Finning International Inc. · TSX:FTT
Finning International — Investor Presentation (September 2009)
25 slides from Finning International's investor presentation, September 2009
Slide 1: Investor Presentation
Investor Presentation Mike Waites, President & CEO September 2009
Slide 2: Forward-Looking Information
Forward-Looking Information This presentation 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 ab
Slide 3: Finning International (TSX:FTT)
Finning International (TSX:FTT) World’s largest Caterpillar Finning (Canada) equipment dealer Exclusive rights in three diverse regions Finning South America Operate in two of the Fort McMurray world’s best heavy equipment territories Edmonton Antofagasta Market cap - $2.9 billion Vancouver 2008 rev
Slide 4: What Drives Value in Our Business?
What Drives Value in Our Business? Caterpillar Equipment + Finning Service = Customer Value Proven Reliability Unmatched Capabilities First with Customers Strong customer relationships Large installed equipment fleet Meeting customer need for maximum equipment uptime 4
Slide 5: Investment Proposition
Investment Proposition Resilient earnings Diversification across industries and lines of business Installed equipment fleet gives visibility on product support business High barriers to entry Profitability improvement Higher return on capital employed Strong balance sheet and financial position Low
Slide 6: Earnings Performance
Earnings Performance Average ROE = 14.6% (2004 – 2008) Diluted EPS (C$) ROE (%) 2.00 20.0 16.8 15.7 15.8 15.4* 14.1 14.3 1.50 13.1* 1.55 15.0 1.31 1.49* 11.8 10.5 1.00 8.7 0.87* 0.90 10.0 0.84 0.84 0.67 0.47 0.50 0.37 5.0 0.00 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 * Adjusted for sign
Slide 7: Diversified by Line of Business
Diversified by Line of Business FY 2008 revenues June YTD 2009 revenues 32% Product Support 38% Product Support 43% New 49% New Equipment Equipment Sales Sales 12% Equipment 11% Rental 7% Used Equipment 8% Used Equipment Rental Equipment Sales Sales 7
Slide 8: Diversified by Industry
Diversified by Industry FY 2008 New Equipment Sales June YTD 2009 New Equipment Sales Other Other 7% Petroleum 1% 7% Petroleum 3% Forestry 1% Forestry 2% Mining Power Mining Power Systems 50% 43% Systems 23% 18% Construction Construction 27% 18% 8
Slide 9: Large Equipment Generates the Highest Parts & Service Revenues
Large Equipment Generates the Highest Parts & Service Revenues Average Annual Parts & Service Spend Per Unit Over 10 years $ millions 1.2 1.0 ~300 797 trucks in our territories 0.8 0.6 0.4 0.2 0 797 793 D11 24H D10 D6 950 320 Truck Truck Dozer Grader Dozer Dozer Loader Excavator 9
Slide 10: Installed Equipment Fleet Gives Visibility
Installed Equipment Fleet Gives Visibility $13 billion in equipment sales (11,000+ large machines) in past 5 years Provides large non-cyclical product support revenue stream Product support Cumulative # of revenue ($B) large units sold $2.0 Total Revenue 2008 = $1.9 B 12,000 Cumulative Units 10,000
Slide 11: Profitability Improvement
Profitability Improvement Cost reductions Operational excellence Improve performance in the UK 11
Slide 12: Cost Reductions
Cost Reductions On track to achieve $150 million in annual SG&A savings ~45% headcount reductions ~55% managing other expenses and improved productivity 10% reduction in workforce Significant cost-cutting initiatives Depot and branch closure Reduced discretionary costs Reduced transportation costs V
Slide 13: Operational Excellence
Operational Excellence Improved productivity and EBIT margin Improved service planning and forecast practices Supply chain efficiencies Preferred vendor contracts Centralized freight management Increased skill level of technicians and supervisors Process re-engineering Implementation of new Enterpri
Slide 14: Improve Performance in the UK
Improve Performance in the UK Back office consolidation complete Reduced operating costs, prepared to cut costs further SG&A down 9% from Q4/08 in local currency Bright spots in coal mining and power systems Growth opportunities in product support Strategic review at Hewden underway 14
Slide 15: Cash Engine for Growth
Cash Engine for Growth Strong cash flow from operations EBITDA ~ $500-$800M per year Cash for Growth Disciplined Dividends Enhanced capital spending focus on ~ $100M per year Reduce debt working capital management Acquisitions Strategic shift in rental: net adds ~ $100-$150M per year 15
Slide 16: Strong Free Cash Flow
Strong Free Cash Flow Strong operating cash flow Minimize working capital requirements Low rental fleet additions Below $50 million in 2009 vs. $205 million in 2008 Disciplined approach to capital spend Expect in excess of $300 million free cash flow in 2009 Uses of cash Dividends Reduce debt 16
Slide 17: Strong Balance Sheet
Strong Balance Sheet On plan to reduce debt 46% at the end of June 2009, target lower end of 40% - 50% range Approximately $500 million of bank facilities available No term debt maturities until 2011 Investment grade ratings confirmed by DBRS and S&P 17
Slide 18: Mining – Key Growth Opportunity
Mining – Key Growth Opportunity Large machines - more parts and service 24/7 business - heavy demands on equipment Many large customers – low cash cost producers Mining fleets – strong growth over last 5 years Strong market share Good product support visibility World class facilities - lowest “cost
Slide 19: Outlook
Outlook Challenging economic conditions impacting new equipment sales and rental Mining (including oil sands) remains active Heavy construction customers expected to benefit from government spending Residential construction, conventional oil & gas and forestry are slow, expected to remain weak Produ
Slide 20: Summary
Summary Strong customer relationships drives value Operational excellence drives profitability Earnings resilience and visibility from product support on growing installed equipment base Continued growth opportunities in mining, heavy construction and power systems “We Service What We Sell” Earl B.
Slide 21: Appendix
Appendix
Slide 22: Heavy Construction
Heavy Construction Strong relationships with many long- term customers Reliable Caterpillar equipment is highly regarded Infrastructure opportunities Road building Site cleaning and preparation Ports, bridges, mass transit Mine site construction Strong correlation between infrastructure spending and
Slide 23: Power Systems
Power Systems 2008 Power Systems revenue = $897 million, 5 year CAGR = 14.5% Diverse range of customers Electric Power Generation (EPG) Conventional oil and gas Marine Industrial Finning advantage – strong engineering capabilities Many large sophisticated power projects Data centres Biogas – to – En
Slide 24: Q2 2009 Results
Q2 2009 Results (C$ millions) Q209 Q208 Q209/Q208 Q109 Q209/Q109 Revenue 1,165 1,531 (24%) 1,364 (15%) Gross profit 350 440 (21%) 394 (11%) GP margin 30.0% 28.7% 28.8% SG&A (275) (324) 15% (310) 11% Other income (expenses) (15) (8) (8) EBIT 60 108 (44%) 76 (21%) EBIT margin 5.2% 7.0% 5.5% Net Income
Slide 25: Cash Flow
Cash Flow (C$ millions) Q209 Q208 Q109 Operating cash flow (1) 115 155 120 Changes in working capital items 52 (118) (106) Net (expenditures)/disposals on capital assets (27) (18) (22) Net (expenditures)/disposals on rental fleet (2) - (57) 6 Free cash flow 140 (38) (2) Strong free cash flow = $178
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