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Toronto, Montreal September 12 - 14, 2012 Investor Presentation Mike Waites, President and CEO

Finning toronto & montreal presentation sep 12 to 14, 2012_website

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Page 1: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Toronto, Montreal

September 12 - 14, 2012

Investor Presentation

Mike Waites, President and CEO

Page 2: Finning toronto & montreal presentation sep 12 to 14, 2012_website

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 Debt Ratio; the impact of new and revised IFRS that have been issued but are not yet effective; the expected timetable for completion of the proposed

transaction between the Company and Caterpillar to acquire the distribution and support business formerly operated by Bucyrus in Finning‟s Canadian dealership territory; growth prospects

for the former Bucyrus business acquired or being acquired by the Company in Finning‟s dealership territories (Bucyrus) and the competitive advantages of the business being acquired;

expected future financial and operating results generated from Bucyrus; anticipated benefits and synergies of Bucyrus; and the expected impact of Bucyrus on Finning‟s earnings. 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 September 12, 2012. Except as may be required by Canadian securities laws,

Finning does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results

could differ materially from the expectations expressed in or implied by such forward-looking statements and that Finning‟s business outlook, objectives, plans, strategic priorities and other

statements that are not historical facts may not be achieved. As a result, Finning cannot guarantee that any forward-looking statement will materialize. Factors that could cause actual results

or events to differ materially from those expressed in or implied by these forward-looking statements include: general economic and market conditions; foreign exchange rates; commodity

prices; the level of customer confidence and spending, and the demand for, and prices of, Finning‟s products and services; Finning‟s dependence on the continued market acceptance of

Caterpillar‟s products and Caterpillar‟s timely supply of parts and equipment; Finning‟s ability to continue to improve productivity and operational efficiencies while continuing to maintain

customer service; Finning‟s ability to manage cost pressures as growth in revenues occur; Finning‟s ability to attract suffic ient 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 successfully integrate the distribution and support business formerly operated by Bucyrus after that transaction closes; 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; 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

Page 3: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Finning International Inc. (TSX:FTT)

World‟s largest Caterpillar dealer

3 regions, 7 countries

15,000 employees

Key industries

Mining (oil sands, copper, coal)

Construction

Power systems

Market cap ~ $4.0 billion

Revenue

FY2011 = $5.9 billion

YTD ended Jun 30, 2012 = 3.2 billion

Quarterly dividend = $0.14 per share

Vancouver (head office)

Edmonton

Fort McMurray

Santiago

Antofagasta

South America 33%

UK & Ireland 14%

Canada 53%

Cannock

3

British Columbia

Yukon

Alberta

The Northwest Territories

Bolivia

Argentina

Chile

Uruguay

United Kingdom

Ireland

Page 4: Finning toronto & montreal presentation sep 12 to 14, 2012_website

4

Operating in some of most resource-rich territories

Unmatched product support capability and customer relationships

Well-positioned to capture growth opportunities

Strong cash generating business model

Focused on disciplined and rigorous execution of our strategy

+ = Caterpillar Equipment

Proven Reliability

Finning Service

Unmatched Capabilities

Customer Value

First with Customers

Value Proposition

Page 5: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Intermediate

(2013-2014)

Operational

Excellence

5

Vision Providing unrivalled services that earn

customer loyalty, we will be CAT’s best

global business partner.

Acquisition(s)

Power Systems

Core/BCP

Leadership

Canada Business Recovery/

EBIT Improvement

Free Cash Flow/

Balance Sheet Deleverage Bucyrus Integration

High Performance/

Engagement

Sales & Solutions

Service & Parts

Supply Chain

Safety

Systems

Operational

Excellence 5 x S Operating

Leverage

9-10% EBIT

Ultimate

(2015)

Priorities

(2012)

Global

Solutions

Provider

Execution

S

T

R

A

T

E

G

I

C

G

R

O

W

T

H

Mining Solutions

Creating Our Future

Page 6: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Cash Engine for Growth

Cash for Growth

Dividends

Reduce debt

Acquisitions

Net rental additions ~ $100-$150M per year*

Disciplined capital spending

~ $100M per year*

Strong cash flow from operations EBITDA ~ $500 - 800M per year*

Enhanced focus on

working capital management

* Averages over economic cycle 6

Page 7: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Solid Foundation – The New Finning

Strategically re-positioned to drive operating performance regardless of market

conditions

Reduced rental exposure

Revenue and asset shift to core business and mining

Limited fixed capital commitments

Targeted investments to strengthen competitive advantage

Unparalleled product support infrastructure and capabilities

People development (technical and leadership) and high-performance culture

New ERP system

Increased focus on cost discipline and margin expansion

Driving operational excellence through productivity & efficiency improvements

Tremendous discipline on working capital

Reducing uncommitted inventory given current economic uncertainty

7

Page 8: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Strong Core Business

Product support growth

Significant installed base of large mining and heavy construction equipment

with high parts and service consumption

Unmatched product support infrastructure (e.g. component remanufacturing

and machine rebuild facilities in all regions)

Broad product support capabilities and differentiated technologies (e.g.

productivity optimization, remote condition monitoring & diagnostics)

Expanded product offering

Bucyrus (shovels, drills, underground)

795F electric drive truck

Truck bodies

Strong relationship and alignment

with Caterpillar

8

Page 9: Finning toronto & montreal presentation sep 12 to 14, 2012_website

2012 Outlook

9

Market activity remains positive across our operations

Healthy order intake and strong backlog provide good visibility into the

balance of 2012

Robust demand for product support

Expect 2012 revenues to grow by 12-15% over 2011

Operating with caution

Monitoring business conditions closely

Taking prudent steps to reduce working capital

Optimistic about Q3 and Q4

Strong revenue levels

Continued improvement in EBIT margin performance

Improving working capital and debt ratios

Page 10: Finning toronto & montreal presentation sep 12 to 14, 2012_website

2013 Tailwinds

Revenue

Bucyrus FY revenue ~$700 million

Sustainable growth in product support

Large equipment population and aging

fleets

Fort McKay oil sands facility operational

SG&A

ERP - no „support‟ costs; operational benefits

in Canada

Supply chain improvements = reduced

working capital

Improved service productivity and efficiency

EBIT margin expansion

On track to reach 9-10% EBIT margin target

New Fort McKay oil sands service

facility: 16 bays, 160,000 sq. ft.

10

Page 11: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Summary

Robust long-term fundamentals

Solid foundation

Strong core business

Significant tailwind into 2013

Focus on disciplined execution

Driving operational excellence

Committed to reach EBIT margin targets

in all operations

2012 priorities

Improve operating profitability in Canada

Successfully integrate Bucyrus into

each region

Drive strong free cash flow and

strengthen balance sheet

11

Page 12: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Appendix

Page 13: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Q2 2012 Highlights

Strong top line growth; record product support revenue for the third

consecutive quarter

Record EBIT and EBITDA driven by solid results from South America and

UK & Ireland

Robust market activity in all territories

Good quoting activity and solid order intake

Large equipment population drives growing demand for product support

ERP costs in Canada continued to decline

Sequential improvement in Canada‟s operating profitability

Stepping up efforts to reduce incremental costs through second half

of 2012

Negative free cash flow driven by higher working capital requirements

Expect positive free cash flow in Q3 and Q4; essentially break-even

in FY2012

13

Page 14: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Oil Sands Mining Fleet Growth

* Includes units projected from June 30, 2012 to the end of 2016

99%

100%

89%

91%

98%

87%

88%

1,539

85

90

255

293

408

158

250

320 – 340 Ton Trucks (future 795F/MT5500)

Total

Large Graders (16)

Ultra Large Graders (24)

Large Tractors (D8 & D9)

Ultra Large Tractors (D11 & D10)

100 – 200 Ton Trucks (777-789)

240 Ton Trucks (793)

400 Ton Trucks (797)

40

69

80

165

158

67

147

86

90

287

322

416

278

Finning’s Market Share

Caterpillar Units at Jun 30, 2012 Equipment Type

Total Units at Jun 30, 2012

Additional CAT Units Projected 2012 to 2016*

726

131

182

1,792

Projections include the existing projects and their expansions, as well as

contractor equipment for: Syncrude (Base & Aurora), Suncor (Steepbank &

Millennium), Shell/Albian (Muskeg River & Jackpine), CNRL (Horizon),

Exxon/Imperial (Kearl), Suncor (Fort Hills)

14

Page 15: Finning toronto & montreal presentation sep 12 to 14, 2012_website

FINSA Mining Fleet Growth

15

* Market share, PINS rolling 12 months as of June 2011.

** Caterpillar projected includes units forecast for FINSA from 2012 till 2016 which are incremental to units at December 31, 2011. These projections

constitute “forward-looking information” which reflect the current view of Finning of future events and are subject to risk and uncertainties. Actual

results could differ materially from current expectations.

Finning’s Market Share

Caterpillar Units at Dec 31, 2011 Equipment Type

Total Units at Dec 31, 2011

Additional CAT Units Projected 2012 to 2016*

59%

37%

71%

60%

84%

71%

69%

55%

749

1,822

120

152

301

137

151

212

Large Mining Trucks (793 – 777)

Total

Underground

Motor Graders (24 - 16)

Track-Type Tractors (D11 – D9)

Large Wheel Dozers (854 – 824)

Large Wheel Loaders (994 – 992)

Ultraclass Trucks Size (797-795)

328

979

90

62

138

64

37

260

1,208

3,393

400

253

535

253

236

508

Page 16: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Well Diversified Across End Markets

16

Mining

32%

Power

Systems

17%

Construction

40%

Mining

62%

Power Systems

10%

Construction

27%

Product Support Revenue

by Industry

New Equipment Sales

by Industry

Forestry

2%

Other

3%

YTD ending June 30, 2012

Petroleum

6%

Other*

1%

* Includes petroleum, forestry and other sectors

Page 17: Finning toronto & montreal presentation sep 12 to 14, 2012_website

Well Diversified Across Regions

17

Canada

52%

UK and Ireland

10%

South America

38%

Product Support Revenue

by Operation

New Equipment Sales

by Operation

YTD ending June 30, 2012

Canada

51%

UK and Ireland

18%

South America

31%