Finning International Inc. · TSX:FTT
Finning International — Investor Presentation (September 2014)
30 slides from Finning International's investor presentation, September 2014
Slide 1: Investor Presentation
INVESTOR PRESENTATION Scott Thomson, President and CEO Marcello Marchese, President, Finning South America Mauk Breukels, VP Investor Relations Toronto, Boston, Montreal September 2014
Slide 2: Forward Looking Information
Forward Looking Information This report contains statements about the Company’s business outlook, objectives, plans, strategic priorities and other statements that are not historical facts. A statement Finning makes is forward-looking when it uses what the Company knows and expects today to make a s
Slide 3: Overview of Finning International
Overview of Finning International World’s largest Caterpillar dealer serving customers for over 80 years We sell, rent and provide parts and service for Caterpillar equipment and engines Yukon The Northwest Operate in Western Canada, Chile, Argentina, Bolivia, Uruguay, UK Territories and Irela
Slide 4: Compelling Value Proposition
Compelling Value Proposition Passionate and committed employees Right people in the right places to execute on the plan Best products, best territories Aligned with Caterpillar, world’s best heavy equipment company Resource-rich territories with significant organic growth opportunities C
Slide 5: Broadest Range of Quality Caterpillar Products
Broadest Range of Quality Caterpillar Products Over 300 equipment product lines 5
Slide 6: Market Leader in Most Desirable Regions
Market Leader in Most Desirable Regions Revenue by region for six months ended Jun 30, 2014 6
Slide 7: Powerful, Sustainable Business Model
Powerful, Sustainable Business Model 7
Slide 8: Diverse Customer Base
Diverse Customer Base 67% of new equipment deliveries from non-mining * Agriculture, industrial and government segments 8
Slide 9: New Focus: Driving Return on Invested Capital
NEW FOCUS Driving Return on Invested Capital
Slide 10: Operational Priorities
Operational Priorities Service Excellence Service Excellence Target ∆ in 3 Years Drives lowest equipment owning and operating costs Maximizes equipment uptime and improves customer loyalty Consolidated EBIT $ $40 – 60M Increases service profitability Attracts and retains technical talent Su
Slide 11: Service Excellence
Service Excellence Action Plans and Progress Update Improve labour recovery Enhance leadership, competencies and technical skills Improve parts availability by leveraging supply chain efficiencies Standardize processes and planning Improve quoting to reduce bid variances Implement consistent
Slide 12: Supply Chain
Supply Chain Canada - Reducing Lead Times and Transfer Points 12
Slide 13: Supply Chain
Supply Chain Canada - Progress Update Focus on inventory management, network optimization and transportation efficiency Completed 5 branches in 2013 Rolling out to 17 branches in 2014 Parts service levels at or above targets 24 hour service level at above 86%, up 6 points from 2013 72 ho
Slide 14: Market Leadership
Market Leadership Progress Update Core equipment market share up materially in all regions since the end of 2013 In Canada, core equipment market share up 5 points from last year Better sales coverage – higher participation and closing of deals Restructured incentive schemes motivate sales f
Slide 15: Asset Utilization
Asset Utilization Canada - Progress Update Allocating work and assets across facilities Shovels and Drills moved from its Fort McMurray location into Mildred Lake branch; vacated building subleased Power Systems moved from its Fort McMurray shop into local branch; location vacated Prince Geo
Slide 16: Priorities Will Drive Improved Return on Invested Capital (ROIC)
Priorities Will Drive Improved Return on Invested Capital (ROIC) All priorities are linked directly to EBIT or Invested Capital 16
Slide 17: Return on Invested Capital
Return on Invested Capital Historical Performance Significant Investments: - Drills & Shovels 30.0% - Fort MacKay Economic Underperforming working capital 25.0% downturn ERP implementation 20.0% 15.0% 10.0% 5.0% 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 ROIC 27.6% 26.8% 15.0% 10.2% 15.3% 16
Slide 18: Strengthening Balance Sheet
Strengthening Balance Sheet FCF per Share (dollars) Net debt to total capital ratio (%) 53 52 51 51 50 48 47 45% 42 41 TARGET RANGE 35% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 2013 2014 Net debt / EBITDA Positive free cash flow through the cycle Target Range Strong cash flow from operatio
Slide 19: Continued Commitment to Dividend Growth
Continued Commitment to Dividend Growth Important component of total Annual Dividends shareholder return 0.685 Committed to growing dividend, consistent with sustainable 0.5975 earnings growth 0.55 0.51 Target payout ratio: 25-35% 0.47 0.43 0.44 10 year CAGR ~13% 0.36 5 year CAGR ~9% 0.28
Slide 20: Talent Management
Talent Management Finning International appointments Gillian Platt, Chief Human Resources Officer Dave Cummings, Chief Information Officer Greg Palaschuk, VP Treasurer Search in progress for new CFO interim support from Anna Marks, Sr VP Controller Finning Canada appointments Chad Hiley,
Slide 21: FINSA
FINSA Responding well to challenging market conditions South America maintaining its EBIT margin despite significantly reduced business volumes Significant reductions to workforce since mid-2013 Reached equitable agreement with shovels and drills employees – may have one off cost of a couple o
Slide 22: FINSA Outlook
FINSA Outlook Business conditions expected to remain challenging Mining Mines are increasing production New equipment sales expected to be soft; product support activity stable Codelco will invest US$4B for 2014-18 - should also drive large contractor activity Government infrastructure p
Slide 23: Key Takeaways
Key Takeaways Finning has a great business model with resource rich territories; general economic trends support continued growth Focus on what we can control: costs, working capital and capital investment Significant increase in invested capital has offset profitability improvements over last
Slide 24: Appendix
FINnHING. APPENDIX
Slide 25: Oil Sands
Oil Sands Benefitting from ongoing projected growth Source: CAPP (Canadian Association of Petroleum Producers) 25
Slide 26: Western Canada LNG
Western Canada LNG Seizing new business opportunities Projects proposed to transport gas from Western Investment Canada to Asia1 LNG Canada (Shell, Korea Gas, Mitsubishi, PetroChina) +28B Pacific NorthWest (Petronas, Sinopec, Japex, Indian Oil) +20B Kitimat LNG (Chevron & Apache) +11B 1Source: Finni
Slide 27: Copper in Chile
Copper in Chile Participating in long-term growth Source: Wood Mackenzie 27
Slide 28: Reasons for Optimism in the U.K.
Reasons for Optimism in the U.K. UK Real GDP (% Change) “The UK economy showed clear signs of 4.0 recovery during 2013 and we expect this to 3.1 continue in 2014-15. All major industry 2.5 sectors and regions are now showing 2.0 1.7 1.7 1.1 positive growth trends.” PwC; July 2014 0.1 0.0 “We anticip
Slide 29: Q2 2014 Results
Q2 2014 Results Earnings C$ millions Q2 2014 Q2 2013 % change Revenue 1,768 1,620 9 Gross profit 523 513 2 GP margin 29.6% 31.7% SG&A (388) (392) 1 SG&A as % of revenue (22.0)% (24.2)% Equity earnings 3 4 Other income (expenses) (1) (3) EBITDA 190 176 8 EBIT 137 125 12 EBIT margin 7.8% 7.6% Net inco
Slide 30: Q2 2014 Results: Invested Capital
Q2 2014 Results Invested Capital Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Inventory ($ millions) 1,835 1,945 1,756 1,904 1,978 Inventory turns (times) 2.56 2.61 2.74 2.44 2.23 Invested capital(1) ($ millions) 3,334 3,414 3,138 3,342 3,443 Invested capital turnover (times) 2.12 2.06 2.04 2.03 2.01 Fre
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