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 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 the Company’s Debt Ratio; the impact of 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 Finning’s expectations at June 25, 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 forward-looking 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, and availability of information technology and the data processed by that technology;
expected operational benefits from the new ERP system. 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.
All amounts in this presentation are in Canadian dollars unless otherwise noted
3. June 25, 2013
Finning Canada Investor Tour
Andy Fraser, President, Finning Canada
Strategic Overview
4. Finning Canada
2012 revenue = $3.3 billion
2012 EBIT = $231 million
Employees: ~6,000
Industries:
Mining (including oil sands)
Construction
Power systems
Petroleum / Oil & Gas
Forestry
Pipelines
80th anniversary in 2013
4
Vancouver
Edmonton
(OEM, PDC)
Fort McMurray
(4 branches + Fort McKay)
Western Canada
Red Deer
(COE)
British
Columbia
Alberta
Yukon
Northwest
Territories
5. 2012 Canada Revenue Profile
5
Mining
(incl. oil sands)
32%
Power
Systems
12%
Construction
35%
Mining
(including oil sands)
66%
Power Systems
8%
Construction
26%
Product Support
Revenue by Industry
New Equipment
Sales by Industry
Forestry
4%
Other
6%
Petroleum
11%
Revenue
by Line of Business
New
Equipment
44%
Product
Support
43%
Used
Equipment
5%
Rental
8%
Other includes government and industrialProduct support for petroleum and forestry
is allocated among above key industries
6. Strategic Priorities
Advance operational excellence
Leverage investments
Fort McKay oil sands service facility
Expanded mining product line (formerly Bucyrus)
ERP system
Grow market share in construction, forestry and power
systems
6
Improve EBIT Margin
7. Operational Excellence
Key focus areas
Supply chain
Service efficiency
SG&A cost management
Focus on disciplined execution
Organizational alignment
7
8. Culture of Accountability
Safety
Lost time injury frequency (LTIF)
= 0.14 in Q1/13
Employee engagement
Record participation in 2012
Technical training
Focus on compliance and
discipline
8
9. Market Outlook
Mining
Customers under pressure to reduce costs
Soft market conditions for new equipment sales
Product support expected to remain active
Large installed machine population
Good equipment utilization rates
Full-year’s contribution from expanded mining product line
Heavy construction and forestry
Expect solid activity levels in new equipment and product support
Power Systems
Continued softness in conventional oil & gas
EPG and marine expected to remain strong
9
11. June 26, 2013
Finning Canada Investor Tour
Dave Primrose, EVP, Mining, Construction and Forestry
Mining, Construction and Forestry
12. Construction and Forestry
Heavy Construction
Continued investment in
infrastructure
Alberta: ring roads, airports, LRT’s
British Columbia: Evergreen Line
Rapid Transit - Coquitlam to
Vancouver; Interior to Lower
Mainland (ILM) Transmission
Project - Nicola to Coquitlam
Numerous pipeline projects in
Western Canada through 2020
Forestry
US housing starts improving
Diversified markets
12
13. Power Systems
Petroleum / Oil & Gas
Many idled drilling rigs
Exploration, well servicing and production companies leveraging existing
assets, driving demand for product support
Natural Gas
Low prices expected to curtail exploration
Increased focus on producing more power using NG
Desire to switch from diesel to NG (or dual fuel) growing in all markets
Electric Power Generation - new mines off-grid, requiring
powerhouses
BC Hydro upgrading off-grid communities
Alberta market remains buoyant
Solid demand, particularly in mining
13
14. Coal and Metals Mining
Two copper mines, Mt. Milligan and Red Chris, going into production
in 2013 - 2014
Diamond mining activity continues strong as Dominion Diamond
expands in NWT by purchasing Ekati
Teck Coal proceeds with site development of Quintette Coal in north
eastern BC
Underground mining opportunities expand as product line and
market grow
Numerous new mines at various stages throughout our territory
14
16. OEM Remanufacturing
325,000 square foot purpose built “5 Star” facility
Meets Caterpillar’s highest contamination control standards
530 employees, two shift operation
Fully integrated facility
Investments in inspection, salvage and testing technologies
Reman components reduce equipment owning and operating costs
Typically 50% to 75% of cost of new components
Finning Canada mining and heavy construction product support
focus
Critical customer requirements
Availability
Quality and reliability
Cost efficiency, continuous improvement
Supporting services
16
17. Center of Excellence (COE)
17
1. Machine Overhauls / Rebuilds
Overhauling equipment for its second life under various options –
45% to 75% of new price
Finning - customer program
CAT certified powertrain program
CAT complete machine certification
Support capabilities
Component repairs
Ready-to-go ‘modules’ (e.g., cabs,
grader circles, track frames, radiators)
Engineered products (e.g., handrails, platforms)
2. New Equipment Preparation
New equipment delivered from CAT to COE where it is assembled and
modified to meet customer specifications
19. Expanded Mining Product Line
Bucyrus acquisition meeting business case expectations
Service on plan; parts ahead of plan
Equipment sales slower, as expected
Ongoing transition to genuine Caterpillar parts and
components
Expanded electric drive truck options with Unit Rig in addition
to 795
Existing models updated and new models introduced
19
20. Operational Excellence
Supply Chain
Global Supply Chain Council
Improving forecasting and planning for
equipment
Leveraging Spokane Parts Distribution Center
Service Excellence
Customer-centric business balanced with
operating discipline
Leveraging scale and repeatable processes
Caterpillar Production System (CPS)
SG&A initiatives
Third party benchmark and assessment of
SG&A costs
Developing and implementing sustainable
process improvements in product support areas
20
21. Strong Competitive Advantage
Leading market position – broadest product line
Product support capabilities
Service culture
Focus on operational excellence
Enhancing customer service and loyalty
Driving sustainable improvement in operating profitability
21
23. 23
Finning Oil Sands Locations
CNRL
Total E&P
Syncrude
Syncrude
Suncor
Suncor
Shell
Syncrude
Fort Hills
Energy
Imperial
OilShell
Exxon
Mobil
Syncrude
Fort
McMurray
Fort McKay
Athabasca River
Mildred Lake Branch
Fort McMurray
Town Shop Branch
Power Systems
Branch
Shell/Albian
2 warehouses
Fort McKay
Service Facility
The Cat Rental Store
24. $
2005 2006 2007 2008 2009 2010 2011 2012
Oil Sands Revenue Growth
Total revenue
2012: ~$1 billion
7-year CAGR (2005 to 2012) ~17%
24
Oil Sands Revenue
New EquipmentProduct Support
25. 797 Population Growth
797 Population in Oil Sands at Year-End
25
10
250
0
50
100
150
200
250
300
1999 2003 2004 2005 2006 2007 2008 2009 2010 2011 20122000 2001 2002
27. Oil Sands Product Support
~1,100 regional employees, including
~550 mechanics and apprentices
5 branches, including new Fort McKay
service facility
4 parts warehouses (Mildred Lake, Fort
McMurray, 2 at Shell/Albian)
Parts distribution center (Edmonton)
OEM - component remanufacturing
facility (Edmonton)
COE - equipment assembly and rebuild
facility (Red Deer)
Dedicated business units at mine sites
Over 200 fully equipped field service
trucks
27
28. Fort McKay – Game Changer
Key stats
16 bays; 160,000 sq. ft.
$110M investment: 2011 and 2012
Operational in Q4 2012;
24 x 7 in January 2013
~120 employees
Repair and maintenance facility
Supports contractors and
producers
Regional training centre
Capacity to rebuild 797 trucks
Ramping up on plan
28
29. Operational Excellence
Driving velocity, process, technology
Velocity - capacity planning and equipment scheduling
Bay scheduler – efficient planning
Warehouse – staging, not stocking – parts as required
Process - Caterpillar Production System (CPS) – make it visual
Lean and operational efficiency
In bay monitors – real time updates on job progress
Technology – enabler
Electronic pen
Toolhound
29
Customer-centric business balanced
with operating discipline
30. Challenges
Level of commodity prices for new mines and expansions
Customers focused on cost containment
Pricing differential - pipeline capacity
Environmental concerns
Attracting and retaining technical labour
30
31. Building for the Future
Keyano FinnTech Program
Customized Heavy Equipment Technician apprenticeship
program (CAT, Finning, Keyano)
$3.5M investment from CAT and Finning
Launched in Feb 2012
Will graduate up to 48 2nd year apprentices per year
First graduate class - end of 2013
31
32. Opportunities
Significant product support opportunity
Large and well-utilized equipment population
Aging fleets drive demand for component remanufacturing and
rebuild
Expanded mining product line
Equipment opportunity
Future fleet replacement – 797’s 100,000 hours
Future mine expansions and new projects
Expanded mining product line (e.g. electric drive truck, large
hydraulic mining shovel)
32
Reducing customer operating costs
by improving equipment productivity
33. Priorities
Deliver superior customer service
Drive efficiency and productivity
Attract and retain technicians
Capture product support opportunities
33
