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 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 and EBIT margin growth; expected results from service
excellence action plans; anticipated asset utilization, inventory turns and parts service levels; and the expected target range of the Company’s net debt to total
capital 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 Finning’s expectations at December 17, 2013. 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 forwardlooking statements include: general economic and market conditions; risks associated with the conduct of business in foreign jurisdictions; 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 realize expected benefits of acquisitions; 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 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.
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.
2
3. Agenda
9:00
AM
Registration and Breakfast
9:30 AM
9:35 AM
10:05 AM
10:35 AM
10:50 AM
Welcome
Value Proposition
Operational Priorities
Financial Objectives
Summary
11:00
AM
Break
11:15
AM
Q&A
12:15
PM
Mauk Breukels, VP, Investor Relations
Scott Thomson, President & CEO
Juan Carlos Villegas, President, Finning Canada & COO
Dave Smith, EVP & CFO
Scott Thomson, President & CEO
Lunch
3
4. 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
! Opportunity to generate positive free cash flow throughout the cycle
! Significant opportunity to improve operating performance
! Going forward, profit can grow faster than revenue and working capital
management will improve markedly
! Opportunity to optimize and capitalize on historic investments
! More disciplined approach to capital investment
4
5. Revitalized Management Team
New leadership, new focus
Scott Thomson
President & CEO
Andy Fraser
EVP,
Customer &
External
Relations
Marcello
Marchese
President,
Finning South
America
Neil
Dickinson
Managing
Director,
Finning UK &
Ireland; EVP,
Global Power
Systems
Juan Carlos
Villegas
President,
Finning
Canada &
COO, Finning
International
Dave Smith
EVP & CFO
Dave
Cummings
SVP & CIO
Chief Human
Resources
Officer
5
6. Engaged Culture & Strong Safety Record
2013 Employee Opinion
Survey Highlights
0.50
Consolidated
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Jun-11
Mar-11
0.00
Sep-11
Scores above increased
from 2012 to 2013
1.00
Dec-10
Top Quartile
1.50
Sep-10
Accountability
for Results
2.00
Jun-10
Top Decile
2.50
Mar-10
75% 74%
89% 84%
78% 77%
3.00
Dec-09
Safety
TRI Frequency
2009 - 2013
CAT Dealer
Average
Sep-09
Engagement
(per 200,000 hours)
Frequency per 200,000 hrs
Finning
Total Recordable Injury Frequency
Month
6
7. Broadest Range of Quality Products
Over 300 equipment product lines
Construction
WHEEL LOADERS
BACKHOE LOADERS
SKID STEER LOADERS
COMPACTORS
FORBES Top 100
Most Valuable
Brands
Forestry
FOREST MACHINES
GRADERS
Power Systems
ELECTRICAL POWER GEN.
INDUSTRIAL OEM
Mining
Petroleum
OFF-HIGHWAY TRUCKS
PIPE LAYERS
SKIDDERS
FELLER BUNCHERS
$2.5B
MARINE POWER
DOZERS
HYDRAULIC SHOVEL
DOZERS
EXCAVATORS
Record 2012
R&D Investment
ELECTRIC ROPE SHOVEL
UNDERGROUND TRUCKS
POWER SYSTEMS
7
8. Market Leader in Most Desirable Regions
UK &
Ireland
13%
South
America
37%
Canada
50%
Revenue by region (nine months ended Sept 30, 2013)
8
9. Diverse & Growing Customer Base
66% of new equipment deliveries from non-mining
New Equipment Deliveries by Industry
Forestry
3%
Petroleum
5%
Forestry
2%
Petroleum
3%
Other*
9%
Other*
7%
Power
Systems
18%
Mining
43%
Power
Systems
17%
Mining
34%
Construction
32%
Construction
27%
2008
2013
nine months ended
September 30
Non-mining equipment deliveries increased
from 57% to 66% over last 5 years
* Other: agriculture, industrial and government segments
9
10. Powerful, Sustainable Business Model
Revenue by Line of Business
Used
4%
Rental
6%
~100,000
Large
Installed
Base
Product
Support
48%
New
Equipment
42%
2012 Mobile
Machine
Population
Product Support
10-Year CAGR ~11%
(2003-LTM)
Product
Support
New
Equipment
Sales
2013
nine months ended
September 30
10
11. Return on Invested Capital
Drives Shareholder Value
Correlation of Key Metrics
to Total Returns
Average Three-Year ∆
ROIC
Total Returns vs. Three-year Δ ROIC by Quartile
12%
76.9
9.1
0.51
8%
ROA
0.39
60%
57.9
0.44
EPS
80%
41.8
4%
40%
2.5
ROE
0.23
0.1
0%
Revenue
0.10
20%
13.3
FTT – Flat ROIC over last three years – 3rd quartile
0
0.15 0.30 0.45 0.60
-4%
-2.9
Fourth
Third
Second
First
0%
Quartile
Source: RBC Capital Markets
Average Three-year Δ ROIC
Average Total Return
11
12. Return on Invested Capital Defined
EBIT
$523M
EBIT
Margin
ROIC
15.8%
7.8%
×
Invested
Capital
Turnover
2.0x
÷
Revenue
$6,706M
Revenue
÷
Average
Invested
Capital
$3,308M
Last twelve months ended September 30, 2013
12
13. Performance Gap
Revenue Growth %
(’06 – ’12 CAGR)
Invested
Capital Turnover
(LTM)
EBIT Margin %
(LTM)
Ferreycorp
Toromont
Wajax
Finning
H&E Equipment
Barloworld
Wajax
Seven Group
Toromont
Barloworld
Finning
Finning
Strongco
Ferreycorp
Ferreycorp
H&E Equipment
Barloworld
Strongco
Toromont
Wajax
Seven Group
Seven Group*
Strongco
H&E Equipment
-10
0
10
20
30
0
3
6
9
12
0
1
2
3
4
Source: RBC Capital Markets
See Appendix for description of Finning peers
* Not meaningful
13
14. ROIC Performance
Invested Capital
Turnover
EBIT Margin
7.8
Finning
6.9
8.1
Canada
UK & Ireland
South America
Finning
7.0
5.1
Canada
2.0
9.6
9.8
South America
LTM
Finning
2.6
2.0
Canada
2.4
3.3
UK & Ireland
4.5
ROIC
2.7
1.9
2.2
UK & Ireland
South America
15.8
18.2
15.9
16.9
16.8
12.2
17.9
21.2
Seven-Year Average
Results have been adjusted to exclude discontinued operations
LTM – last twelve months ended September 30, 2013
Seven-year average – 2006 to 2012
14
15. Priorities Will Drive Improved ROIC
All priorities are linked directly to EBIT or Invested Capital
Priorities
Market Leadership
Safety & Talent
Management
(Foundation)
Service Excellence
Supply Chain
Asset Utilization
EBIT
ROIC
Invested
Capital
15
16. Priorities Linked to Incentives
Realignment of incentives
• From management to
branch level
• Metrics linked to what
employees control
Short
Term
Incentive
Plan
Long
Term
KPI Categories
!
!
!
!
Safety
Employee development
Market share
Customer loyalty
!
!
!
Parts growth
Supply chain
Service profitability
!
SG&A
Safety
EBIT Margin
Free Cash Flow
Customer Loyalty
Invested Capital Turnover
Return on Invested Capital
Total Shareholder Return
50%
Priorities
Market Leadership
Safety &Talent
Management
(Foundation)
Service Excellence
Supply Chain
Asset Utilization
EBIT
ROIC
Invested
Capital
Defined key performance indicators (KPIs) to consistently
measure performance against priorities across the organizations
16
17. Safety & Talent Management
Foundation for all priorities
Safety
excellence
! Rigorous, company-wide
focus on safety
! New role – Andy Fraser,
EVP, customer & external
relations – reflects
fundamental importance of
safety:
! strategic oversight
! greater consistency
across operations
Right people
in right roles
! Recent vice president
appointments
! Canada:
! Supply chain
! Power systems
! Customer solutions
! Service
! South America:
! Human resources
! Supply chain
People
development
! Continued investment in
learning and development
! Ongoing focus
on employee engagement to
drive high performance
! Structured succession
planning for key roles
17
20. Supply Chain
Benefits
! Competitive advantage as
a world-class distributor
! Efficient supply chain
drives customer loyalty
! Reduces invested capital
! Reduces costs
! Improves cash generation
Primary opportunities
! Canada
! FINSA – Drills and Shovels
Inventory Turns
3.0X
2.4X
LTM
COGS
LTM Average
Inventory*
2011
$4,656M
$1,931M
LTM
Supply Chain
Target ∆ in 3 Years
Inventory Turns Consolidated
0.5 – 0.9x "
Working Capital Reduction
0.1 turn = $50M inventory #
* 4 quarters average
LTM - last twelve months ended September 30, 2013
20
21. Canada
Supply Chain Action Plans
Network
! Implement direct ship from Caterpillar’s Spokane Distribution Centre
! Implement direct ship from Regional Distribution Centres to local customers
! Optimize existing warehouse and distribution network resulting in reduction of delivery
touches
Transportation
! Consolidate transportation services, driving cost improvement
! Optimize delivery frequencies and routes
Inventory
! Centralized inventory management function
! Dedicated focus on critical customer parts
! Rationalize slow moving parts
! Standardize parts warehouse processes
! Implement new inventory management replenishment rules
21
22. Dramatically Reduced Lead Times
and Transfer Points
Edmonton, AB
Kamloops, BC
Vernon, BC
12h
Spokane, WA
7d
Planned Logistics Model: Direct Stock Routes
Spokane, WA
(Caterpillar)
12h
Vernon,
BC
Customer
Edmonton,
AB
Kamloops,
BC
Legacy Network Model
Morton, IL
(Caterpillar)
7d
Vernon,
BC
Customer
Morton, IL
22
23. Canada
Supply Chain Progress to Date
Emergency Parts
Purchases (% of items)
Parts Service Level (%)
24 Hours
100
Parts
Inventory
Turns
∆ +0.3x
100
72 Hours
93
92
88
82
75
76
75
80
95%
85%
2013
TARGET
54
50
2012
50
YTD
2013
29
25
0
25
19
June
2011
2012
Sept
2013
0
June
2011
2012
Sept
2013
23
24. Service Excellence
Benefits
! Drives lowest equipment owning and
operating costs for customers
! Maximum uptime for customers
! Improves customer loyalty
! Increases service profitability
! Attracts and retains technical talent
Primary opportunities
! All regions
Service Excellence
Target ∆ in 3 Years
Consolidated EBIT $
$40 – 60M"
24
25. Canada
Service Excellence Action Plans
Improve labour recovery
! Enhance leadership, competencies & technical skills
! Improve parts availability by leveraging supply
chain efficiencies
! Standard processes & planning
! Improved quoting process to reduce bid variances
Labour Recovery
75%
68%
2008
2013
2013
Canada
Implement consistent service delivery model in all branches
! Governance, roles & responsibilities - clear accountability
! Standard service rates and definitions
! 5 branches roll-out - January 2014; all branches - by end of 2014
Enhance profitability visibility at branch level
! Align compensation with customer loyalty and profitability
80%
FINSA
Service Opportunity
∆ Over 3 Years
$40-60 Million
FINSA,
UK & Ireland
30%
Canada
70%
Labour recovery drives
80% of service opportunity
in Canada
25
26. Asset Utilization
Benefits
! Optimizes footprint & distribution of activities
! Maximizes return on investments made
! Improves service delivery
! Reduces costs and invested capital
Primary opportunities
! Canada
! FINSA
Major Infrastructure
Investments in
Last 5 Years
2008 – COE,
Red Deer, AB
2011/12 – Fort McKay
oil sands service
facility
$110M
$110M
2008/09 – Truck
Shop & PDC, La
Negra, Chile
$22M
2011/13 – Dump
Bodies Mfg.
Facility, Chile
$20M
26
27. Canada
Asset Utilization Action Plans
Gross Capital
Expenditures
Optimize allocation of work across facilities
Current mining facilities underutilized
Ensure more disciplined capital allocation going forward
Decisions-to-date
! Move oil sands new equipment preparation
from COE to Fort McKay
! Move oil sands overhauls to Fort McKay
! Move 797 rebuilds from Mildred Lake to Fort McKay
! Move Drills & Shovels from Fort McMurray to Mildred Lake
! Move Power Systems in Fort McMurray to local branch
~
$150M /year
Under
$100M
Average
2011-2013
2014F
27
28. Customer & Market Leadership
Benefits
! Builds machine population and drives future product support
! Aligns with Caterpillar’s focus on market share growth
! Expands focus to entire product line
Primary opportunities
! Core equipment in Canada
! Core equipment and large mining trucks in FINSA
! Parts market share in all regions
! Power systems in Canada
Customer & Market Leadership
Target ∆ in 3 Years
Revenue Opportunity
Core Equipment Market Share – Consolidated
2-4% "
1% share = $35M
Parts Market Share – Consolidated
2-4% "
1% share = $45M
Power Systems Revenue – Canada
10-15% "
5% growth = $20M
Opportunity to increase revenues in a no-growth industry scenario
28
29. Canada – Core Equipment
Customer & Market Leadership Action Plans
Improve sales coverage
! Industry segmentation
! Strengthening sales team
Core Equipment
Market Share
∆ -5%
Adjust sales force compensation
Drive improved participation rates
Right equipment, right time, right place
! Forecasting accuracy improved dramatically
! Supply chain improving equipment availability
2008
2012
∆ +2%
New products to maximize customer uptime
! Cat E-series excavator range – impressive fuel economy
! Hybrid excavator – potential game-changer in performance &
operator costs
Oct
2012
Oct
2013
29
30. FINSA – Equipment
Customer & Market Leadership Action Plans
Improved sales coverage
! Increased dedicated core equipment sales force
! Detailed competitive analysis by territory and product
! Leads from remote sales force and internet passed to dedicated
sales representatives
! Full integration with sales and operations planning process
Implementing significant changes to commission structure
Improving customer service experience – impacts loyalty and
repurchase
! Achieved 3 point increase in customer loyalty YTD
Core Equipment
Market Share
∆ +3%
2008
2012
∆ -7%
Strengthened product line-up
! Introduce new excavators and wheel loaders to utility sector
Sept
2012
Sept
2013
30
31. Canada – Parts
Customer & Market Leadership Action Plans
Improve customer loyalty through enhanced parts availability
and mix
! Leverage supply chain for improved service delivery,
focus on fast-moving parts
! Develop high velocity and easy-to-use channels
(i.e. e-business, inside sales)
! Achieved 5 point increase in customer loyalty year-to-date 2013
Pursue more customer service agreements to secure parts
business
! Offer broader range of support contract options
Introduce new component options for mid-range equipment
! Leveraging both Finning and Caterpillar remanufacturing
capabilities
Parts
Market Share
∆ -1.0%
2011
YTD
2013
Parts Market
Share
~20% Gap
Introduce market-based pricing
Monitor customer asset performance to increase predictability
of future parts needs
! Utilize UK & Ireland capabilities to monitor equipment in
Canada
Canada
FINSA
31
32. Drills and Shovels – Parts
Customer & Market Leadership Action Plans
Progress to date
! Canada exceeding expectations - solid performance on
parts and service
! FINSA exceeding service expectations
FINSA
Drills & Shovels
Parts Opportunity
Opportunity – South America
! Addressing supply chain challenges
! Pursuing large parts opportunity
Action Plan – South America
! Managing business separately from mining organization
! Improving parts inventory performance
! Reducing cost structure
! Improving asset utilization
FINSA’s
Current Drills &
Shovels Parts
Share ~60%
Excellent acquisition in long-term
! Broadest range of mining product
! Expect continued product support growth
! Migrating to larger percentage of Caterpillar parts
! Successfully bundling shovels and trucks & support equipment
32
33. Canada – Power Systems
Customer & Market Leadership Action Plans
Seizing growing global power systems opportunity
Introduced new organizational structure to drive
participation
! Segmented approach – by industry versus regional
! Key appointments: new Senior Vice President, industry
leaders, additional sales force
Canada Power
Systems Revenue
CAGR
0%
(2008 - LTM)
Improving inventory management
Providing integrated product offering
Caterpillar Power
Systems Revenue
CAGR
Leveraging global collaboration
! Example: regions working together on global opportunities
Collaborative Projects Completed (~$40 Million)
3250 Series
Engines
Santa Marta Landfill, Chile
6
Bonnybrook Water Treatment, Canada
(2008 - LTM)
8
Cliba Landfill, Argentina
4%
3
33
35. Improving ROIC
EBIT Margin and Invested Capital Turnover
! Operational cost efficiencies
! Supply chain
! Service excellence
! Discretionary cost control
EBIT Margin
! Improved working capital driven by
higher equipment and parts turns
! Optimized asset utilization, including
supply chain network
! Capital discipline
IC Turnover
2.5x
7.8%
2.0x
6.3%
2011
LTM
2011
LTM
35
37. Measuring Progress
EBIT – Annual
EBIT Margin (%) – consolidated & regions
Canadian Service Labour Recovery (∆%)
Market Share:
• Core Equipment (∆%)
• Parts (∆%)
• Canadian Power Systems Revenue (∆%)
ROIC (%)
consolidated & regions
Invested Capital – Quarterly
Inventory ($) – consolidated
Inventory Turns (x) – consolidated
Working Capital to Sales Ratio (%) – consolidated
Invested Capital ($) – consolidated & regions
Invested Capital Turnover (x) – consolidated & regions
Free Cash Flow ($) – consolidated
Net Debt to Total Capital Ratio (%) – consolidated
See Appendix for definition of terms
37
38. Strengthening Balance Sheet
FCF per Share (dollars)
Net debt to total capital ratio (%)
2.89
53
50
1.86
1.53
51
51
48
47
45
45%
0.31
52
0.13
42
TARGET
RANGE
-0.22
-0.62
35%
-1.29
2006 2007 2008 2009 2010 2011 2012 LTM
Q4
Q1
2011
Positive free cash flow
through the cycle
De-levering
balance sheet
! Strong cash flow from
operations
! Improving working
capital primarily through
higher inventory turnover
! Capital expenditures to
remain significantly
below 3-year average
! Net debt to total capital
expected to be at lower
end of 35-45% target
range by end of 2014
! Strong operating cash
flow comfortably
supports debt levels and
investment grade ratings
Q2
Q3
Q4
Q1
2012
Q2
Q3 Q4E Q1
2013
Q2
Q3
Q4
2014
Net debt / EBITDA
Target
Range
3.0
2.5
2.4
2.4
2.2
2.2
2012
LTM
1.8
1.8
1.5
1.1
0.5
2008
2009
2010
2011
38
39. Continued Commitment to Dividends
! 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 ~7%
! Current quarterly dividend =
$0.1525
! Current dividend yield ~2.4%
assuming $25.00 share price
Annual Dividends
0.5975
0.55
0.51
0.43 0.44
0.47
0.36
0.28
0.18
0.20
0.22
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
39
41. Oil Sands
Benefitting from ongoing projected growth
Typical Oil Sands Start-up Fleet
(for 100,000 bblpd operation)
Oil$Sands$Raw$Bitumen$(Mbbl/d)$
Open Pit Oil Sands Production
(Thousands of Barrels per Day)
2,000"
Rope
Shovel
2
Hydraulic
Shovel
1
Mining"
1,000"
Off-highway
Trucks
20-25
0"
2012" 2013" 2014" 2015" 2016" 2017" 2018" 2019" 2020" 2021" 2022" 2023" 2024" 2025" 2026" 2027" 2028" 2029" 2030"
Motor
Graders
5-6
Track-Type
Tractors
8-9
Source: CAPP (Canadian Association of Petroleum Producers)
41
42. Oil Sands
Benefitting from ongoing projected growth
Projections From Current Customers*
• 2013-2017
• ~40% increase in overburden moved
• ~60% increase in tons of ore moved
New Project
• Fort Hills (Suncor) - $13.5 billion
• Production starts Q4, 2017
• ~180,000 bbls/day
Expansions
• Horizon (CNRL)
• 2013: 119,000 bbls/day
• 2017: 250,000 bbls/day
• Kearl (Imperial)
• 2013: 100,000 bbls/day
• 2015: 220,000 bbls/day
• 2020: 345,000 bbls/day
• Jackpine (Shell)
• 100,000 bbls/day
Potential New Projects
• Joslyn (Total)
• Production starts 2018
• ~100,000 bbls/day
• Frontier (Teck)
• Production starts 2021
• ~80,000 bbls/day to grow to
227,000 bbls/day by 2031
* Finning estimates
42
43. Copper in Chile
Participating in long-term growth
Mining Companies Investing
in Chile 2014-2018
(in Billions)
Codelco
Mining Investment
in Chile
(in Billions)
20
Chile
Teck
Largest Copper
Producing Regions
China
Peru
Barrick
15
13.9
12.9
USA
BHP
13.4
12.6
13.1
12.6
Australia
Goldcorp
10
Russia
Antofagasta
Zambia
Capstone
Congo
Glencore Xstrata
Canada
KGHM
5
Mexico
0
7.5 15 22.5 30
Source: Wood Mackenzie
0
5
10
15
20
0
’13
‘14
‘15
‘16
‘17
‘18
Mine Production (millions)
Proven Reserves (10 millions)
43
44. Construction Opportunities
UK Real GDP (% Change)
UK#Real#GDP#(%#change)
3.0
500
2.5
1.7
1.5
1.8
1.5
1.1
Replace chart, attached (Anson)
400
0.1
0
%
Non-Mining Order Intake – Consolidated ($M)
300
-1.5
200
-3.0
100
-4.5
-6.0
-5.2
2009
2010
2011
2012
2013F
2014F
2015F
0
Q3-12
Q4-12
Q1-13
Q2-13
Q3-13
Source: Economist Intelligence Unit
Region
Investment
($Billions)
Timing
BC Lower Mainland
11.5
Completion 2020
Anthony Henday Drive North East
Edmonton
1.8
Completion 2016
LRT Downtown – Mill Woods
Edmonton
1.8
2015-2018
Calgary
1.4
Completion 2015
Metro Vancouver
1.4
Completion 2015
Alberta
0.9
Completion 2015
Western Canada Infrastructure Project
Roberts Bank
Airport Expansion
Evergreen Rapid Transit
Twinning Highway 63
44
45. Western Canada LNG
Seizing new business opportunities
Compression & Prime Power
Projects proposed to transport gas
from Western Canada to Asia1
Investment
LNG Canada (Shell, Korea Gas, Mitsubishi, PetroChina)
+$28B
Projected
Opportunity
Malaysia (Petronas)
+$20B
Engines
Kitimat LNG (Chevron & Apache)
+$10.6B
per bcfpd
Total
engine
requirement
Equipment
Parts & Service
1
7.25
89
645
bcfpd
>$1B
Source: Finning estimates
45
46. Historical Revenue
Correlation to Economic Growth
CAGR 8-Years
(2005-2013)
Chile GDP
(USD)
FINSA
Revenue
(USD)
11%
15%
CAGR 8-Years
(2005-2013)
Western Canada
GDP (CAD)
Finning Canada
Revenue (CAD)
4%
6%
Chile Real GDP
Forecast
4.7%
2014
5.2%
2015
Western Canada
Real GDP Forecast
3.3%
3.2%
2014
2015
Source: Economist Intelligence Unit; Company estimates
Finning 2013 revenues - LTM ended September 30, 2013
Western Canada includes BC and Alberta
46
47. Key Takeaways
! 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
!
!
!
!
Bucyrus
Oil sands investments
ERP
Increase in working capital to sales
! 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
! Finning has a great business model with resource rich territories – general economic
trends support continued growth
47
52. Market Outlook
Canada
! Continued stable oil sands activity
! Solid infrastructure activity and market share gains to drive growth in Core and BCP
! Growing power systems opportunities (LNG)
! Product support remains solid
South America
! Slower pace of growth - copper producers are focused on productivity and efficiencies
! Expect reduction in new equipment sales to be offset by continued growth in product
support, driven by large equipment population and solid utilization levels
! Construction and power systems activity impacted by mining slowdown
! Argentina’s business continues to be impacted by import restrictions
UK and Ireland
! Signs of macro-economic improvement
! Coal mining stabilizing; increased confidence in infrastructure spend; active quarrying
and aggregates; improving plant-hire market
! Power Systems: EPG projects, industrial, pleasure craft remain active
52
53. Finning 101
World’s largest Caterpillar dealer:
! New equipment and engines sales
! Used equipment sales
! Products support / parts and service
! Equipment rental
Main industries:
! Mining (oil sands, copper, coal)
! Construction
! Other: petroleum, forestry, pipeline
Key statistics:
! Nine months ended Sep 30, 2013
! Revenue = $4.96 billion
! EPS = $1.41
! Quarterly dividend = $0.1525/share
! ~15,000 employees
! Market cap ~ $4.4 billion*
Yukon
The Northwest
Territories
Fort McMurray
British
Alberta
Columbia
Edmonton
Bolivia
Antofagasta
Chile
Argentina
Uruguay
Vancouver
(head office)
Santiago
Ireland
United
Kingdom
Cannock
* At December 13, 2013
53
54. Glossary
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
BCP
COE
COGS
CRC
CRM
EBIT
EBITDA
EPG
EPS
ERP
FCF
FINSA
CAGR
GDP
IC
KPI
LNG
LTM
OEM
PDC
ROA
ROE
ROIC
TRIF
TSR
W/C
YTD
Building construction product
Centre of Excellence – Finning’s service facility in Red Deer, AB
Cost of goods sold
Component rebuild centre
Customer relationship management
Earnings before finance costs and income taxes
Earnings before finance costs, income taxes, depreciation and amortization
Electric power generation
Earnings per share
Enterprise Resource Planning System
Free cash flow
Finning South America
Compound annual growth rate
Gross domestic product
Invested capital
Key performance indicator
Liquefied natural gas
Last twelve months
Finning’s component remanufacturing facility in Edmonton, AB
Parts distribution centre
Return on assets
Return on equity
Return on invested capital
Total Recordable Injury Frequency
Total shareholder return
Working capital
Year to date
54
55. Definition of Terms
! EBIT margin: earnings before finance costs and income taxes ÷ total revenue
! Free cash flow: cash provided by (used in) operating activities less net additions to property, plant,
and equipment and intangible assets
! Invested capital: book equity + net debt (total debt less cash held) OR total assets – total liabilities,
excluding net debt
! Net debt to total capital: net debt (short term debt + long term debt, net of cash and cash
equivalents) ÷ total capitalization (net debt + all components of equity)
! Net debt to EBITDA: net debt (defined above) ÷ EBITDA (adjusted for significant one-time items)
! Return on invested capital: EBIT (adjusted for significant one-time items) ÷ invested capital (4 point
average)
! Working capital: total current assets (excluding cash) – total current liabilities (excluding short term
debt and current portion long term debt)
! Working capital to sales: working capital (4 point average) ÷ total revenues
! Total recordable injury frequency: (total recordable injuries x 200,000)/exposure hours
55
56. Finning Peers
Barloworld
Multinational distributor of leading equipment brands and provider of integrated rental, fleet management, product
support and logistics solutions; headquartered in South Africa; operates in 26 countries.
Ferreycorp
Peruvian conglomerate engaged in the distribution and maintenance of construction, mining, agricultural and transport
equipment, manufactured by Caterpillar and many others brands.
H&E Equipment
Integrated equipment services company, which rents, sells, and provides parts and service support for earthmoving
and other equipment; headquartered in Louisiana and operates across 22 states in the US.
Seven Group
Australian diversified operating and investment firm which owns WesTrac Group, the Caterpillar dealer in Western
Australia and North Eastern China.
Strongco
Canadian multi-line mobile equipment dealer, which also operates in the North East United States, and represents
multiple equipment manufacturers, including Volvo and Case.
Toromont
Caterpillar dealer in Ontario, Manitoba, Newfoundland, and most of Labrador and Nunavut.
Wajax
Canadian multi-line mobile equipment distributor representing over 30 manufacturers, including Hitachi, JCB, Tigercat.
56
57. Mauk Breukels
Vice President, Investor Relations & Corporate Affairs
604-331-4934
Mauk.Breukels@finning.com
Finning International Inc.
Suite 1000, Park Place
666 Burrard Street
Vancouver, BC V6C 2X8
Ilona Rojkova
Manager, Investor Relations
604-331-4900
Ilona.Rojkova@finning.com
finning.com
57
