Finning International Inc. · TSX:FTT
Finning International — Investor Presentation (August 2004)
46 slides from Finning International's investor presentation, Aug 10, 2004
Slide 1: Investor Presentation
We will be Caterpillar’s best global business partner, providing unrivalled services that earn customer loyalty. Investor Presentation West Coast Investor Meetings August 10-11, 2004 Doug Whitehead, President and CEO Wayne Bingham, Executive Vice-President and CFO
Slide 2: Presentation Overview
2 Presentation Overview • Company Profile • Financial Review • Corporate Strategies • Growth Opportunities • Summary 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 (32%) (26%) (18%) (17%) (7%) As at June 30, 2004
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 14.9% 1800 1600 1400 1200 1000 Finning International Inc. 800 600 S&P 500 400 200 S&P/TSX Index 0 Jun-84 Jun-86 Jun-88 Jun-90 Jun-92 Jun-94 Jun-96 Jun-98 Jun-00 Jun-02 Jun-04 Note: 10 year CAGR of 13.2%
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 Number 1 by Canadian Business Magazine in both the 2004 and 2003 reports on corporate governance • Ranked 4th of 207 companies in Canada in Glob
Slide 13: Corporate Governance – Executive Team
Company Profile 13 Corporate Governance – Executive Team • Doug Whitehead, President and CEO (since April 2000) • Joined Finning January 1999 (as President and COO) • Appointed President and CEO April 2000 • Previously President and CEO Fletcher Challenge Canada 1992-1998 • Brian Bell, President Fin
Slide 14: Corporate Governance – Executive Team
Company Profile 14 Corporate Governance – Executive Team • Nick Lloyd, Managing Director, Hewden plc. (since June 2003) • Joined Finning 1983 (through acquisition of Bowmaker – joined Bowmaker 1968) • Previously President, Finning Chile, January 2000-June 2003 • Steve Mallett, Managing Director, Fin
Slide 15: Corporate Governance – Executive Team
Company Profile 15 Corporate Governance – Executive Team • Wayne Bingham, Executive Vice-President and CFO (since May 2003) • Joined Finning May 2003 • Previously EVP and CFO Ontario Power Generation – prior to that senior executive positions in the Westcoast Energy Group of companies • Doug Sprout,
Slide 16: Corporate Governance – Stock Ownership
Company Profile 16 Corporate Governance – Stock Ownership • At June 30, 2004, there were 77,849,258 shares outstanding • Directors and Officers of the Company own approximately 288,576 shares outright (.37% of total shares outstanding) • No single shareholder owns more than 10% of shares • Executive
Slide 17: Financial Review
FINNING INTERNATIONAL INC. |
Slide 18: 2003 Record Year
Financial Review 18 2003 Record Year (C$ in millions except per share data) 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 workin
Slide 19: 2003 Highlights
Financial Review 19 2003 Highlights • Record revenues • Strong earnings and cashflow • Underlying markets strong • South American economic and mining recovery • Canadian mining and gas/energy sectors • UK construction activity • Record order backlog at year-end ($420mm) • Significantly up over 2002
Slide 20: 2003 Highlights
Financial Review 20 2003 Highlights • Acquired Lex Harvey materials handling business • Finning (UK) sold power systems rental business to Energyst • consortium of CAT dealers serving the UK and Europe • FII acquired 15% ownership of Energyst • Expands scope of power rental business to Europe • Rene
Slide 21: Q2 2004
Financial Review 21 Q2 2004 (C$ in millions except per share data) 2004 2003 % Change Revenue $1,032.6 $861.1 19.9% Net Income $27.8 $32.2 Earnings per share (Basic) $0.35 $0.42 Normalized - EPS (Basic) $0.40 $0.46 (13.0%) Cash Flow $125.4 $123.6 1.5% (prior to working capital changes)
Slide 22: Q2 2004 Highlights
Financial Review 22 Q2 2004 Highlights • Record quarterly revenue • Reflected accretive acquisitions and strong commodity- based markets (Finning South America revenues up 81.8%) • Normalized earnings down (5.2%), but includes costs which reduced EPS $0.08 per share, y-o-y: • Long term stock based c
Slide 23: Working Capital / Sales
Financial Review 23 Working Capital /Sales 40% 36.7% 35% 30.5% 30% 25% 21.8% 21.1% 20% 16.4% 17.1% 17.4% 18.0% 15% 10% 5% 0% 1998 1999 2000 2001 2002 2003 Mar-04 Jun-04
Slide 24: Order Backlog
Financial Review 24 Order Backlog 550,000 500,000 Sales Dollar (CAD) 450,000 400,000 350,000 300,000 250,000 200,000 150,000 b b ov ug ec ay l ct ay pr pr n n ar ar n n p Ju Fe Fe Ja Ja Se Ju Ju O D M M A A N M M A Month
Slide 25: 2004 Operating Initiatives
Financial Review 25 2004 Operating Initiatives • Review of Hewden cost structure/delivery model • Service delivery network • Business support functions (“back office”) • Single information system • $60 million cost reduction program launched to achieve savings by 2006 • DBSi implemented in Finning (
Slide 26: Corporate Strategies
FINNING INTERNATIONAL INC. |
Slide 27: Vision
Corporate Strategies 27 Vision We will be Caterpillar’s best global business partner, providing unrivalled services that earn customer loyalty
Slide 28: Corporate Strategies
Corporate Strategies 28 Corporate Strategies • Maintain an excellent relationship with Caterpillar and market Caterpillar products and services • Diversify our activities by: • Geography • Industry Segment • Revenue Stream • Grow rental, parts and service businesses to provide increased earnings sta
Slide 29: Strategic Criteria
Corporate Strategies 29 Strategic Criteria Growth +15% per year Market Share +30% ROE +20%
Slide 30: End Market Diversification
Corporate Strategies 30 End Market Diversification Serving a number of different industries New Equipment* Construction Other 19% 12% Petroleum 7% Power 19% Forestry Mining 8% 28% * New equipment deliveries at June 30, 2004
Slide 31: Revenue Diversification
Corporate Strategies 31 Revenue Diversification 100% 90% 80% 70% 60% 50% 40% 30% 56.4% 20% 38.6% 10% 0% 1997 1998 1999 2000 2001 2002 2003 Mar-04 Jun-04 Finance Rental Parts and Service Equipment
Slide 32: Gross Profit Stability
Corporate Strategies 32 Gross Profit Stability 100% 80% 60% 40% 69.3% 80.3% 20% 0% 1997 1998 1999 2000 2001 2002 2003 Mar-04 Jun-04 Finance Rental Parts and Service Equipment
Slide 33: Long Term Revenue Growth
Corporate Strategies 33 Long Term Revenue Growth Organic growth complemented by acquisitions Hewden 20 Year CAGR of 12.0% (U.K.) C$ 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 34: Shareholder/Financing Initiatives
Corporate Strategies 34 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 35: Growth Opportunities
FINNING INTERNATIONAL INC. |
Slide 36: Positioned for Internal Growth
Growth Opportunities 36 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 37: Finning's Formula for Future Growth
Growth Opportunities 37 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 38: Finning Oil Sands - Opportunity
Growth Opportunities 38 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) • $13 billion of SAGD (not as big an opportunity) • Total industry opportunity through
Slide 39: FINSA Mining Potential
Growth Opportunities 39 FINSA Mining Potential Identified mining projects/opportunities over next 5 Years Mine Commodity Owner Start-up CapEx (US$ 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 40: FINSA Mining Potential
Gold (Spot) 200 250 300 350 400 450 Jun-93 Dec-93 Jun-94 Dec-94 Jun-95 Growth Opportunities Dec-95 Jun-96 Dec-96 Jun-97 Dec-97 Gold Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Copper Dec-00 Jun-01 Dec-01 FINSA Mining Potential Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 60 70 80 90 100 110 120 130 140 150 Copper (fut
Slide 41: FINSA Mining Potential
Growth Opportunities 41 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 42: Finning (UK) – Transport Plan 2010
Growth Opportunities 42 Finning (UK) – Transport Plan 2010 z Primary driver for growth for Finning (UK) over next several years will be associated with UK Government £180 billion infrastructure program z Major projects are proceeding as per the original 10-year plan (to 2010) z December 2002 £5.5 bi
Slide 43: Hewden
Growth Opportunities 43 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 44: Power and Energy Systems
Growth Opportunities 44 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 45: Summary
Summary 45 Summary • Strong 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 46: Disclaimer
46 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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