Finning International Inc. · TSX:FTT
Finning International — Investor Day (September 2023)
70 slides from Finning International's investor day presentation, Sep 26, 2023
Slide 1: Finning Investor Day
Finning Investor Day Antofagasta, Chile September 26, 2023
Slide 2: Investor Day Agenda
Investor Day Agenda Chile Standard Time (1 hour ahead of Eastern Standard Time) 8:30 Our Compelling Business and Priorities Kevin Parkes President & CEO 8:50 South America Juan Pablo Amar President, Finning South America 9:30 Break – 10 min 9:40 UK & Ireland Tim Ferwerda Managing Director, Finning U
Slide 3: Our Compelling Business and Priorities
Our Compelling Business and Priorities Kevin Parkes President and CEO INVESTOR DAY | September 26, 2023
Slide 4: Our Compelling Business – Focused on Long-Term Product Support Growth
Our Compelling Business – Focused on Long-Term Product Support Growth Supporting Caterpillar in highly attractive territories Largest Caterpillar Operational focused management team Dealer Employees highly focused on safety and customer service 2021 Investor Day Plan This team has a track re
Slide 5: Largest Caterpillar Dealer in Highly Attractive Territories
Largest Caterpillar Dealer in Highly Attractive Territories Largest Caterpillar dealer Canada South America UK & Ireland Safety Culture LTM Q2 2023 net revenue (1)(2) of $9.2B Significant Incident Bolivia Frequency (SIF) ‘Servicing what we sell’ for 90 years NU YT 60% NWT Diversified by geog
Slide 6: Operational Focused Executive Team
Operational Focused Executive Team Kevin Parkes Employee Share President & CEO Purchase Plan Appointed November 2022 22 Years with Finning $125M Finning shares owned by employees (1) 3 million shares or >2% of shares outstanding Juan Pablo Amar David Primrose Tim Ferwerda President, Finning South Am
Slide 7: 2021 Investor Day Plan Significantly Exceeded
2021 Investor Day Plan Significantly Exceeded Drive Product Support Reduce Costs Reinvest to Compound Product Support Revenue CAGR SG&A as % of Net Revenue (1) Reinvestment 5-9% (2021 base) 17% (mid-cycle) $250M annual 21% 17.3% $630M CAGR (LTM Q2 2021 - LTM Q2 2023) LTM Q2 2023 Share buybacks and a
Slide 8: Strong Operational Execution Has Transformed Our Earnings Capacity
Strong Operational Execution Has Transformed Our Earnings Capacity Key Metrics 2018 2021 LTM Q2 2023 Product Support Revenue $3,632M $3,727M $5,207M Product Support Revenue Mix(1)(2) 52% 56% 57% SG&A as a % of Net Revenue 19.0% 18.9% 17.3% Weighted Avg. Shares O/S 168M 161M 151M Adjusted EPS(2) $1.6
Slide 9: Optimally Positioned to Benefit from Key Megatrends
Optimally Positioned to Benefit from Key Megatrends Megatrends Mine the Minerals Build the Infrastructure Power Resilience Energy Transition Extraction of critical minerals such Significant investment in resilient Growth in electric power as copper and lithium infrastructure including generation and
Slide 10: Diversified Portfolio - Regional Themes
Diversified Portfolio - Regional Themes (1) South America UK & Ireland Western Canada Mobilizing Resilient | Agile Steady Growth Electrification driving demand for Investment in infrastructure From pipeline construction to copper, lithium, and infrastructure and electric power generation disciplined
Slide 11: Go-Forward Strategic Priorities
Go-Forward Strategic Priorities Our people are our biggest Fostering a safe, secure, and Empowering our people to competitive advantage prosperous place to work build customer loyalty Drive Product Support Full Cycle Resilience Sustainable Growth Continued profitable growth Earnings consistency Targ
Slide 12: Installed Equipment Base with Ongoing Value Throughout the Asset Lifecycle
Installed Equipment Base with Ongoing Value Throughout the Asset Lifecycle New Population/Full Machine Rebuild “ We service what we sell “ New sale New lease Earl B. Finning Rental Product Support Rebuilt as new Product Support Installed Equipment Base with CVA with CVA active units at June
Slide 13: Strong Alignment with Caterpillar to Continue Driving Product Support Growth
Strong Alignment with Caterpillar to Continue Driving Product Support Growth Growing rebuilds and maximizing STRONG Customer Value Agreements across Double ME&T (1) ALIGNMENT all market segments Services Revenues from 2016 to 2026 Finning’s Strong Value Proposition to Meet Customers’ Product Support
Slide 14: Product Support Growth Profile Over Time
Product Support Growth Profile Over Time Stable, Resilient, and Growing Product Support Revenue Stream Key Drivers Total Product Support Revenue Aftermarket share growth across all sectors Expanding and maturing equipment population with 2016 – LTM Q2 2023 7 CAGR % high utilization CVA penetra
Slide 15: Full Cycle Resilience – Earnings Consistency
Full Cycle Resilience – Earnings Consistency Continuous Improvement Initiatives(1) Cost Flexibility | Contracted Revenue | Resilient Segments Mid-Cycle SG&A as % of Cost and Capital Model Continue lowering fixed overhead costs Net Revenue 2019 - 2022 Greater penetration of product support contra
Slide 16: Sustainable Growth – Targeted Addressable Market Growth
Sustainable Growth – Targeted Addressable Market Growth (1) Used Rental Power Increasing participation in used Increasing rental penetration with Standby power (e.g., data centres) equipment market from “the core out” initial focus on Canada Short-term capacity power for peak Expanding sou
Slide 17: Sustainability at Finning
Sustainability at Finning Electricity from Renewable Sources Source Clean Energy Carbon-free power supply by 2025+ for 50% of power needs 21% Working with Caterpillar and customers to support the adoption of autonomous and/or of Alberta operations (1) 2022, up 10 percentage electric or hydrogen powe
Slide 18: South America – Premium Business with Near and Long-Term Growth
South America – Premium Business with Near and Long-Term Growth Finning South America Highlights Adjusted ROIC Strong operational management team 26.4% 24.5% Large installed equipment base 20.3% Healthy and growing customers Strong technology platform 12.2% 12.9% 10.5% Excellent track reco
Slide 19: Key Takeaways
Key Takeaways Product Support Full Cycle Resilience Sustainable Growth Largest driver of value and source Disciplined execution with Building capabilities to drive of continued earnings growth added focus on capital velocity growth from the core out Premium Business | Mobilizing Resilient | Agile La
Slide 20: South America
South America Juan Pablo Amar President, Finning South America INVESTOR DAY | September 26, 2023
Slide 21: South America – Overview
South America – Overview Juan Pablo Amar – President, Finning South America Business Overview Joined Finning in 1992 Joined Finning Operating in Chile, Argentina and Bolivia, with a shared Net revenue services center in Uruguay Q2 2023 LTM Has held numerous positions across different areas and
Slide 22: Extensive Capabilities and On-Site Presence Across Chile
Extensive Capabilities and On-Site Presence Across Chile CRC(1) PDC (1) & Truck Shop IKC / FIT (1) Antofagasta La Negra Antofagasta 10 North 9 Mining Power Selected Mine Sites Central Codelco Codelco BHP Glencore 9 Codelco Chuquicamata Radomiro Tomic Spence Lomas Bayas Gabriela
Slide 23: Antofagasta Master Plan Development – Increasing Capacity and Efficiency
Antofagasta Master Plan Development – Increasing Capacity and Efficiency Key Master Plan Steps – Self-Funded With Net Proceeds(1) La Negra New Service Shops Consolidate Antofagasta Shift service functions to La Negra Branch Move retail sales to CRC location Operations Sell Branch sale in progr
Slide 24: South America – Mobilizing for Growth
South America – Mobilizing for Growth Strong demand for copper & Chile Global lithium with significant long- Electrification term upside Moderated mining royalty framework approved Strategic wins and opportunities for Mining market share gains with electric Decarbonization drive trucks and associate
Slide 25: Operating Environment – Improving Clarity and Confidence in Chile
Operating Environment – Improving Clarity and Confidence in Chile Chile Mining Royalties Chile Constitution Chile’s Senate/Congress passed the proposed mining New Constitutional Council elected in May 2023 with royalty in May 2023 broader representation Presidential approval in August 2023 F
Slide 26: Lithium Development – Additional Growth Potential
Lithium Development – Additional Growth Potential Lithium Triangle Global Lithium Overview (1) Significant Growth Potential (2) Global Lithium 65% 48% Demand Growth 2021 to 2030 ~ 8x 5% 21% Chile Lithium 30% 20% Production Growth 2021 to 2030 2 -3x 11% 49% Production Resources Argentina Lithium Chil
Slide 27: Industrial Activity Improving – Supporting Growth Beyond Mining
Industrial Activity Improving – Supporting Growth Beyond Mining Chile Infrastructure Spending Regional Data Center Outlook “ Further consolidations are expected… in countries such as Brazil, Chile and Mexico, due to demand driven by hybrid cloud “ adoption, requiring large processing and storage cap
Slide 28: Significant Growth in Copper Demand – Key Regional Growth Driver
Significant Growth in Copper Demand – Key Regional Growth Driver Growing Demand Supply Gap (1) Chilean Copper Mining Trends (2) Chile Copper Production Profile (3) 2008 – 2022 7.1 ~ 25% ~ 44% Ore Grade Volume Mined % Decrease % Increase Selected Proposed Regional Future Projects (4) kT CuEq Annual I
Slide 29: Illustrative Greenfield Mine – Poised to Capture Growth
Illustrative Greenfield Mine – Poised to Capture Growth Mine Life-Cycle Mine Development Over Time Results In… Early Closure Works Increased number of Increased intensity of Lower ore grades units required equipment utilization Production Product Support Growth Opportunities 7yr Avg Parts # Units Re
Slide 30: Product Support – Mining Growth Drivers
Product Support – Mining Growth Drivers Chile Industry Mined Volumes (1) Caterpillar Mining Equipment Population in South America Metrics 2008 2022 Equipment Type # of Active Units Average Age As at June 30, 2023 Years Total Volumes Million Tonnes 878 1,262 Ultra Class Mined Ore Trucks ~250 11 Grade
Slide 31: Mining Electrification and Autonomy – Strong Competitive Position
Mining Electrification and Autonomy – Strong Competitive Position Recent BHP deal is the largest award in Finning’s history and expands CAT mining equipment population and market share Step-function improvement in BHP’s operational excellence ESCONDIDA Increased material-moving capacity (2) CAT 79
Slide 32: Growing Product Support Across All Industries
Growing Product Support Across All Industries (1) Customer Value Agreements Rebuilds Equipment Population Expansion Ramping up fulfilment of CVA contracts Deepening number of standard rebuild Truck wins in mining include BHP, Teck, Codelco, secured since 2021 models in construction Lundin Le
Slide 33: Product Support Revenue Growth Continues
Product Support Revenue Growth Continues (1) South America Product Support Revenue (US$) Future Growth Drivers Continued increase in installed equipment base CAGR Electric drive truck market share 6% >8% 2016 – LTM Q2 2023 gains Increase in mined volumes and CAGR production Continued contrac
Slide 34: Full Cycle Resilience – Velocity Opportunities in Focus
Full Cycle Resilience – Velocity Opportunities in Focus (1) Lead Time Reduction Warehouse Automation Component Repair Optimization Inbound lead time reduction from Miami Automation technology implementation Integrated Business Planning improvements to Chile and Argentina: distribution model at Antof
Slide 35: South America - Key Takeaways
South America - Key Takeaways (1) Product Support Full Cycle Resilience Sustainable Growth Poised to capture aftermarket Continue disciplined execution Helping mining customers opportunities in all sectors as with added focus on driving meet their long-term the region mobilizes for growth invested c
Slide 36: UK & Ireland
UK & Ireland Tim Ferwerda Managing Director, Finning UK&I INVESTOR DAY | September 26, 2023
Slide 37: UK and Ireland – Overview
UK and Ireland – Overview Tim Ferwerda – Managing Director Finning UK & Ireland Business Overview Joined Finning in 2016 as Director of Sales, Marketing Joined Finning Highly diversified customer and revenue base with a strong and and Distribution differentiated power systems business Net Revenu
Slide 38: UK and Ireland – Resilient and Agile
UK and Ireland – Resilient and Agile (1) Infrastructure Investment (2) The UK government Robust quarrying and aggregates Infrastructure has significant investments planned in infrastructure and £650B industry, buoyed by demand from key projects, such as HS2, with energy transition By 2031 significan
Slide 39: Growing Product Support Across All Industries
Growing Product Support Across All Industries Customer Value Agreements Rebuilds Equipment Population & Market Expansion CVAs establish a post-sale relationship Compelling proposition, offering both Addressable market growth through expanded asset with customers, driving incremental sales econ
Slide 40: Product Support Revenue Growth Continues
Product Support Revenue Growth Continues (1) UK & Ireland Product Support Revenue (£) Future Growth Drivers Extend CVA duration, value and coverage in high opportunity segments Expand range of rebuild models, options and CAGR 8% customer coverage 2016 – LTM Q2 2023 >6% Continued growth of inst
Slide 41: Full Cycle Resilience – Agile and Efficient Operations Drive Invested Capital Turns
Full Cycle Resilience – Agile and Efficient Operations Drive Invested Capital Turns (1) Lean Operating Model Productive & Engaged Workforce Digitally Enabled Business Drive efficiencies and velocity through RRR network, Workforce enablement and remote service capabilities Existing customers spend up
Slide 42: Sustainable Growth – Power Systems Underpinned by Strong Market & Capabilities
Sustainable Growth – Power Systems Underpinned by Strong Market & Capabilities Electric Power Generation Data Centers UK Electricity UK and Ireland Demand Increase (1) Data Center up to Capacity Growth (2) 50% 5.5% By 2035 Through to 2030 Opportunities driven by electrification megatrend Cloud s
Slide 43: UK & Ireland – Key Takeaways
UK & Ireland – Key Takeaways (1) Product Support Full Cycle Resilience Sustainable Growth Continued momentum on CVAs Finning’s leader in SG&A efficiency Global leader in power supporting and rebuilds whilst growing the and invested capital velocity; growth in Canada and Chile addressable market sh
Slide 44: Canada
Canada David Primrose President, Finning Canada INVESTOR DAY | September 26, 2023
Slide 45: Canada – Overview
Canada – Overview David Primrose – President Finning Canada Business Overview Joined Finning in 1988 and has held numerous positions Joined Finning Operating in British Columbia, Alberta, Saskatchewan, Net revenue across Operations, Finance, Supply Chain and Human Yukon, the Northwest Territorie
Slide 46: Canada – Steady Growth
Canada – Steady Growth Federal Healthy and disciplined customers are Energy Sector steadily increasing re-investment levels, and Strength refreshing and rebuilding equipment fleet $180B Committed infrastructure spend (2016-2028), with energy transition focus (1) Major infrastructure projects are Inf
Slide 47: Canadian Energy Companies – New Era of Disciplined Growth
Canadian Energy Companies – New Era of Disciplined Growth Indexed Oil Sands Industry: EBIT & Capex (1) 1,000 800 600 Index FY2009 = 100 400 200 -- (200) FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 E FY2024 E Capex Index (FY2009 = 100) EBIT
Slide 48: Pipeline Construction Completion Leads to Steady Production Growth
Pipeline Construction Completion Leads to Steady Production Growth Completion of Significant Growing Oil Sands Mined Volume (MT)(2) Oil Export Infrastructure 898 942 “ Canada’s oil supply growth CAGR of 3% from 2022-27 to 5.6 Oil +590 kbbl/d 882 863 million bbl/d broadly mirrors that of the oil Tran
Slide 49: Product Support – Great Products and Population
Product Support – Great Products and Population Oil Sands Mined Volumes (1) Caterpillar Mining Equipment Population in Western Canada Metrics 2018 2022 Equipment Type # of Active Units Average Age As at June 30, 2023 Years Total Volumes (Million Tonnes) 830 942 Ultra Class Trucks ~405 11.5 797, 794A
Slide 50: Growing Product Support Across All Industries
Growing Product Support Across All Industries Customer Value Agreements Rebuilds Equipment Population Expansion Construction CVAs are capturing a Deepening number of standard rebuild ~25% growth in mining population from 2018 broader scope and expanding our models in construction; >90% of our
Slide 51: Product Support Revenue Growth Continues
Product Support Revenue Growth Continues (1) Canada Product Support Revenue Future Growth Drivers Expected 2x large rebuilds by 2025 from 2023 levels CAGR 9% Construction equipment market share at 2016 – LTM Q2 2023 >6% 10 year high CAGR Growing oil & gas capital re-investment by customers E
Slide 52: Full Cycle Resilience – Agile and Efficient Operations Drive Invested Capital Turns
Full Cycle Resilience – Agile and Efficient Operations Drive Invested Capital Turns (1) Maturing RRR Network Centralized Edmonton Warehouse New Equipment Preparation Product support revenue per sq. ft. and Lines shipped per day far in excess of Modelling UK approach to reduce labour flexibility cont
Slide 53: Sustainable Growth Through Expanded Rental Services Offering
Sustainable Growth Through Expanded Rental Services Offering (1) Capture the Rental Megatrend Leverage Our Core Grow the Business Customers require flexible growth options Our strategy aligns Caterpillar construction We see a scalable opportunity to grow and access to specialty equipment with sp
Slide 54: Canada – Key Takeaways
Canada – Key Takeaways (1) Product Support Full Cycle Resilience Sustainable Growth Dedicated focus on product Velocity and productivity gains to Canada is the largest opportunity support including doubling drive working capital efficiency for sustainable growth in each of our rebuilds rental, used,
Slide 55: Global Used Equipment
Global Used Equipment Kieran Holm EVP Used Equipment INVESTOR DAY | September 26, 2023
Slide 56: Global Used Equipment – Overview
Global Used Equipment – Overview Kieran Holm – EVP, Global Used Equipment Largest Caterpillar Dealer Advantage Joined Finning in 2022 with 17 years of experience in the used Strong brand recognition and sales penetration in all market sectors equipment industry in Canada, the United States, and
Slide 57: Retail and Wholesale Channels Dominate
Retail and Wholesale Channels Dominate Global Used Equipment Market Growing Internal Capabilities and Identified Near-Term Opportunities Dealer | Retail Significantly enhanced our internal used capabilities since 2021 44% Added 4 senior leaders with extensive international used equipment industr
Slide 58: Immediate Used Equipment Opportunities with Attractive ROIC
Immediate Used Equipment Opportunities with Attractive ROIC (1) Enhanced Rental Roll-Out & Trade-in Performance Retail Consignment Growth Used equipment partnership with in-house teams and Enhancing sourcing capabilities to target consignment that customers would normally flow to other channels
Slide 59: Delivering Value Over Asset Lifecycle – Built to be Rebuilt
Delivering Value Over Asset Lifecycle – Built to be Rebuilt Annual Product 1 Mining Spotlight Support Opportunity in Canada (1) New Population | UE team sources 793s from a Full Machine Rebuild customer in Chile, which are $100 -150M Product Support New Sale New Lease Product Support rebuilt and
Slide 60: Global Used Equipment – Key Takeaways
Global Used Equipment – Key Takeaways (1) Product Support Full Cycle Resilience Sustainable Growth In territory used equipment Our global dealership footprint, Improve rental roll-out and trade- opportunities align with our customer connectivity, facilities, in performance, increase rebuilds, produc
Slide 61: Financial Summary
Financial Summary Greg Palaschuk EVP and CFO INVESTOR DAY | September 26, 2023
Slide 62: Go-Forward Strategic Priorities
Go-Forward Strategic Priorities Our people are our biggest Fostering a safe, secure, and Empowering our people to competitive advantage prosperous place to work build customer loyalty Drive Product Support Full Cycle Resilience Sustainable Growth Continued profitable growth Earnings consistency Targ
Slide 63: Drive Product Support – Our Growth Momentum Continues
Drive Product Support – Our Growth Momentum Continues (1) Stable, Resilient, and Growing Product Support Revenue Stream Growth Across All Regions and Sectors South America – growing and maturing installed equipment base with additional product support CAGR 7% 2016 – LTM Q2 2023 >7% contracts UK
Slide 64: Full Cycle Resilience – Invested Capital Improvements by 2025
Full Cycle Resilience – Invested Capital Improvements by 2025 (1) Invested Capital Improvement Plans Invested Capital Base Low ROIC activities Strong Returns Exit | Optimization Minority equity positions >$125M Pension optimization South America master plan Real Estate Sales Canada long-te
Slide 65: Capital Allocation Priorities and Sustainable Growth
Capital Allocation Priorities and Sustainable Growth (1) Allocate capital to maximize the Return on Above WACC(2) returns with double digit ROIC within 2 years Philosophy discounted cash flow per share Growth Upside cases that can achieve ROIC on a 3+ year basis of our long-term business plan
Slide 66: Return on Invested Capital Overview
Return on Invested Capital Overview Adjusted ROIC Consolidated Canada South America UK and Ireland 26.4% 20.2% 20.2% 16.2% 14.2% 15.9% 13.5% 12.2% 2018 2023 2018 2023 2018 2023 2018 2023 Q2 LTM Q2 LTM Q2 LTM Q2 LTM Adj. EBIT % of Net Revenue 6.4% 9.8% 7.9% 10.9% 6.6% 11.8% 4.4% 5.4% Invested Capital
Slide 67: Our Clear Path to Sustainable Value Creation
Our Clear Path to Sustainable Value Creation (1) Product Support Full Cycle Resilience Sustainable Growth Largest driver of value and source Disciplined execution with Building capabilities to drive of continued earnings growth added focus on capital velocity growth from the core out Product Support
Slide 68: Disclosures
Disclosures Forward-looking information This presentation contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation, including information about: our regional themes and market outlook including on slides 10, 24, 38 and 46; our increase in instal
Slide 69: Disclosures
Disclosures Forward-looking information (continued) momentum (based on assumptions that we will be able to continue to source and hire technicians, build capabilities and capacity, improve workshop efficiencies and build customer loyalty); commodity prices, and interest and foreign exchange rates; s
Slide 70: Slide Notes
Slide Notes Slide 26 – Lithium Development – Additional Growth Potential Slide 28 – Significant Growth in Copper Demand – A Key Regional (1) U.S. Geological Survey - Mineral Commodity Summaries – Lithium, Jan 2022 Growth Driver (2) Vantaz August 2023 proprietary report, IEA Lithium production, 2021,
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