agriculture, industrial and government sectors Petroleum 3% Forestry 2% Other 7% Power Systems 18% Mining 43% Construction 27% Construction 20% Mining 47% Petroleum 3% Forestry 1% Other 6% Power Systems 23% Strong mining sales visibility into 2011 / 2012
    • Diversification by Line of Business Product Support 32% Rental 12% Used Equipment 7% New Equipment 49% Driving growth in higher margin product support revenue Total Revenue ($ millions) FY 2009 = $4,738 FY 2008 = $5,991 $2,929 $1,899 $713 $432 Excludes other revenue: $12 million in 2009 and $19 million in 2008 Product Support 40% Rental 11% Used Equipment 7% New Equipment 42% $1,985 $1,893 $510 $338
    • Focus on Execution
      • 2009 Commitments
      2009 Achievements 2010 Targets
      • Reduce SG&A Expenses
      • $200 million over 2008
      • $110 million in targeted cost savings
      • $170 million over 2008
      • (excluding Hewden)
      • Free Cash Flow
      • Over $300 million
      • Record free cash flow = $494 million
      • ~ $200 million
      • 39% at year end
      • Mid 30% at year end
      • Net Debt to Total Capital
      • Low end of 40-50% range
    • Improve Operating Leverage EBIT Margin Targets
      • Canada
      • FINSA
      • UK
      9 – 10% 10 – 11% 7 – 8%* Reduced Cost Structure
        • Permanent SG&A cost reductions
        • Productivity improvements
      Reduced Asset Base
        • Disciplined working capital management
        • Reduction in net rental additions
      Increased Revenue
        • Volumes return as economy recovers
      + * cost of capital Increase ROIC ROE Target = 15%
    • Cash Engine for Growth
        • Solid Free Cash Flow
        • Dividends
        • Debt reduction
        • Acquisitions
      Strategic shift in rental spending: ~$100-150M net Disciplined capital spending ~$100M per year Strong cash flow from operations EBITDA ~$400-600M per year Enhanced focus on working capital management
    • Key Growth Opportunity: Mining
      • Demand for mining equipment continues to grow
          • New mines and expansions
          • Fleet replacement cycle
          • Many large global customers are low cash cost producers
          • Strong commodity cycle
      • Long-term mining product support opportunities
          • Large machines = more parts and service
          • 24/7 operations = heavy demands on equipment
      • Finning advantage: lowest “cost per ton” solution
          • World-class mining support infrastructure
          • Best trained people in the industry
          • High entry barriers
    • Oil Sands Mining Fleet Projections * Includes units projected from 2010 to 2014, incremental to units at Dec 31, 2009 99% 100% 94% 89% 95% 90% 88% 1,251 72 69 214 236 310 133 217 330/340 Ton Trucks (future 795) Total Large Graders (16) Ultra Large Graders (24) Large Tractors (D8 & D9) Ulltra Large Tractors (D11 & D10) 100 – 200 Ton Trucks (777-789) 240 Ton Trucks (793) 400 Ton Trucks (797) 752 31 85 86 155 125 91 180 1,354 73 69 228 264 326 148 246 Finning’s Market Share Caterpillar Units at Dec 31, 2009 Equipment Type Total Units at Dec 31, 2009 Projections take into account the following projects, expansions of existing operations as well as contractor equipment: Syncrude, Suncor, Shell Albian, CNRL, Kearl Additional CAT Units Projected 2010 to 2014*
    • FINSA Mining Fleet Projections * Caterpillar projected includes units forecast for FINSA from 2010 till 2014 which are incremental to units at December 31, 2009 Projections take into account all FINSA's projects 596 1,527 73 160 281 148 125 144 Large Mining Trucks (793 – 777) Total Underground Motor Graders (24 - 14) Track-Type Tractors (D11 – D9) Large Wheel Dozers (854 – 824) Large Wheel Loaders (994 – 992) 400 Ton Trucks (797) 233 758 60 65 101 75 33 191 1,028 2,586 261 200 432 200 198 267 Finning’s Market Share Caterpillar Units at Dec 31, 2009 Equipment Type Additional CAT Units Projected 2010 to 2014* Total Units at Dec 31, 2009 59% 28% 80% 65% 74% 63% 58% 54%
    • UK Opportunities – Heavy Construction and Power Systems
        • Dominate coal mining
          • Grow 777 population to 400+ trucks
          • Maximize mining product support
        • Diversify to high growth sectors
          • Waste & recycling, scrap & demolition
        • Power Systems growth areas
          • Biogas-to-energy and data centres
          • Global engineering, procurement and construction (EPC)
          • Integrated managed services: marine, petroleum
    • 2010 Outlook - Continuing Operations
        • Revenues slightly below 2009
          • Lower new equipment sales, primarily due to Canada
          • Modest product support growth in all operations
        • Expected EBIT improvement in second half of the year
        • EBIT expected to be roughly flat to 2009
        • EBIT margin to improve modestly in 2010 on lower revenue levels
        • Recovery is gaining momentum in all regions, led by mining
        • Signs of improvement in non-mining sectors
    • Q1 2010 Highlights
        • Q1 results in line with expectations
        • Product support revenues increased in all operations in local currency
          • Strong product support growth in mining
          • Improving activity in non-mining sectors
        • On track to achieve targeted cost reductions of $170 million (adjusted for Hewden)
        • Strong free cash flow of $99 million. Expected to moderate for the next two quarters. On track for ~ $200 million in FCF for 2010.
        • Order intake increased from Q4/09 driven by mining. Backlog of $900 million is 60% higher than at Dec 31, 2009
        • Quarterly dividend raised to $0.12 per share from $0.11 per share
    • Q1 2010 Results
        • New equipment sales down 45% from Q1/09, down 26% from Q4/09
        • Product support revenues flat year over year, up 5% from Q4/09
        • FX negative impact of $0.08 per share compared to Q1/09 due to stronger Canadian dollar
      C$ millions Q1 2010 Q1 2009 Q1-10/Q1-09 Q4 2009 Q1-10/Q4-09 Revenue 1,028 1,364 (25%) 1,135 (9%) Gross profit 305 384 (20%) 301 1% GP margin 29.7% 28.1% 26.5% SG&A (262) (300) 13% (261) 0% Other income (expenses) (6) (8) (10) EBIT 37 76 (51%) 30 24% EBIT margin 3.6% 5.5% 2.6% Net Income 20 45 (55%) 16 23% Diluted EPS 0.12 0.26 (54%) 0.10 20% EBITDA 95 150 (37%) 89 6%