Finning investor meeting dec 17, 2013 web

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 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, 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 Welcome Mauk Breukels, VP, Investor Relations 9:35 AM Value Proposition Scott Thomson, President & CEO

10:05 AM Operational Priorities Juan Carlos Villegas, President, Finning Canada & COO 10:35 AM Financial Objectives Dave Smith, EVP & CFO 10:50 AM Summary Scott Thomson, President & CEO

11:00 AM Break

11:15 AM Q&A

12:15 PM 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

5

New leadership, new focus

Scott ThomsonPresident & CEO

Andy FraserEVP,

Customer & External Relations

Neil DickinsonManaging Director,

Finning UK & Ireland; EVP, Global Power

Systems

Marcello MarchesePresident,

Finning South America

Juan Carlos Villegas

President, Finning

Canada & COO, Finning International

Dave SmithEVP & CFO

Dave CummingsSVP & CIO

Chief Human Resources

Officer

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Sep

-09

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Freq

uenc

y pe

r 20

0,00

0 hr

s

Month

TRI Frequency 2009 - 2013

Consolidated

Engaged Culture & Strong Safety Record

6

Total Recordable Injury Frequency (per 200,000 hours)

2013 Employee Opinion Survey Highlights

Scores above increased from 2012 to 2013

74%Engagement 75%Finning CAT Dealer

Average

84%89%Safety

77%78%Accountabilityfor Results

Top Decile

Top Quartile

Broadest Range of Quality Products

7

Over 300 equipment product lines

OFF-HIGHWAY TRUCKS UNDERGROUND TRUCKS

FOREST MACHINES

POWER SYSTEMSPIPE LAYERS

GRADERS

DOZERS

COMPACTORS

Power Systems

Construction

Forestry

Mining

Petroleum

WHEEL LOADERS BACKHOE LOADERS SKID STEER LOADERS

HYDRAULIC SHOVEL ELECTRIC ROPE SHOVEL

SKIDDERS FELLER BUNCHERS

DOZERS EXCAVATORS

ELECTRICAL POWER GEN. INDUSTRIAL OEM MARINE POWER

FORBES Top 100 Most Valuable

Brands

Record 2012 R&D Investment

$2.5B

Market Leader in Most Desirable Regions

8

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

UK &Ireland

13%

SouthAmerica

37%

Canada50%

2013nine months ended

September 30

Other*9%

Forestry3%

Petroleum5%

PowerSystems

17%

Construction32%

Mining34%

Other*7%

Forestry2%

Petroleum 3%

PowerSystems

18%

Construction27%

Mining43%

New Equipment Deliveries by Industry

2008

Non-mining equipment deliveries increased from 57% to 66% over last 5 years

Diverse & Growing Customer Base

9

66% of new equipment deliveries from non-mining

* Other: agriculture, industrial and government segments

Rental6%Used

4%

NewEquipment

42%

ProductSupport48%

Revenue by Line of Business

Large Installed

Base

Product Support

Product Support10-Year CAGR ~11%

(2003-LTM)

~100,0002012 Mobile

Machine Population

New Equipment

Sales2013

nine months ended September 30

Powerful, Sustainable Business Model

10

ROIC

ROA

EPS

ROE

Revenue

0 0.15 0.30 0.45 0.60

0.10

0.23

0.39

0.44

0.51

Average Three-Year ∆

Correlation of Key Metrics to Total Returns

Total Returns vs. Three-year Δ ROIC by Quartile

-4%

0%

4%

8%

12%

Fourth Third Second First0%

20%

40%

60%

80%

-2.9

0.1

2.5

9.1

13.3

41.8

57.9

76.9

Average Three-year Δ ROICAverage Total Return

Quartile

Return on Invested Capital

11

Drives Shareholder Value

Source: RBC Capital Markets

FTT – Flat ROIC over last three years – 3rd quartile

Return on Invested Capital Defined

12

Last twelve months ended September 30, 2013

ROIC

EBITMargin

Invested Capital

Turnover

×

÷

EBIT

Revenue

÷

Revenue

Average Invested Capital

2.0x

7.8%

15.8%

$523M

$6,706M

$3,308M

Ferreycorp

Finning

Wajax

Barloworld

Strongco

H&E Equipment

Toromont

Seven Group*

-10 0 10 20 30

Wajax

Barloworld

Toromont

Finning

Ferreycorp

Strongco

Seven Group

H&E Equipment

0 1 2 3 4

Toromont

H&E Equipment

Seven Group

Finning

Ferreycorp

Barloworld

Wajax

Strongco

0 3 6 9 12

Revenue Growth %(’06 – ’12 CAGR)

EBIT Margin %(LTM)

Invested Capital Turnover(LTM)

FinningFinning

Finning

Performance Gap

13

Source: RBC Capital Markets See Appendix for description of Finning peers * Not meaningful

Finning

Canada

UK & Ireland

South America9.8

4.5

7.0

6.9

9.6

5.1

8.1

7.8

EBIT MarginInvested CapitalTurnover ROIC

Finning

Canada

UK & Ireland

South America21.2

12.2

16.9

18.2

17.9

16.8

15.9

15.8Finning

Canada

UK & Ireland

South America2.2

2.7

2.4

2.6

1.9

3.3

2.0

2.0

LTM Seven-Year Average

ROIC Performance

14

Results have been adjusted to exclude discontinued operations LTM – last twelve months ended September 30, 2013 Seven-year average – 2006 to 2012

Priorities Will Drive Improved ROIC

15

All priorities are linked directly to EBIT or Invested Capital

ROIC

EBIT

Invested Capital

Market Leadership

Supply Chain

Asset Utilization

Service ExcellenceSafety & Talent Management(Foundation)

Priorities

ROIC

EBIT

Invested Capital

Market Leadership

Supply Chain

Asset Utilization

Service ExcellenceSafety &Talent Management(Foundation)

Priorities

Priorities Linked to Incentives

16

Realignment of incentives •  From management to

branch level •  Metrics linked to what

employees control

!  Safety !  Employee development !  Market share !  Customer loyalty !  Parts growth !  Supply chain !  Service profitability !  SG&A

KPI Categories

Defined key performance indicators (KPIs) to consistently measure performance against priorities across the organizations

IncentivePlan

Short Term

LongTerm

SafetyEBIT MarginFree Cash FlowCustomer LoyaltyInvested Capital Turnover

Return on Invested CapitalTotal Shareholder Return

50%

Safety & Talent Management

17

Foundation for all priorities

!  Recent vice president appointments !  Canada:

!  Supply chain !  Power systems !  Customer solutions !  Service

!  South America: !  Human resources !  Supply chain

Safety excellence

Right people in right roles

!  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

People development

!  Continued investment in learning and development

!  Ongoing focus on employee engagement to drive high performance

!  Structured succession planning for key roles

EXECUTING ON OUR PRIORITIES

Priorities

Foundational !  Safety & Talent Management

Operational !  Supply Chain !  Service Excellence !  Asset Utilization !  Customer & Market Leadership

19

2011 LTM

2.4X3.0X

Inventory Turns

LTMCOGS $4,656M

LTM AverageInventory* $1,931M

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

20

Supply Chain Target ∆ in 3 Years Working Capital Reduction

Inventory Turns Consolidated 0.5 – 0.9x " 0.1 turn = $50M inventory #

* 4 quarters average LTM - last twelve months ended September 30, 2013

Canada

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

Supply Chain Action Plans

Morton, IL

Edmonton, AB

Kamloops, BCVernon, BC

7d

Spokane, WA

12h

CustomerVernon,BC

Spokane, WA(Caterpillar)

Planned Logistics Model: Direct Stock Routes

Legacy Network Model

12h

7dMorton, IL(Caterpillar)

Edmonton,AB

CustomerVernon, BC

Kamloops, BC

Dramatically Reduced Lead Times and Transfer Points

22

Canada

23

Supply Chain Progress to Date

0

25

50

75

100

June2011 2012

Sept2013

29

54

19

0

25

50

75

100

June2011 2012

Sept2013

9388

92

8076

82

24 Hours 72 Hours

95%

85%

2013 TARGET

Emergency Parts Purchases (% of items) Parts Service Level (%)

PartsInventory

Turns

2012YTD2013

∆ +0.3x

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

24

Service Excellence Target ∆ in 3 Years

Consolidated EBIT $ $40 – 60M"

Canada

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

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

25

Service Excellence Action Plans

Canada70%

FINSA, UK & Ireland

30%

Service Opportunity ∆ Over 3 Years$40-60 Million

Labour recovery drives 80% of service opportunity

in Canada

2008 2013

68%75%

2013

80%

Labour Recovery

Canada FINSA

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

26

2008 – COE, Red Deer, AB $110M

2011/12 – Fort McKay oil sands service

facility

Major InfrastructureInvestments in

Last 5 Years

$110M2008/09 – Truck Shop & PDC, La

Negra, Chile

$20M

$22M2011/13 – Dump

Bodies Mfg. Facility, Chile

Average2011-2013 2014F

$100M

$150M

Gross Capital Expenditures

Under~ /year

Canada

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

27

Asset Utilization Action Plans

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

28

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

2008 2012

Oct2012

Oct2013

∆ -5%

∆ +2%

Core EquipmentMarket Share

Canada – Core Equipment

Improve sales coverage !  Industry segmentation !  Strengthening sales team

Adjust sales force compensation

Drive improved participation rates

Right equipment, right time, right place

!  Forecasting accuracy improved dramatically

!  Supply chain improving equipment availability

New products to maximize customer uptime

!  Cat E-series excavator range – impressive fuel economy

!  Hybrid excavator – potential game-changer in performance & operator costs

29

Customer & Market Leadership Action Plans

2008 2012

∆ +3%

Core EquipmentMarket Share

Sept2012

Sept2013

∆ -7%

FINSA – Equipment

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

Strengthened product line-up !  Introduce new excavators and wheel loaders to utility sector

30


2011YTD2013

Canada FINSA

∆ -1.0%

Parts Market Share

Parts Market Share

~20% Gap

Canada – Parts

31


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

Introduce market-based pricing

Monitor customer asset performance to increase predictability of future parts needs !  Utilize UK & Ireland capabilities to monitor equipment in

Canada

Drills and Shovels – Parts

Progress to date !  Canada exceeding expectations - solid performance on

parts and service !  FINSA exceeding service expectations 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 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


FINSADrills & Shovels

Parts Opportunity

FINSA’sCurrent Drills & Shovels Parts Share ~60%

Canada Power Systems Revenue

CAGR

Caterpillar Power Systems Revenue

CAGR

4%(2008 - LTM)

0%(2008 - LTM)

Canada – Power Systems

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

Improving inventory management

Providing integrated product offering

Leveraging global collaboration

!  Example: regions working together on global opportunities

33


Collaborative Projects Completed (~$40 Million) 3250 Series Engines

Santa Marta Landfill, Chile 8

Cliba Landfill, Argentina 6

Bonnybrook Water Treatment, Canada 3

FINANCIAL OBJECTIVES Focus On Metrics We Control

6.3% 7.8%

2011 LTM

Improving ROIC

!  Operational cost efficiencies !  Supply chain !  Service excellence

!  Discretionary cost control

35

EBIT Margin and Invested Capital Turnover

EBIT Margin

!  Improved working capital driven by higher equipment and parts turns

!  Optimized asset utilization, including supply chain network

!  Capital discipline

2.5x

2.0x

2011 LTM

IC Turnover

ROIC

36

Historical Performance

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

2006 2007 2008 2009 2010 2011 2012 LTM

ROIC 27.6% 26.8% 15.0% 10.2% 15.3% 16.0% 16.5% 15.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

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

2.0x

3.0x

4.0x

5.0%

6.0%

7.0%

8.0%

9.0%

Economic downturn

!  Significant Investments: -  Drills & Shovels -  Fort MacKay

!  Underperforming working capital

!  ERP implementation

ROIC 18.2%Average Values

(2006 -2012)

EBIT% 6.9%Invested

Capital T/O 2.6x

Revenue 5.8%CAGR

(2006 - 2012)

EPS 7.8%

Measuring Progress

37

EBIT – Annual

EBIT Margin (%) – consolidated & regions

Canadian Service Labour Recovery (∆%)

Market Share: •  Core Equipment (∆%) •  Parts (∆%) •  Canadian Power Systems Revenue (∆%)

ROIC (%) consolidated & regions

See Appendix for definition of terms

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

2006 2007 2008 2009 2010 2011 2012 LTM

1.86

-0.22

-1.29

1.53

2.89

0.13

-0.62

0.31

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E Q1 Q2 Q3 Q4

42

47

5352

5051 51

48

45

2012 2013 20142011

45%

35%

TARGETRANGE

Strengthening Balance Sheet

Positive free cash flow through the cycle !  Strong cash flow from

operations !  Improving working

capital primarily through higher inventory turnover

!  Capital expenditures to remain significantly below 3-year average

De-levering balance sheet !  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

38

Target Range

Net debt to total capital ratio (%) FCF per Share (dollars)

0.5

1.1

1.8

2.4

3.0

2008 2009 2010 2011 2012 LTM

2.52.4

1.5

1.8

2.2 2.2

Net debt / EBITDA

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

39

0.18 0.20 0.22

0.28

0.36

0.43 0.44 0.47

0.51 0.55

0.5975

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Annual Dividends

CAPITALIZING ON ATTRACTIVE MARKET OPPORTUNITIES

Oil Sands

41

Benefitting from ongoing projected growth

Source: CAPP (Canadian Association of Petroleum Producers)

Track-TypeTractors 8-95-6Motor

Graders

Typical Oil Sands Start-up Fleet (for 100,000 bblpd operation)

Off-highway Trucks 20-25

Open Pit Oil Sands Production (Thousands of Barrels per Day)

0"

1,000"

2,000"

2012" 2013" 2014" 2015" 2016" 2017" 2018" 2019" 2020" 2021" 2022" 2023" 2024" 2025" 2026" 2027" 2028" 2029" 2030"

Oil$Sands$Raw$Bitumen$(Mbbl/d)$

Mining"

HydraulicShovel 1Rope

Shovel 2

Oil Sands

Projections From Current Customers* •  2013-2017

•  ~40% increase in overburden moved •  ~60% increase in tons of ore moved

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

New Project •  Fort Hills (Suncor) - $13.5 billion

•  Production starts Q4, 2017 •  ~180,000 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

42

Benefitting from ongoing projected growth

* Finning estimates

Codelco

Teck

Barrick

BHP

Goldcorp

Antofagasta

Capstone

Glencore Xstrata

KGHM

0 7.5 15 22.5 30

Chile

China

Peru

USA

Australia

Russia

Zambia

Congo

Canada

Mexico

0 5 10 15 20

Mining Companies Investing in Chile 2014-2018(in Billions)

Largest Copper Producing Regions

0

5

10

15

20

’13 ‘14 ‘15 ‘16 ‘17 ‘18

12.613.1

12.613.4

12.913.9

Mining Investmentin Chile(in Billions)

Mine Production (millions)Proven Reserves (10 millions)

Copper in Chile

43

Participating in long-term growth

Source: Wood Mackenzie

Construction Opportunities

44

Non-Mining Order Intake – Consolidated ($M) UK Real GDP (% Change)

0

100

200

300

400

500

Q3-12 Q4-12 Q1-13 Q2-13 Q3-13

Source: Economist Intelligence Unit

Replace chart, attached (Anson)

Western Canada Infrastructure Project Region Investment($Billions) Timing

Roberts Bank 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

Airport Expansion Calgary 1.4 Completion 2015

Evergreen Rapid Transit Metro Vancouver 1.4 Completion 2015

Twinning Highway 63 Alberta 0.9 Completion 2015

-6.0

-4.5

-3.0

-1.5

0

1.5

3.0

2009 2010 2011 2012 2013F 2014F 2015F

1.82.5

1.5

0.1

1.11.7

-5.2

UK#Real#GDP#(%#change)

%

Projected Opportunity 7.25

Engines per bcfpd

645>$1BEquipment

bcfpd

89Total engine

requirement

Projects proposed to transport gas from Western Canada to Asia1 Investment

LNG Canada (Shell, Korea Gas, Mitsubishi, PetroChina) +$28B

Malaysia (Petronas) +$20B

Kitimat LNG (Chevron & Apache) +$10.6B

Compression & Prime Power

Parts & Service

Western Canada LNG

45

Seizing new business opportunities

1 Source: Finning estimates

Historical Revenue

46

Correlation to Economic Growth

Source: Economist Intelligence Unit; Company estimates Finning 2013 revenues - LTM ended September 30, 2013 Western Canada includes BC and Alberta

Chile GDP (USD) 11%

Western Canada GDP (CAD)

CAGR 8-Years(2005-2013)

FINSA Revenue

(USD)

Finning Canada Revenue (CAD)

15%

4%6%

Chile Real GDP Forecast

Western CanadaReal GDP Forecast

2014 2015

5.2%4.7%

2014 2015

3.2%3.3%

CAGR 8-Years(2005-2013)

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

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APPENDIX


(2006 - 2012)

EBIT% 7.0%Invested

Capital T/O 2.4x

ROIC – Historical Performance

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Canada

2006 2007 2008 2009 2010 2011 2012 LTM ROIC 25.0% 24.9% 16.7% 7.3% 14.4% 14.4% 15.7% 15.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

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 2.0x

1.0x

2.0x

3.0x

4.0%

6.0%

8.0%

10.0%


(2006 - 2012)

EBIT% 9.8%Invested

Capital T/O 2.2x


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South America

2006 2007 2008 2009 2010 2011 2012 LTM ROIC 22.9% 23.4% 22.0% 21.6% 18.8% 20.0% 19.7% 17.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%


1.0x

2.0x

3.0x

5.0%

7.5%

10.0%

12.5%


(2006 - 2012)

EBIT% 4.5%Invested

Capital T/O 2.7x


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UK & Ireland

2006 2007 2008 2009 2010 2011 2012 LTM ROIC 11.6% 13.0% 11.6% 5.9% 7.9% 18.3% 16.3% 16.8%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%


1.0x

2.0x

3.0x

4.0x

2.0%

3.0%

4.0%

5.0%

6.0%

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

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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*

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Vancouver (head office)

Edmonton

Fort McMurray

Santiago

Antofagasta

Cannock

British Columbia

Yukon

Alberta

The Northwest Territories

Bolivia

Argentina Chile

Uruguay

United Kingdom Ireland

* At December 13, 2013

Glossary

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!  BCP Building construction product !  COE Centre of Excellence – Finning’s service facility in Red Deer, AB !  COGS Cost of goods sold !  CRC Component rebuild centre !  CRM Customer relationship management !  EBIT Earnings before finance costs and income taxes !  EBITDA Earnings before finance costs, income taxes, depreciation and amortization !  EPG Electric power generation !  EPS Earnings per share !  ERP Enterprise Resource Planning System !  FCF Free cash flow !  FINSA Finning South America !  CAGR Compound annual growth rate !  GDP Gross domestic product !  IC Invested capital !  KPI Key performance indicator !  LNG Liquefied natural gas !  LTM Last twelve months !  OEM Finning’s component remanufacturing facility in Edmonton, AB !  PDC Parts distribution centre !  ROA Return on assets !  ROE Return on equity !  ROIC Return on invested capital !  TRIF Total Recordable Injury Frequency !  TSR Total shareholder return !  W/C Working capital !  YTD Year to date

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

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Finning Peers

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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.

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Finning International Inc.Suite 1000, Park Place666 Burrard StreetVancouver, BC V6C 2X8

finning.com

Mauk BreukelsVice President, Investor Relations & Corporate [email protected]

Ilona RojkovaManager, Investor [email protected]

Finning investor meeting dec 17, 2013 web

Business

Transcript of Finning investor meeting dec 17, 2013 web