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NEW FOCUS
Driving Return on Invested Capital

Investor Meeting
December 17, 2013
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
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
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
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
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
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
Market Leader in Most Desirable Regions

UK &
Ireland
13%

South
America
37%

Canada
50%

Revenue by region (nine months ended Sept 30, 2013)

8
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
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
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
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
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
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
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
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
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
EXECUTING ON OUR PRIORITIES
Priorities

Foundational
!  Safety & Talent Management
Operational
!  Supply Chain
!  Service Excellence
!  Asset Utilization
!  Customer & Market Leadership

19
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
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
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
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
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
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
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
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
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
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
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
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
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
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
FINANCIAL OBJECTIVES
Focus On Metrics We Control
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
ROIC
Historical Performance

30.0%

Economic
downturn

25.0%

!  Significant Investments:
-  Drills & Shovels
-  Fort MacKay
!  Underperforming
working capital
!  ERP implementation

CAGR
(2006 - 2012)
Revenue

20.0%
15.0%

EPS

10.0%

5.8%
7.8%

5.0%
0.0%
ROIC

2006

2007

2008

2009

2010

2011

2012

27.6%

26.8%

15.0%

10.2%

15.3%

16.0%

16.5%

Average Values
(2006 -2012)

LTM
15.8%

9.0%

4.0x

ROIC

8.0%
3.0x

EBIT%

7.0%
2.0x

Invested
Capital T/O

6.0%

5.0%

2006

2007

2008

2009

2010

2011

2012

LTM

EBIT Margin

7.8%

8.3%

6.8%

5.5%

6.3%

6.3%

7.4%

7.8%

Inv. Cap. T/O

3.6x

3.2x

2.2x

1.8x

2.4x

2.5x

2.2x

2.0x

1.0x

18.2%
6.9%
2.6x

Results have been adjusted to exclude discontinued operations
LTM – last twelve months ended September 30, 2013

36
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
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
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
CAPITALIZING ON ATTRACTIVE MARKET OPPORTUNITIES
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
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
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
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
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
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
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
APPENDIX
ROIC – Historical Performance
Canada
30.0%
25.0%
20.0%
15.0%

Average Values
(2006 - 2012)

10.0%
5.0%
0.0%
ROIC

2006

2007

2008

2009

2010

2011

2012

25.0%

24.9%

16.7%

7.3%

14.4%

14.4%

15.7%

ROIC

LTM
15.9%

10.0%

3.0x

EBIT%
Invested
Capital T/O

8.0%
2.0x

16.9%
7.0%
2.4x

6.0%

4.0%

2006

2007

2008

2009

2010

2011

2012

LTM

EBIT Margin

8.9%

9.8%

7.3%

4.1%

6.1%

5.7%

7.1%

8.1%

Inv. Cap. T/O

2.8x

2.6x

2.3x

1.8x

2.4x

2.5x

2.2x

1.0x

2.0x

49
ROIC – Historical Performance
South America
25.0%
20.0%
15.0%

Average Values
(2006 - 2012)

10.0%
5.0%
0.0%
ROIC

2006

2007

2008

2009

2010

2011

2012

22.9%

23.4%

22.0%

21.6%

18.8%

20.0%

19.7%

ROIC

LTM
17.9%

12.5%

3.0x

EBIT%
Invested
Capital T/O

10.0%
2.0x

21.2%
9.8%
2.2x

7.5%

5.0%

2006

2007

2008

2009

2010

2011

2012

LTM

EBIT Margin

10.8%

9.6%

9.9%

10.3%

9.0%

9.2%

9.9%

9.6%

Inv. Cap. T/O

2.1x

2.4x

2.2x

2.1x

2.1x

2.2x

2.0x

1.0x

1.9x

50
ROIC – Historical Performance
UK & Ireland
20.0%
16.0%
12.0%

Average Values
(2006 - 2012)

8.0%
4.0%
0.0%
ROIC

2006

2007

2008

2009

2010

2011

2012

11.6%

13.0%

11.6%

5.9%

7.9%

18.3%

16.3%

ROIC

LTM
16.8%
4.0x

EBIT%

3.0x

6.0%

Invested
Capital T/O

5.0%
4.0%

12.2%
4.5%
2.7x

2.0x
3.0%
2.0%

2006

2007

2008

2009

2010

2011

2012

LTM

EBIT Margin

4.4%

5.3%

5.5%

3.2%

2.3%

5.6%

5.0%

5.1%

Inv. Cap. T/O

2.8x

2.4x

2.1x

1.8x

3.4x

3.3x

3.2x

1.0x

3.3x

51
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
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
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
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
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
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

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Finning investor meeting dec 17, 2013 web

  • 1. NEW FOCUS Driving Return on Invested Capital Investor Meeting December 17, 2013
  • 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
  • 18. EXECUTING ON OUR PRIORITIES
  • 19. Priorities Foundational !  Safety & Talent Management Operational !  Supply Chain !  Service Excellence !  Asset Utilization !  Customer & Market Leadership 19
  • 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 (~$40 Million) 3250 Series Engines Santa Marta Landfill, Chile 6 Bonnybrook Water Treatment, Canada (2008 - LTM) 8 Cliba Landfill, Argentina 4% 3 33
  • 34. FINANCIAL OBJECTIVES Focus On Metrics We Control
  • 35. Improving ROIC EBIT Margin and Invested Capital Turnover !  Operational cost efficiencies !  Supply chain !  Service excellence !  Discretionary cost control EBIT Margin !  Improved working capital driven by higher equipment and parts turns !  Optimized asset utilization, including supply chain network !  Capital discipline IC Turnover 2.5x 7.8% 2.0x 6.3% 2011 LTM 2011 LTM 35
  • 36. ROIC Historical Performance 30.0% Economic downturn 25.0% !  Significant Investments: -  Drills & Shovels -  Fort MacKay !  Underperforming working capital !  ERP implementation CAGR (2006 - 2012) Revenue 20.0% 15.0% EPS 10.0% 5.8% 7.8% 5.0% 0.0% ROIC 2006 2007 2008 2009 2010 2011 2012 27.6% 26.8% 15.0% 10.2% 15.3% 16.0% 16.5% Average Values (2006 -2012) LTM 15.8% 9.0% 4.0x ROIC 8.0% 3.0x EBIT% 7.0% 2.0x Invested Capital T/O 6.0% 5.0% 2006 2007 2008 2009 2010 2011 2012 LTM EBIT Margin 7.8% 8.3% 6.8% 5.5% 6.3% 6.3% 7.4% 7.8% Inv. Cap. T/O 3.6x 3.2x 2.2x 1.8x 2.4x 2.5x 2.2x 2.0x 1.0x 18.2% 6.9% 2.6x Results have been adjusted to exclude discontinued operations LTM – last twelve months ended September 30, 2013 36
  • 37. Measuring Progress EBIT – Annual EBIT Margin (%) – consolidated & regions Canadian Service Labour Recovery (∆%) Market Share: •  Core Equipment (∆%) •  Parts (∆%) •  Canadian Power Systems Revenue (∆%) ROIC (%) consolidated & regions Invested Capital – Quarterly Inventory ($) – 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 $25.00 share price Annual Dividends 0.5975 0.55 0.51 0.43 0.44 0.47 0.36 0.28 0.18 0.20 0.22 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 39
  • 40. CAPITALIZING ON ATTRACTIVE MARKET OPPORTUNITIES
  • 41. Oil Sands Benefitting from ongoing projected growth Typical Oil Sands Start-up Fleet (for 100,000 bblpd operation) Oil$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
  • 49. ROIC – Historical Performance Canada 30.0% 25.0% 20.0% 15.0% Average Values (2006 - 2012) 10.0% 5.0% 0.0% ROIC 2006 2007 2008 2009 2010 2011 2012 25.0% 24.9% 16.7% 7.3% 14.4% 14.4% 15.7% ROIC LTM 15.9% 10.0% 3.0x EBIT% Invested Capital T/O 8.0% 2.0x 16.9% 7.0% 2.4x 6.0% 4.0% 2006 2007 2008 2009 2010 2011 2012 LTM EBIT Margin 8.9% 9.8% 7.3% 4.1% 6.1% 5.7% 7.1% 8.1% Inv. Cap. T/O 2.8x 2.6x 2.3x 1.8x 2.4x 2.5x 2.2x 1.0x 2.0x 49
  • 50. ROIC – Historical Performance South America 25.0% 20.0% 15.0% Average Values (2006 - 2012) 10.0% 5.0% 0.0% ROIC 2006 2007 2008 2009 2010 2011 2012 22.9% 23.4% 22.0% 21.6% 18.8% 20.0% 19.7% ROIC LTM 17.9% 12.5% 3.0x EBIT% Invested Capital T/O 10.0% 2.0x 21.2% 9.8% 2.2x 7.5% 5.0% 2006 2007 2008 2009 2010 2011 2012 LTM EBIT Margin 10.8% 9.6% 9.9% 10.3% 9.0% 9.2% 9.9% 9.6% Inv. Cap. T/O 2.1x 2.4x 2.2x 2.1x 2.1x 2.2x 2.0x 1.0x 1.9x 50
  • 51. ROIC – Historical Performance UK & Ireland 20.0% 16.0% 12.0% Average Values (2006 - 2012) 8.0% 4.0% 0.0% ROIC 2006 2007 2008 2009 2010 2011 2012 11.6% 13.0% 11.6% 5.9% 7.9% 18.3% 16.3% ROIC LTM 16.8% 4.0x EBIT% 3.0x 6.0% Invested Capital T/O 5.0% 4.0% 12.2% 4.5% 2.7x 2.0x 3.0% 2.0% 2006 2007 2008 2009 2010 2011 2012 LTM EBIT Margin 4.4% 5.3% 5.5% 3.2% 2.3% 5.6% 5.0% 5.1% Inv. Cap. T/O 2.8x 2.4x 2.1x 1.8x 3.4x 3.3x 3.2x 1.0x 3.3x 51
  • 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