Finning International Inc. · TSX:FTT
Finning International — Investor Presentation (February 2003)
22 slides from Finning International's investor presentation, Feb 26, 2003
Slide 1: Analyst Meeting
Analyst Meeting Toronto, Ontario February 26, 2003 Richard Mahler, Executive Vice President & Chief Financial Officer
Slide 2: Agenda
Agenda • Review of 2002 • Discussion of ‘Other Expenses (Income)’ • Dealer Business System (DBSi) • The Year Ahead 2
Slide 3: 2002 Record Year
2002 Review 2002 Record Year 2002 2001 Change Revenue (Mils) $3,207 $3,247 é 1.2% Net Income (Mils) $132 $104 27% Earnings per share $1.72 $1.50 15% Earnings per share $1.66 $1.54 7.8% (normalized) Cash Flow (Mils) $473 $446 7.6% (after working capital changes) 3 3
Slide 4: Revenue Diversification
2002 Review Revenue Diversification 100% 90% 80% 70% 60% 50% 40% 58.0% 30% 38.6% 20% 10% 0% 1997 1998 1999 2000 2001 2002 Finance Rental Parts and Service Equipment 4
Slide 5: Gross Profit Stability
2002 Review Gross Profit Stability 100% 80% 60% 82.3% 40% 69.3% 20% 0% 1997 1998 1999 2000 2001 2002 Finance Rental Parts and Service Equipment 5
Slide 6: Net Income/Cash Flow
2002 Review Net Income/Cash Flow Continued Income & Cash Flow improvement 600 500 400 $million 300 200 100 0 1998 1999 2000 2001 2002 Net Income Cash Flow after working capital changes 6
Slide 7: Improving Operating Performance
2002 Review Improving Operating Performance Improved Turnover 4.00 3.80 3.60 3.40 3.20 3.00 2.80 2.60 2.40 2.20 2.00 1998 1999 2000 2001 2002 Inventory turns - Parts Inventory turns - New Equipment 7
Slide 8: Working Capital / Sales
2002 Review Working Capital /Sales Continued operational improvement 40% 36.7% 35% 30.5% 30% 25% 21.8% 20% 16.4% 17.1% 15% 10% 5% 0% 1998 1999 2000 2001 2002 8 8
Slide 9: Return on Equity
2002 Review Return on Equity Increasing ROE 20% 15.7% 14.1% 15% 10.5% 8.7% 10% 5% 0.5% 0% 1998 1999 2000 2001 2002 9 9
Slide 10: Consolidated Debt / Equity
2002 Review Consolidated Debt / Equity Reduced Leverage 1.9 1.67 1.7 1.5 1.29 1.3 1.04 1.1 0.87 0.9 0.7 0.58 0.5 1998 1999 2000 2001 2002 Equity includes shareholders’ equity and non-controlling interest 2000 ratio excludes Hewden investment and related debt 10
Slide 11: Other Expenses (Income)
Other Expenses (Income) 2002 2001 a) Gain on sale of surplus properties $ (15,216) $ (8,725) b) Deferred gain on sale of the (1,600) (3,571) Canadian Materials Handling business c) Costs incurred on DBSi business process 10,264 – reengineering d) Loss from equity investment 972 – e) Loss on sale of
Slide 12: DBSi
Dealer Business System DBSi • “Best of breed” enterprise software solution – SAP, Siebel, Exact (Rental) • “Blended” by Caterpillar and team of dealers • Standardize business processes amongst all Finning dealers – Standard financial/management reporting – Facilitates future acquisitions – Significa
Slide 13: Finning, Caterpillar and Accenture
Dealer Business System Finning, Caterpillar and Accenture Finning Strategy: “Caterpillars best global business partner” Caterpillar: DBSi as platform for common Dealer Systems and Processes Finning leverages DBSi to contribute to achieving the strategic objectives on: – Growth – Efficiency & Effecti
Slide 14: The DBSi Solution deployed at other dealers
Dealer Business System The DBSi Solution deployed at other dealers Dealer Go Live Date Implemented Ziegler (Minnesota) October 1, 2001 All modules (staggered) Pilot Macrosa (Argentina) January 7, 2002 All modules in DBSi 1.0 Pilot Foley (New Jersey) November 4, 2002 All modules except (6 month deplo
Slide 15: Overview
Dealer Business System Overview Team Selling Marketing Intelligence Business Capabilities Project Management Standardized • Process Improvement Engineering Performance Driven Organization Prerequisite Capabilities Shared Services IT Processes DBSi • Base System System 15
Slide 16: These cases were considered
Dealer Business System These 3 cases were considered Case 1 Case 2 Case 3 Team Selling Marketing Intelligence Business Capabilities Project Management Team Selling Team Selling Team Selling Marketing Intelligence Marketing Intelligence Marketing Intelligence Business Business Business Standardized C
Slide 17: Case 3 UK only – Journey Roadmap
Dealer Business System Case 3 UK only – Journey Roadmap UK delivery Canada delivery Chile delivery 2002 2002 2003 2003 2003 2003 2004 2004 2004 2004 2005 2005 2005 2005 2006 2006 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Journey Management Deploy Capabilities UK - 12 months Business Arch. Depl
Slide 18: Accounting for DBSi
Dealer Business System Accounting for DBSi • Operating benefits/costs included in SG&A • Will not affect 2003 earnings guidance ü up 5 – 10 % • Base system costs will show in ‘other expenses’ ü estimate 0.17 per share ü largely offset by gains • Reported & ‘Normalized Earnings’ about same in 2003 ü
Slide 19: The Year Ahead
The Year Ahead The Year Ahead • Modest economic recovery in 2003 • Commodity prices and exchange rates stable • Overall revenue up 5–10% • Continued focus on cost containment and balance sheet management • Net income (normalized) up 5-10% - assuming “business as usual” 19
Slide 20: The Year Ahead
The Year Ahead The Year Ahead • Strategic investment – Information technology (DBSi in UK) – Facilities (797 support) • Strategic acquisitions – Small, accretive – Market share enhancing • Southern Cone integration • Succession plans addressed 20
Slide 21: Capital Expenditures
The Year Ahead Capital Expenditures • 2003 “Maintenance” Capex in line with previous years – $50 million per year (gross) - $20-30 million net • Additional investment in 2003 primarily related to 797 mining truck (approx. $75 million) – New Component Rebuild Centre in Canada – Mildred Lake expansion
Slide 22: Summary
Summary • Record net income in 2002 • Modest economic recovery in 2003 • 5-10% top and bottom line growth • Strategic investments in IT and facilities • Solid revenue and share price growth over the long run • Excellent global, industry and revenue stream diversification • Proven formula for creatin
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