Finning International Inc. · TSX:FTT
Finning International — Investor Presentation (May 2004)
40 slides from Finning International's investor presentation, May 28, 2004
Slide 1: Investor Presentation
We will be Caterpillar’s best global business partner, providing unrivalled services that earn customer loyalty. Investor Presentation Toronto May 28, 2004 Doug Whitehead, President and CEO Wayne Bingham, EVP and Chief Financial Officer
Slide 2: Presentation Overview
2 Presentation Overview • Company Profile • Financial Review • Corporate Strategies • Growth Opportunities • Summary • Appendix All figures are in Canadian dollars unless noted otherwise
Slide 3: Finning International Inc.
Company Profile 3 Finning International Inc. • Incorporated in 1933 - head office Vancouver, B.C., Canada • Caterpillar’s largest dealer worldwide • Focused on three key geographies: Western Canada, the U.K. and South America • Over 11,000 highly skilled employees with “Can Do” attitude • Publicly o
Slide 4: What Does Finning Do?
Company Profile 4 What Does Finning Do? • Sell new equipment (95% is Caterpillar) and engines • Sell used equipment • Provide ongoing equipment maintenance and repair • Sell parts and components • Rent and lease equipment • Finance equipment • Insure equipment
Slide 5: What Does Finning Really Do?
Company Profile 5 What Does Finning Really Do? • We are in the productivity business • We develop customized solutions that boost our customers’ return on investment • We lower customers’ total owning and operating costs over the equipment life • We minimize customers’ risk of owning and operating e
Slide 6: Caterpillar Dealers
Company Profile 6 Caterpillar Dealers • “Strong independently owned dealer organization is key to long term success” • 180 dealers worldwide • Exclusive right to represent Caterpillar in defined geographic areas • Most are privately owned • Most operate in one specific geographic area
Slide 7: International Diversification and Balance
Company Profile 7 International Diversification and Balance FINNING FINNING FINNING HEWDEN POWER & (CANADA) (UK) LTD. SOUTH AMERICA STUART ENERGY SYSTEMS Revenue Revenue Revenue Revenue Revenue (34%) (22%) (20%) (17%) (7%)
Slide 8: Western Canada
Company Profile 8 Western Canada 2003 Revenue: $1.46 billion Employees: 2,717 Branches: 41 Key Industry Segments: mining, forestry, construction, oil & gas, government sector, pipeline Growth Opportunities: • Oil Sands • Arctic Pipeline • Rental & Service • Power & Energy Systems
Slide 9: United Kingdom
Company Profile 9 United Kingdom 2003 Revenue: $1.58 billion Employees: 6,191 Locations: over 325 (figures include both Finning (UK) and Hewden) Key Industry Segments: mining & quarrying, construction, materials handling, plant hire Growth Opportunities: • Infrastructure program - £180 billion • Mar
Slide 10: South America
Company Profile 10 South America 2003 Revenue: $562 million Employees: 2,456 Locations: 37 Key Industry Segments: mining, oil & gas, construction, agriculture, forestry, fishing Growth Opportunities: • Chile copper – world low cost region • Economic recovery in Southern Cone • Mining and gas develop
Slide 11: Long Term Share Growth
Company Profile 11 Long Term Share Growth 20 year CAGR of 14.0% 1600 1400 1200 1000 Finning International Inc. 800 600 S&P 500 400 200 S&P/TSX Index 0 Apr-84 Apr-86 Apr-88 Apr-90 Apr-92 Apr-94 Apr-96 Apr-98 Apr-00 Apr-02 Apr-04 Note: 10 year CAGR of 10.4%
Slide 12: Corporate Governance
Company Profile 12 Corporate Governance • Finning is in full compliance with the new corporate governance guidelines of the Toronto Stock Exchange • Ranked 4th of 207 companies in Canada in Globe and Mail Report on Business September 2003 study on corporate governance • Ranked Number 1 by Canadian B
Slide 13: Financial Review
FINNING INTERNATIONAL INC. DT
Slide 14: Q1 2004
Financial Review 14 Q1 2004 2004 2003 Revenue $968 $874 Net Income $24 $35 Earnings per share $0.31 $0.45 Normalized - EPS $0.37 $0.36 Cash Flow $116 $105 (prior to working capital changes)
Slide 15: 2003 Record Year
Financial Review 15 2003 Record Year 2003 2002 Revenue $3,593 $3,207 12% Net Income $132 $132 --- Earnings per share $1.71 $1.72 --- Earnings per share $1.75 $1.66 5.4% (normalized) Return on Equity 14.3% 15.7% (1.4) pts Cash Flow $506 $461 10% (prior to working capital changes)
Slide 16: 2004 Operating Initiatives
Financial Review 16 2004 Operating Initiatives • Review of Hewden cost structure/delivery model • Business support functions (“back office”) • Single information system • Service delivery network • Opportunities for back office integration within Hewden/Finning (UK) • DBSi implemented in Finning (UK
Slide 17: Working Capital / Sales
Financial Review 17 Working Capital /Sales 40% 36.7% 35% 30.5% 30% 25% 21.8% 21.1% 20% 16.4% 17.1% 17.4% 15% 10% 5% 0% 1998 1999 2000 2001 2002 2003 Mar-04
Slide 18: Corporate Strategies
FINNING INTERNATIONAL INC. DT
Slide 19: Vision
Corporate Strategies 19 Vision We will be Caterpillar’s best global business partner, providing unrivalled services that earn customer loyalty
Slide 20: Corporate Strategies
Corporate Strategies 20 Corporate Strategies • Maintain an excellent relationship with Caterpillar and market Caterpillar products and services • Diversify our activities by: • Geography • Industry Segment • Revenue Stream • Grow rental, parts and service businesses to provide increased earnings sta
Slide 21: Strategic Criteria
Corporate Strategies 21 Strategic Criteria Growth +15% per year Market Share +30% ROE +20%
Slide 22: End Market Diversification
Corporate Strategies 22 End Market Diversification Serving a number of different industries New Equipment* Other Construction 7% 19% Petroleum 8% Power 20% Forestry Mining 9% 34% * New equipment deliveries for 2003
Slide 23: Revenue Diversification
Corporate Strategies 23 Revenue Diversification 100% 90% 80% 70% 60% 50% 40% 56.3% 30% 38.6% 20% 10% 0% 1997 1998 1999 2000 2001 2002 2003 Mar-04 Finance Rental Parts and Service Equipment
Slide 24: Gross Profit Stability
Corporate Strategies 24 Gross Profit Stability 100% 80% 60% 78.9% 40% 69.3% 20% 0% 1997 1998 1999 2000 2001 2002 2003 Mar-04 Finance Rental Parts and Service Equipment
Slide 25: Long Term Revenue Growth
Corporate Strategies 25 Long Term Revenue Growth Organic growth complemented by acquisitions Hewden 20 Year CAGR of 12.0% (U.K.) C$ millions 2001 3,500 10 Year CAGR of 13.2% H. Leverton (U.K.) 3,000 1997 2,500 Gildemeister (Chile) 1993 R. Angus 2,000 (Canada) Argentina/Bolivia/ Lex Harvey 1989 Urugu
Slide 26: Shareholder/Financing Initiatives
Corporate Strategies 26 Shareholder/Financing Initiatives • Increased dividend by 11.1% January 2004 • Dividend now $0.10/share per quarter • Fourth dividend increase since 2002 • Strategy to maintain competitive dividend • Re-filed Normal Course Issuer Bid December, 2003 • Third NCIB (first program
Slide 27: Growth Opportunities
FINNING INTERNATIONAL INC. DT
Slide 28: Positioned for Internal Growth
Growth Opportunities 28 Positioned for Internal Growth Canada • Oil Sands - $5-6 Billion opportunity • Arctic Gas Pipelines – $750M opportunity • 2010 Olympics infrastructure spending South America • New mining projects - $3B opportunity • Oil and gas, construction opportunity United Kingdom • £180
Slide 29: Order Backlog
Growth Opportunities 29 Order Backlog 500,000 450,000 400,000 Sales Dollar (CAD) 350,000 300,000 250,000 200,000 150,000 100,000 50,000 - c b b ar ar p Jan Jan ct ov ay n r l g De Ju Ap Fe Fe Se Ju Au M O M M N Month
Slide 30: Finning's Formula for Future Growth
Growth Opportunities 30 Finning’s Formula for Future Growth • Continue to lever Caterpillar’s world renowned brand name • Solve difficult customer problems • Operating in extreme weather conditions in oil sands • Mining at high altitudes in South America (14,000 ft) • Command strong regional market
Slide 31: Summary
Summary 31 Summary • Solid revenue and share price growth over the long run • Corporate strategies remain firmly in place • 2003 record revenue; strong earnings and cashflow • Outlook positive in 2004 and beyond • Excellent organic growth opportunities in all markets • Proven formula to transfer to
Slide 32: Appendix
FINNING INTERNATIONAL INC. DT
Slide 33: Finning (Canada)
Growth Opportunities 33 Finning (Canada) • Oil Sands projects major contributor to growth in Finning (Canada) for past several years and will be going forward • Major natural gas pipeline projects present significant opportunities • Other growth opportunities include: • Conventional oil and gas (dri
Slide 34: Finning Oil Sands - Opportunity
Growth Opportunities 34 Finning Oil Sands - Opportunity • $87 billion of projects in place or announced • $46 billion of new projects/expansions announced • $33 billion of conventional Oil Sands (truck and shovel) • $13 billion of SAGD (not as big an opportunity) • Total industry opportunity through
Slide 35: Finning (UK) – Transport Plan 2010
Growth Opportunities 35 Finning (UK) – Transport Plan 2010 l Primary driver for growth for Finning (UK) over next several years will be associated with UK Government £180 billion infrastructure program l Major projects are proceeding as per the original 10-year plan (to 2010) l December 2002 £5.5 bi
Slide 36: Hewden
Growth Opportunities 36 Hewden • Hewden operates in 3 business units (8 product focused channels) • Plant (Equipment/Hoists/Accommodation) • Hire (Tool) • Special Services (Services/Access/Power/Mobile Cranes) • Industry conditions very competitive at the moment • Growth opportunities exist through:
Slide 37: FINSA Mining Potential
Growth Opportunities 37 FINSA Mining Potential Identified mining projects/opportunities over next 5 Years Mine Commodity Owner Start-up CapEx (US$ mm) Refugio Gold Kinross/Bema 2004 200 Spence Copper BHPB 2004/5 800 Cerro Casale Gold/Copper Placer Dome 2006 1,430 Pascua-Lama Gold/Silver Barrick 2006
Slide 38: FINSA Mining Potential
Growth Opportunities 38 FINSA Mining Potential • Total mining trucks currently in operation: 300+ units • Equipment industry Revenue Potential: $180mm p.a. - Equipment Revenue (to 2007): $528 million (268 units) - Product Support Revenue (10 years): $2.6 billion • Market share for mining equipment:
Slide 39: Power and Energy Systems
Growth Opportunities 39 Power and Energy Systems • Goal to grow revenue to $1 billion by 2008 • 2003 total revenue approximately $440 million • Opportunities exist in all markets • Truck engines • Marine engines (pleasure craft and commercial) • EPG (distributed power) • Oil and gas (gas compression
Slide 40: Disclaimer
40 Disclaimer This presentation contains forward-looking statements and information which reflect the current view of Finning International Inc. ("Finning" or the "Company") with respect to future events and financial performance. Any such forward-looking statements are subject to risks and uncertai
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