INVESTOR PRESENTATION
Scott Thomson, President and CEO
Greg Palaschuk, VP Treasurer
Mauk Breukels, VP Investor Relations
J...
Forward Looking Information
2
This report contains statements about the Company’s business outlook, objectives, plans, str...
Overview of Finning International
 World’s largest Caterpillar dealer serving customers for over 80 years
 We sell, rent...
Finning History
4
Delivering Unrivalled Service to Customers for Over 80 Years
Compelling Value Proposition
 Passionate and committed employees
 Right people in the right places to execute on the pla...
Broadest Range of Quality Caterpillar Products
6
Over 300 equipment product lines
Market Leader in Most Desirable Regions
7
2013 revenue by region
Powerful, Sustainable Business Model
8
Diverse Customer Base
9
63% of new equipment deliveries from non-mining
* Agriculture, industrial and government segments
NEW FOCUS
Driving Return on Invested Capital
Operational Priorities
Service Excellence
 Drives lowest equipment owning and operating costs
 Maximizes equipment uptim...
Service Excellence
Improve labour recovery
 Enhance leadership, competencies and technical skills
 Improve parts availab...
13
Supply Chain
Canada - Reducing Lead Times and Transfer Points
Asset Utilization
 Optimize allocation of work across facilities
 Current mining facilities underutilized
 Ensure more ...
15
All priorities are linked directly to EBIT or Invested Capital
Priorities Will Drive Improved
Return on Invested Capita...
2006 2007 2008 2009 2010 2011 2012 2013
ROIC 27.6% 26.8% 15.0% 10.2% 15.3% 16.0% 16.5% 15.7%
0.0%
5.0%
10.0%
15.0%
20.0%
2...
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
42
47
53
52
50
51 51
48
41
2012 2013 20142011
45%
35%
TARGET
RANGE
Strengthening Ba...
18
 Important component of total
shareholder return
 Committed to growing dividend,
consistent with sustainable
earnings...
GROWTH OPPORTUNITIES
Oil Sands
20
Benefitting from ongoing projected growth
Source: CAPP (Canadian Association of Petroleum Producers)
Western Canada LNG
21
Seizing new business opportunities
Projects proposed to transport gas from Western
Canada to Asia1 I...
Copper in Chile
22
Participating in long-term growth
Source: Wood Mackenzie
Reasons for Optimism in the U.K.
23
UK Real GDP (% Change)
Source: Economist Intelligence Unit
-5.2
1.7
1.1
0.1
1.7
3.1
2....
Key Takeaways
 Finning has a great business model with resource rich territories; general economic
trends support continu...
INVESTOR PRESENTATION
Scott Thomson, President and CEO
Greg Palaschuk, VP Treasurer
Mauk Breukels, VP Investor Relations
J...
Upcoming SlideShare
Loading in …5
×

Investor Presentation - Los Angeles, San Francisco

1,572 views

Published on

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,572
On SlideShare
0
From Embeds
0
Number of Embeds
993
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Investor Presentation - Los Angeles, San Francisco

  1. 1. INVESTOR PRESENTATION Scott Thomson, President and CEO Greg Palaschuk, VP Treasurer Mauk Breukels, VP Investor Relations June 2014
  2. 2. Forward Looking Information 2 This report contains statements about the Company’s business outlook, objectives, plans, strategic priorities and other statements that are not historical facts. A statement Finning makes is forward-looking when it uses what the Company knows and expects 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; EBIT margin; ROIC; market share growth; expected results from service excellence action plans; anticipated asset utilization, inventory turns and parts service levels; the expected target range of the Company’s net debt to invested capital ratio; and the expected target range of the Company’s dividend payout 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 reflect Finning’s expectations at June 18-19, 2014. Except as may be required by Canadian securities laws, Finning does 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 the expectations expressed in or implied by such forward-looking statements and that Finning’s business outlook, objectives, plans, strategic priorities and other statements that are not historical facts may not be achieved. As a result, Finning 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 these 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, Finning’s products and services; Finning’s dependence on the continued market acceptance of Caterpillar’s products and Caterpillar’s timely supply of parts and equipment; Finning’s ability to continue to improve productivity and operational efficiencies while continuing to maintain customer service; Finning’s ability to manage cost pressures as growth in revenues occur; Finning’s ability to reduce costs in response to slowing activity levels; Finning’s ability to attract sufficient skilled labour resources to meet growing product support demand; Finning’s ability to negotiate and renew collective bargaining agreements with satisfactory terms for Finning’s employees and the Company; the intensity of competitive activity; Finning’s ability to raise the capital needed to implement its 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, availability and benefits from information technology and the data processed by that technology. 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 Finning’s 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 Finning believed were reasonable on the day the Company made the forward-looking statements. Refer in particular to the Outlook section of this 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 Section 4 of the Company’s current AIF. Finning cautions readers that the risks described in the AIF are not the only ones that could impact the Company. Additional risks and uncertainties not currently known to the Company or that are currently deemed to be immaterial may also have a material adverse effect on Finning’s business, financial condition, or results of operations. Except as otherwise indicated, 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. Finning therefore cannot describe the expected impact in a meaningful way or in the same way Finning presents known risks affecting its business. Monetary amounts are in Canadian dollars and from continuing operations unless noted otherwise
  3. 3. Overview of Finning International  World’s largest Caterpillar dealer serving customers for over 80 years  We sell, rent and provide parts and service for Caterpillar equipment and engines  Operate in Western Canada, Chile, Argentina, Bolivia, Uruguay, UK and Ireland  Main industries: mining (oil sands, copper, coal), construction, power systems (EPG, petroleum, marine) and forestry  ~14,700 employees worldwide (~65% technicians/mechanics) 3 (1) At May 30, 2014 Vancouver (head office) Edmonton Fort McMurrayBritish Columbia Yukon Alberta The Northwest Territories Santiago Antofagasta Bolivia Argentina Chile Uruguay Cannock United Kingdom Ireland 2013 Financial Statistics Market Statistics (1) Revenue 6.8B Ticker FTT (TSX) EBITDA 0.7B Share Price 29.16 FCF 0.4B % 52-Week High 92% EPS 1.95 ADTV 0.5M Invested Capital 3.1B Market Cap 5.0B Net Debt 1.3B Enterprise Value 6.3B ROE 19.7% S&P/DBRS Rating BBB+/A(low) ROIC 15.7% Dividend Yield 2.4% Dividend 10yr CAGR 13.1%
  4. 4. Finning History 4 Delivering Unrivalled Service to Customers for Over 80 Years
  5. 5. Compelling Value Proposition  Passionate and committed employees  Right people in the right places to execute on the plan  Best products, best territories  Aligned with Caterpillar, world’s best heavy equipment company  Resource-rich territories with significant organic growth opportunities  Compelling business model  Machine population provides embedded product support growth  Customer diversification across many attractive sectors  Significant opportunity to improve operating performance  Going forward, profit can grow faster than revenue and working capital management will improve markedly  All priorities linked to improving return on invested capital  Opportunity to optimize and capitalize on historic investments with more disciplined approach  Opportunity to generate positive free cash flow throughout the cycle  Continued commitment to dividend growth  Long-term growth rate of 13%; increased dividend by over 16% in May 2014 5
  6. 6. Broadest Range of Quality Caterpillar Products 6 Over 300 equipment product lines
  7. 7. Market Leader in Most Desirable Regions 7 2013 revenue by region
  8. 8. Powerful, Sustainable Business Model 8
  9. 9. Diverse Customer Base 9 63% of new equipment deliveries from non-mining * Agriculture, industrial and government segments
  10. 10. NEW FOCUS Driving Return on Invested Capital
  11. 11. Operational Priorities Service Excellence  Drives lowest equipment owning and operating costs  Maximizes equipment uptime and improves customer loyalty  Increases service profitability  Attracts and retains technical talent Supply Chain  Competitive advantage as a world-class distributor  Efficient supply chain drives customer loyalty  Reduces costs and invested capital  Improves cash generation Market Leadership  Builds machine population and drives future product support  Aligns with Caterpillar’s focus on market share growth  Expands focus to entire product line Asset Utilization  Optimizes footprint and distribution of activities  Maximizes return on investments made  Improves service delivery  Reduces costs and invested capital 11 Market Leadership Target ∆ in 3 Years Revenue Opportunity* Core Equipment Market Share 2-4%  1% share = $35M Parts Market Share 2-4%  1% share = $45M Power Systems Revenue (Canada) 10-15%  5% growth = $20M Service Excellence Target ∆ in 3 Years Consolidated EBIT $ $40 – 60M Supply Chain Target ∆ in 3 Years Working Capital Reduction Inventory Turns 0.5 – 0.9x  0.1 turn = $50M inventory  * Assumes no industry growth
  12. 12. Service Excellence Improve labour recovery  Enhance leadership, competencies and technical skills  Improve parts availability by leveraging supply chain efficiencies  Standardize processes and planning  Improve quoting to reduce bid variances Implement consistent service delivery model in all branches  Governance, roles and responsibilities - clear accountability  Standard service rates and definitions Enhance profitability visibility at branch level  Align compensation with customer loyalty and profitability 12 Canada - Action Plans
  13. 13. 13 Supply Chain Canada - Reducing Lead Times and Transfer Points
  14. 14. Asset Utilization  Optimize allocation of work across facilities  Current mining facilities underutilized  Ensure more disciplined capital allocation going forward 14 Canada - Action Plans
  15. 15. 15 All priorities are linked directly to EBIT or Invested Capital Priorities Will Drive Improved Return on Invested Capital (ROIC)
  16. 16. 2006 2007 2008 2009 2010 2011 2012 2013 ROIC 27.6% 26.8% 15.0% 10.2% 15.3% 16.0% 16.5% 15.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 2006 2007 2008 2009 2010 2011 2012 2013 EBIT Margin 7.8% 8.3% 6.8% 5.5% 6.3% 6.3% 7.4% 7.7% Inv. Cap. T/O 3.6x 3.2x 2.2x 1.8x 2.4x 2.5x 2.2x 2.0x 1.0x 2.0x 3.0x 4.0x 5.0% 6.0% 7.0% 8.0% 9.0% Return on Invested Capital 16 Historical Performance Results were adjusted to exclude discontinued operations Economic downturn  Significant Investments: - Drills & Shovels - Fort MacKay  Underperforming working capital  ERP implementation
  17. 17. Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 42 47 53 52 50 51 51 48 41 2012 2013 20142011 45% 35% TARGET RANGE Strengthening Balance Sheet Positive free cash flow through the cycle  Strong cash flow from operations  Improving working capital primarily through higher inventory turnover  Capital expenditures to remain significantly below 3-year average  Strong operating cash flow comfortably supports debt levels and investment grade ratings 17 Target Range Net debt to total capital ratio (%)FCF per Share (dollars) Net debt / EBITDA
  18. 18. 18  Important component of total shareholder return  Committed to growing dividend, consistent with sustainable earnings growth  Target payout ratio: 25-35%  10 year CAGR ~13%  5 year CAGR ~9%  Current dividend  Quarterly = $0.1775  Annualized = $0.71  Dividend yield ~2.4%* 0.20 0.22 0.28 0.36 0.43 0.44 0.47 0.51 0.55 0.5975 0.685 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Annual Dividends Continued Commitment to Dividend Growth * At May 30, 2014
  19. 19. GROWTH OPPORTUNITIES
  20. 20. Oil Sands 20 Benefitting from ongoing projected growth Source: CAPP (Canadian Association of Petroleum Producers)
  21. 21. Western Canada LNG 21 Seizing new business opportunities Projects proposed to transport gas from Western Canada to Asia1 Investment LNG Canada (Shell, Korea Gas, Mitsubishi, PetroChina) +28B Pacific NorthWest (Petronas, Sinopec, Japex, Indian Oil) +20B Kitimat LNG (Chevron & Apache) +11B 1Source: Finning Estimates
  22. 22. Copper in Chile 22 Participating in long-term growth Source: Wood Mackenzie
  23. 23. Reasons for Optimism in the U.K. 23 UK Real GDP (% Change) Source: Economist Intelligence Unit -5.2 1.7 1.1 0.1 1.7 3.1 2.5 -6.0 -4.0 -2.0 0.0 2.0 4.0 2009 2010 2011 2012 2013 2014F 2015F “We anticipate that the U.K.'s economic recovery will continue to broaden, benefiting the public finances.” S&P upgraded its outlook on the U.K.'s triple-A credit rating from negative to stable. S&P; June 13, 2014 “UK economy settling into above-trend growth.” OECD; May 13, 2014 “We expect to see marked improvements in British business investment and productivity.” Britain's top business lobby upgraded its economic growth forecasts for 2014 and 2015. The Confederation of British Industry (CBI) predicted Britain's economy will grow 3.0 percent in 2014, raising its forecast from 2.6 percent previously. It also upped its outlook for the next year to show growth of 2.7 percent, compared with 2.5 percent earlier. CBI; May 11, 2014
  24. 24. Key Takeaways  Finning has a great business model with resource rich territories; general economic trends support continued growth  Focus on what we can control: costs, working capital and capital investment  Significant increase in invested capital has offset profitability improvements over last three years  Opportunity to materially increase Return on Invested Capital over time  Improved profitability, primarily in Canada  Working capital management  Improved capital discipline  Operational priorities linked to improving Return on Invested Capital; team aligned and executing 24
  25. 25. INVESTOR PRESENTATION Scott Thomson, President and CEO Greg Palaschuk, VP Treasurer Mauk Breukels, VP Investor Relations June 2014

×