Finningpresentation uk sep 2011_final

17
Mike Waites, President & CEO September 2011 Investor Presentation

Transcript of Finningpresentation uk sep 2011_final

Page 1: Finningpresentation uk sep 2011_final

Mike Waites, President & CEO

September 2011

Investor Presentation

Page 2: Finningpresentation uk sep 2011_final

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 we

make is forward-looking when it uses what we know and expect 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 expected quantitative impact on the 2010 consolidated statements of

financial position and statements of income and comprehensive income of the Company‟s transition to IFRS effective January 1, 2010; and the impact on new and revised

IFRS that have been issued but are not yet effective. All such forward-looking statements are made pursuant to the „safe harbour‟ provisions of applicable Canadian securities

laws.

Unless otherwise indicated by us, forward-looking statements in this report describe our expectations at September 14, 2011. Except as may be required by Canadian

securities laws, we do 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 our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans,

strategic priorities and other statements that are not historical facts may not be achieved. As a result, we 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 our 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, our products and services;

our dependence on the continued market acceptance of Caterpillar‟s products and Caterpillar‟s timely supply of parts and equipment; our ability to continue to improve

productivity and operational efficiencies while continuing to maintain customer service; our ability to manage cost pressures as growth in revenues occur; our ability to attract

sufficient skilled labour resources to meet growing product support demand; our ability to negotiate and renew collective bargaining agreements with satisfactory terms for our

employees and the Company; the intensity of competitive activity; our ability to raise the capital we need to implement our 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

technology and the data processed by that technology; new or amended IFRS or interpretations that become effective prior to the inclusion of the Company‟s financial

statement of position in its first annual audited IFRS financial statements. 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 our 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 we believed were reasonable on the day we 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.

We caution readers that the risks described in the AIF are not the only ones that could impact us. Additional risks and uncertainties not currently known to us or that we

currently deem to be immaterial may also have a material adverse effect on our business, financial condition, or results of operations.

Except as otherwise indicated by us, 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. We therefore cannot describe the expected impact in a meaningful

way or in the same way we present known risks affecting our business

All amounts in this presentation are in Canadian dollars unless otherwise noted

Page 3: Finningpresentation uk sep 2011_final

Finning International Inc. (TSX:FTT)

Exclusive Caterpillar dealer in some of most resource-rich territories

Unmatched products support capability

and customer relationships

Focused on operational excellence

Well-positioned for growth

Industries served

Mining (including oil sands)

Construction

Power systems

Other: petroleum, forestry, pipelines

Market cap ~ $4 billion

FY 2010 revenue = $4.6 billion

YTD ended Jun 30, 2011 revenue = $2.8 billion

12,900 employees, including ~ 5,700 skilled

technicians

Vancouver

Edmonton

Fort McMurray

Santiago

Antofagasta

FinningSouth America

Finning UKand Ireland

FinningCanada

Cannock

3

Page 4: Finningpresentation uk sep 2011_final

Solid Foundation

Revenue and earnings growing at a higher rate than invested capital

Streamlined, more efficient cost structure

Improved operating leverage driving more revenue to the bottom line

Solid free cash flow over the business cycle

Strong balance sheet

High performance culture

4

Page 5: Finningpresentation uk sep 2011_final

Creating Our Future

VisionProviding unrivalled services that

earn customer loyalty, we will be

CAT‟s best global business partner

Acquisition(s)

Power Systems

Core/BCP

Leadership

Mining Solutions

Ultimate

(2015)

Short-term

(2011)

Panorama

Implementation

Disciplined Growth FCF

Sales & Solutions

Service & Parts

Supply Chain

Safety

Systems

Intermediate

(2012-2014)

Operating

Leverage

10% EBIT

S

T

R

A

T

E

G

I

C

G

R

O

W

T

H

Operational

Excellence 5 x S

High Performance /

EngagementEBIT Improvement

Global

Solutions

Provider

Operational

Excellence

Solidify

Foundation

5

Page 6: Finningpresentation uk sep 2011_final

Investing in Our Future

Drive product support growth – truly differentiated service

Implement new ERP system (launched in Canada in July)

Disciplined capital spending

Fort McKay oil sands service facility – on track

Mining product support infrastructure in FINSA

Technical training

High performance culture – creativity, agility, resilience

World class safety and engagement

Strong Caterpillar relationships

Margin expansion – “The Power of 10” – sustainability 6

Page 7: Finningpresentation uk sep 2011_final

Capturing Growth

Growth within all our markets

Mining

• Oil sands: fleet replacement, capital spending on new projects

• Chile mining investment

• Mining equipment population expected to grow by ~50% over next 5 years

Construction and power systems

Growth with Caterpillar

New businesses

New products (e.g. 795F electric drive truck)

Global power systems

Technology

New territories (e.g. Ireland)7

Page 8: Finningpresentation uk sep 2011_final

Market Outlook

8

In light of macro-economic uncertainty, keeping very close to customers

and monitoring activity levels diligently

Long-term business fundamentals remain strong

Outlook into 2012 and 2013 positive

Healthy demand for commodities from large market in Asia supports

mining equipment and product support growth

Infrastructure activity is robust, particularly in South America and

Canada

Demand for energy continues to be solid

Oil & gas rebounding

Electric power generation (EPG) demand is growing

Expect softer Q3 due to short-term challenges with transition to our new ERP system in Canada and the impact of BC strike on product support revenues

Page 9: Finningpresentation uk sep 2011_final

Summary

9

Great Q2 results: significant improvement in operating leverage drove new earnings record

Investing in capabilities and capacity

New ERP system launched in Canada, working through startup challenges

Fort McKay on track; existing equipment and component rebuild facilities highly utilized

Outlook remains strong

Monitoring market activity levels closely and will act decisively to ensure our business activities match market demand

Well-positioned:

Limited fixed capital commitment

Disciplined working capital spend

Changed philosophy on rental

„Permanent‟ portion of SG&A reduced

Improved operating efficiencies

Remain focused on disciplined execution of our strategy

Page 10: Finningpresentation uk sep 2011_final

Appendix

Page 11: Finningpresentation uk sep 2011_final

Q2 2011 Highlights

11

Exceptionally strong Q2

New quarterly record for product support revenue

Remarkable growth in new equipment sales in all regions

Operating leverage drove record quarterly earnings

Compared to first half of 2010, operating at twice the profitability level

Managing demand-driven increase in working capital

Expect positive free cash flow later in 2011 with moderating inventory additions

FY 2011 free cash flow will be driven by working capital required; current forecast for negative annual FCF in 2011

Backlog up 14% from March 2011 to $1.7 billion, strong order intake continues

On track to achieve EBIT margin targets in 2013

Page 12: Finningpresentation uk sep 2011_final

Focused on Generating Operating LeverageOn Track to 10% EBIT Margin in 2013

EBIT Margin Targets – Solid Progress

Canada

FINSA

UK

9 – 10%

10 – 11%

7 – 8%Streamlined Cost Structure

Cost reductions

Improved productivity and efficiency

Operational excellence

Efficient Asset Base

Disciplined working capital management

Selected net rental additions

Increase in Revenues /

Gross Profits

Strong market activity

Market share growth

Margin improvements

+

ROE Target = 18%

12

Page 13: Finningpresentation uk sep 2011_final

Cash Engine for Growth

Cash for Growth

Dividends

Reduce debt

Acquisitions

Strategic shift in rental: net adds ~ $100-$150M per year*

Disciplined capital spending

~ $100M per year*

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

Enhanced focus on

working capital management

13* Averages over economic cycle

Page 14: Finningpresentation uk sep 2011_final

Outlook - Canada

Machine order intake is solid and expected to continue in 2011

Parts and machine/component rebuild activity robust

Rental activity strong

Oil sands activity increasing

Mine expansions (CNRL, Shell) and new players putting projects through the approval process (Total)

Other mining (coal, copper, gold, silver) seeing solid demand and the outlook remains strong for 2011 and beyond

Expect continued infrastructure activity

Starting to see some modest signs of forestry improvement with new demand from Asia

Expect softer Q3 due to short-term challenges with transition to our new ERP system in Canada and the impact of BC strike on product support revenues

14

Page 15: Finningpresentation uk sep 2011_final

Outlook - South America

Strong mining growth opportunities

Order intake solid

Product support very robust

Thriving construction & power systems

Private and public investments in infrastructure and energy

Mining contracts, expansions

Actively managing cost pressures of strong growth environment

Investing in service infrastructure

Additional opportunities based on Caterpillar growth and expansions

15

Page 16: Finningpresentation uk sep 2011_final

Outlook - UK and Ireland

Great turnaround in performance despite tough economic conditions

Coal mining

Mining equipment opportunities

Strong product support driver

Segmented approach working

Focus on construction segments with large products support opportunities (quarrying, re-handling, industrials, plant hire)

Successfully developing and rolling out low-cost distribution channels for smaller, building construction products

Power systems strengthening

UK renewables, mission critical, industrial and pleasure craft

Global markets - oil & gas, international marine 16

Page 17: Finningpresentation uk sep 2011_final

Mike Waites, President & CEO

September 2011

Investor Presentation