Finning International Inc. · TSX:FTT
Finning International — Investor Presentation (June 2009)
23 slides from Finning International's investor presentation, June 2009
Slide 1: Investor Presentation
Investor Presentation Mike Waites, President & CEO June 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 - $3.0 billion Vancouver 2008 rev
Slide 4: What Drives Value in Our Business?
What Drives Value in Our Business? Caterpillar Equipment + Finning Service = Customer Value Proven Reliability Unmatched Capabilities First with Customers Strong customer relationships Large installed equipment fleet Meeting customer need for maximum equipment uptime 4
Slide 5: Investment Proposition
Investment Proposition Resilient earnings Diversification across industries and lines of business Installed equipment fleet gives visibility on product support business High barriers to entry Profitability improvement Higher return on capital employed Strong balance sheet and financial position Low
Slide 6: Earnings Performance
Earnings Performance 2008: Second Best-Ever EPS Results Despite Economic Downturn Average ROE = 14.6% (2004 – 2008) Diluted EPS (C$) 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 200
Slide 7: Diversified by Business Line & Industry
Diversified by Business Line & Industry Revenue by Line of Business New Equipment Sales by Industry Other Petroleum New Parts & Equipment Forestry 7% Service Sales 3% 2% Mining 32% 49% 43% Power Systems 18% 12% Equipment 27% 7% Rental Construction Used Equipment Sales Based on 2008 revenues 7
Slide 8: 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 8
Slide 9: Installed Equipment Fleet Gives Visibility
Installed Equipment Fleet Gives Visibility $13B in equipment sales (11,000+ large machines) in past 5 years Provides large non-cyclical Parts & Service revenue stream Parts and Service Cumulative # of Revenue ($B) large units sold $2.5 2010 Target = $2.3 B 14,000 Total Revenue $2.0 2008 = $1.9 B 12,
Slide 10: Profitability Improvement
Profitability Improvement Cost reductions Operational excellence Hewden turnaround 10
Slide 11: Cost Reductions
Cost Reductions $150 million in annual SG&A savings identified ~40% headcount reductions ~60% managing other expenses and improved productivity 8% reduction in workforce Significant cost-cutting initiatives Depot and branch closure Reduced discretionary costs Reduced transportation costs Vehicle fle
Slide 12: Operational Excellence
Operational Excellence Rebalancing capacity to demand Relocation of resources Implementation of a new Enterprise Resource Planning system Improved productivity and EBIT margin Improved service planning and forecast practices Increased skill level of technicians and supervisors Process re-engineering
Slide 13: Hewden Turnaround
Hewden Turnaround Lower cost structure 22 depot closures 300 fewer employees, ~16% reduction in workforce Improved fleet composition and asset utilization Focus on strategic accounts Instilling performance culture Leveraging opportunities with the dealership 13
Slide 14: Generate Strong Free Cash Flow
Generate Strong Free Cash Flow Strong operating cash flow Minimize working capital requirements Lower rental fleet additions $50 million in 2009 vs. $205 million in 2008 Surgical focus on capital Uses of cash Maintain dividends Reduce debt 14
Slide 15: Strong Balance Sheet
Strong Balance Sheet Reduce debt – target lower end of 40% - 50% range Over $300 million of bank facilities available No term debt maturities until 2011 Investment grade ratings confirmed by DBRS and S&P 15
Slide 16: 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 17: Outlook
Outlook Mining (including oil sands) remains active Challenging economic conditions impacting new equipment sales and rental Heavy construction customers expected to benefit from government spending Residential construction, conventional oil & gas and forestry are slow, expected to remain weak Parts
Slide 18: Summary
Summary Strong customer relationships drives value Operational excellence drives profitability Earnings resilience and visibility from Parts & Service on growing installed equipment base Continued growth opportunities in mining, heavy construction and power systems “We Service What We Sell” Earl B.
Slide 19: Appendix
Appendix
Slide 20: 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 21: Power Systems
Power Systems 2008 Power Systems revenue = $897 million, 5 year CAGR = 14.5% Diverse range of customers Electric Power Generation (EPG) Conventional oil and gas Marine Industrial Finning advantage – strong engineering capabilities Many large sophisticated power projects Data centres Biogas – to – En
Slide 22: Q1 2009 Results
Q1 2009 Results (C$ millions) Q109 Q108 Q109/Q108 Q408* Q109/Q408 Revenue 1,364 1,430 (5%) 1,567 (13%) Gross profit 394 410 (4%) 432 (9%) GP margin 28.8% 28.6% 27.6% SG&A (310) (315) 2% (349) 11% Other income (expenses) (8) 15 (16) EBIT 76 110 (31%) 67 13% EBIT margin 5.5% 7.7% 4.3% Net Income 45 71
Slide 23: Cash Flow
Cash Flow (C$ millions) Q109 Q108 Q408 FY2008 Operating cash flow 120 136 129 577 Changes in working capital items (105) (148) 40 (299) Net (expenditures)/disposals on capital assets (22) 16 (25) (50) Net (expenditures)/disposals on rental fleet 5 (87) 8 (205) Free cash flow (2) (83) 152 23 Focus fo
Finning International — Investor Presentation (June 2009) on 6ix