Finning cibc whistler conference final


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Finning cibc whistler conference final

  1. 1. CIBC Whistler Institutional Investor Conference Mike Waites, President and CEO January 19, 2012
  2. 2. Forward Looking InformationThis report contains statements about the Company’s business outlook, objectives, plans, strategic priorities and other statements that are not historical facts. A statement wemake 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-lookingstatements 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 financialresults; expected revenue and SG&A levels and EBIT growth; anticipated generation of free cash flow (including projected net capital and rental expenditures), and its expecteduse; anticipated defined benefit plan contributions; the expected target range of Debt Ratio; the expected quantitative impact on the 2010 consolidated statements of financialposition 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 havebeen 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 January 19, 2012. 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 thatactual results could differ materially from our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans, strategicpriorities 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 thatcould 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 thecontinued market acceptance of Caterpillar’s products and Caterpillar’s timely supply of parts and equipment; our ability to continue to improve productivity and operationalefficiencies while continuing to maintain customer service; our ability to manage cost pressures as growth in revenues occur; our ability to attract sufficient skilled labour resourcesto meet growing product support demand; our ability to negotiate and renew collective bargaining agreements with satisfactory terms for our employees and the Company; theintensity 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 orregulations; stock market volatility; changes in political and economic environments for operations; the integrity, reliability, and availability of information technology and the dataprocessed by that technology; operational benefits from the new ERP system; new or amended IFRS or interpretations that become effective prior to the inclusion of theCompany’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 givinginformation about management’s current expectations and plans and allowing investors and others to get a better understanding of our operating environment. However, readersare 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 theforward-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 currentlydeem 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 orin the same way we present known risks affecting our business.All amounts in this presentation are in Canadian dollars unless otherwise noted 2
  3. 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 and high-performance culture Finning South America Fort McMurray  Well-positioned for growth Edmonton Industries  Mining (including oil sands) Vancouver Antofagasta  Construction  Power systems  Other: petroleum, forestry, pipelines Santiago Finning UK and Ireland Over 13,000 employees Market cap ~ $4.2 billion Cannock YTD Sep 30, 2011 revenue = $4.1 billion YTD Sep 30, 2011 EBIT = $272 million 3
  4. 4. Creating Our Future Mining Solutions Power Systems Ultimate Vision (2015) Providing unrivalled services that earn customer loyalty, we will be CAT’s best Global global business partner. Solutions Provider S T R Core/BCP Acquisition(s) A Leadership T E Safety Operating G Leverage Sales & SolutionsIntermediate I 10% EBIT Operational (2012-2014) C Excellence 5 x S Service & Parts Operational Excellence G Supply Chain R Systems O W Panorama T Implementation Short-term H(2010-2011) Solidify Foundation High Performance/ Disciplined Growth FCF EBIT Improvement Engagement 4
  5. 5. Meeting Our Commitments Strong top-line performance as of Sep 30, 2011  Backlog remains strong at $1.8 billion  YTD revenue growth up 26%  Solid market conditions in core businesses Improved operating leverage  Streamlined, more efficient cost structure  On-track to achieving 9-10% EBIT margin target in 2013 Investing to maintain competitive advantage  Fort McKay oil sands service facility – on track  Mining product support infrastructure in South America  Executing acquisition strategy 5
  6. 6. Acquisition of Former Bucyrus Distribution Business Transaction Overview Purchase price: US $465 million Two-phase close: late Q1 2012 in South America and UK; Q2 2012 in Canada Finning to acquire the former Bucyrus International, Inc. distribution business from CAT which sells and supports products in our South American, Canadian and UK territories Purchase price: US $465 million  Attractive return on investment in excess of cost of capital  Asset based transaction Expected to be accretive to 2012 earnings per share* Financing  All cash transaction  Intend to fund acquisition by way of issuance of US and Canadian dollar denominated term debt. Global credit facility can be used to bridge as necessary  Expected to have no impact on credit rating* Excluding transaction costs 6
  7. 7. Compelling Strategic Fit Mining Solutions Provider Product Support Growth Broadest product offering in mining  Substantial installed machine base in our Expanded product offerings for underground territories mining  Equipment sold in 2003 – 2008 nearing key Leveraging existing customer base maintenance overhauls Further assist customers in reaching higher  Opportunity to gain market share by increasing productivity and performance customer service levels Strong macro momentum  Leveraging extensive product support capabilities  Ongoing growth in demand for commodities in emerging markets  Large remanufacturing and rebuild opportunity  Record projected mining investment in  Existing market South America and attractive Canadian  CAT componentry/growth opportunities Strong Relationship with Caterpillar  Cements Finning’s leading position in mining  Alignment on Caterpillar’s largest acquisition 7
  8. 8. Distribution Overview - Former Bucyrus Acquired business distributes and services 2010 Revenue ~$600 million former Bucyrus products throughout Finning’s territories Product Support 2 facilities in South America and 2 in Canada, 48% complete with parts inventory ~900 employees, primarily in customer support New Equipment and field service 52% Projected 2011 revenue: ~$600 million Estimated 2012 revenue (full year): ~$700m Projected EBIT margin: ~8% within 2 to 3 years Canada 36% South America Strong market share in South America and 62% Canada Significant product support growth opportunities UK 2% Potential to grow underground business 8
  9. 9. Pro Forma Finning Profile 2010 Revenue % by Line of Business 2010 Pro Forma Revenue % by Operation Standalone Pro Forma Product SupportProduct Support 46% New Equipment 46% New Equipment Canada: 48% 42% 43% (Standalone : 50%) $4.6 billion $5.2 billion South America: 39% Equipment Rental Used Equipment Equipment Rental Used Equipment (Standalone : 36%) 6% 6% 6% 5% Fort McMurray Edmonton 2010 New Equipment Deliveries % by Industry Iquique Vancouver Standalone Pro Forma Antofagasta Construction, Construction,Forestry, & Other Forestry, & Other 37% Mining 32% Mining 40% 48% UK & Ireland: 13% Santiago (Standalone : 14%) $1.9 billion $2.2 billion Power Systems Power Systems Cannock 23% 20% 9
  10. 10. Acquisition of Former Bucyrus Distribution Business Summary Excellent strategic opportunity for Finning Attractive return on investment in excess of cost of capital Significant upside through growth of product support business and market share Finning and Caterpillar have been working closely since fall of 2011 to ensure a seamless integration 10
  11. 11. Market Outlook Macro-economic uncertainty has not impacted our business and outlook  Actively quoting and taking orders  Monitoring end markets, staying close to customers  Better positioned to respond if end markets weaken Canada  Stable commodity cycle supports mining growth  Healthy demand from construction and power systems South America  Ongoing strength in mining driven by record investments  Solid growth in construction and power systems as public and private investments in infrastructure and energy are expected to continue UK & Ireland  Fragile economy  Focus on core businesses where outlook remains encouraging 11
  12. 12. Creating Our Future Investing in capabilities and capacity  New ERP system  Mining product support People, safety and high-performance culture Strong Caterpillar relationship  New businesses, products, territories Focused on margin expansion and disciplined execution of our strategy Acquisition of former Bucyrus distribution business drives long term value for customers, employees and shareholders 12