Finning International Inc. · TSX:FTT
Finning International — CIBC Investor Conference 2003
29 slides from Finning International's conference presentation, Feb 27, 2003
Slide 1: CIBC Investor Conference
We will be Caterpillar’s best global business partner, providing unrivalled services that earn customer loyalty. CIBC INVESTOR CONFERENCE Whistler February 27, 2003 Doug Whitehead, President and Chief Executive Officer
Slide 2: Presentation Overview
1 Presentation Overview • Company Profile • Financial Review • Strategies/Growth Opportunities • 2003 Outlook • Summary All figures are in Canadian dollars unless noted otherwise
Slide 3: Finning International Inc.
Company Profile 2 Finning International Inc. • Canadian-based international company incorporated in 1933 - largest dealer of Caterpillar equipment • Sell, rent and provide parts, service and financing for Caterpillar machines and engines, and complimentary equipment • Focused on three key geographie
Slide 4: Long Term Revenue Growth
Company Profile 3 Long Term Revenue Growth Organic growth complemented by acquisitions C$ millions 3,500 20 Year CAGR of 12.3% 3,000 10 Year CAGR of 14.6% 2,500 Arg/Bol/Urug 2,000 Hewden 1,500 UMS 1,000 Chile 500 U.K. 0 Canada 82 84 86 88 90 92 94 96 98 2000 2002* Bowmaker/ R. Angus Gildemeister H.
Slide 5: Long Term Share Growth
Company Profile 4 Long Term Share Growth 20 year CAGR of 11.3% 1400 1200 S&P 500 1000 800 Finning International Inc. 600 400 200 S&P TSX Index 0 Dec-82 Dec-84 Dec-86 Dec-88 Dec-90 Dec-92 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Note: 10 year CAGR of 14.1%
Slide 6: International Diversification and Balance
Company Profile 5 International Diversification and Balance FINNING FINNING FINNING HEWDEN POWER & (CANADA) (UK) LTD. SOUTH AMERICA STUART ENERGY SYSTEMS Revenue Revenue Revenue Revenue Revenue (34%) (20%) (15%) (20%) (11%) * South America includes pro-forma Argentina, Bolivia and Uruguay
Slide 7: Industry Diversification
Company Profile 6 Industry Diversification Serving a number of different industries New Equipment* Construction Plant Hire Petroleum 15% (rental) 4% 8% Other 10% Mining 33% Power 21% Forestry 9% * New equipment deliveries for 2002
Slide 8: Revenue Diversification
Company Profile 7 Revenue Diversification 100% 90% 80% 70% 60% 50% 40% 58.0% 30% 38.6% 20% 10% 0% 1997 1998 1999 2000 2001 2002 Finance Rental Parts and Service Equipment
Slide 9: Gross Profit Stability
Company Profile 8 Gross Profit Stability 100% 80% 60% 82.3% 40% 69.3% 20% 0% 1997 1998 1999 2000 2001 2002 Finance Rental Parts and Service Equipment
Slide 10: Vision
Company Profile 9 Vision We will be Caterpillar’s best global business partner, providing unrivalled services that earn customer loyalty.
Slide 11: Corporate Governance
Company Profile 10 Corporate Governance • Finning is in full compliance with the new proposed corporate governance guidelines of the Toronto Stock Exchange • Ranked 5th of 270 companies in Canada in October 2002 study in the Globe and Mail Report on Business on corporate governance • Ranked 3 rd bes
Slide 12: 2002 Record Year
Financial Review 11 2002 Record Year 2002 2001 Change Revenue (Mils) $3,207 $3,247 é 1.2% Net Income (Mils) $132 $104 27% Earnings per share $1.72 $1.50 15% Earnings per share $1.66 $1.54 7.8% (normalized) Return on Equity 15.7% 14.2% 1.5 pts Cash Flow (Mils) $473 $446 7.6% (after working capital ch
Slide 13: 2002 Highlights
Financial Review 12 2002 Highlights • Record EPS. Solid ROE. • Acquisition of Cat dealerships in Argentina, Bolivia, Uruguay • Market share increases in all 3 countries • Hewden Stuart digested/EBIT plan achieved • Surplus/non-core assets divested - Land and Buildings (Canada/the U.K.) - Materials H
Slide 14: 2002 Highlights
Financial Review 13 2002 Highlights • Sold $90 million instalment note portfolio to Caterpillar • Non-core business • Not achieving target rate of return • Trade Receivable Securitization program • $120 million program - $30 million sold in 2002 • Achieves lower cost financing • $39.7 million volunt
Slide 15: Net Income/Cash Flow
Financial Review 14 Net Income/Cash Flow 600 500 400 $million 300 200 100 0 1998 1999 2000 2001 2002 Net Income Cash Flow after working capital changes
Slide 16: Working Capital / Sales
Financial Review 15 Working Capital /Sales Continued operational improvement 40% 36.7% 35% 30.5% 30% 25% 21.8% 20% 16.4% 17.1% 15% 10% 5% 0% 1998 1999 2000 2001 2002
Slide 17: Return on Equity
Financial Review 16 Return on Equity Increasing ROE 20% 15.7% 14.1% 15% 10.5% 8.7% 10% 5% 0.5% 0% 1998 1999 2000 2001 2002
Slide 18: Consolidated Debt / Equity
Financial Review 17 Consolidated Debt / Equity Reduced Leverage 1.9 1.67 1.7 1.5 1.29 1.3 1.04 1.1 0.87 0.9 0.7 0.58 0.5 1998 1999 2000 2001 2002 Equity includes shareholders’ equity and non-controlling interest 2000 ratio excludes Hewden investment and related debt
Slide 19: Improving Operating Performance
Financial Review 18 Improving Operating Performance Improved Turnover 4.00 3.80 3.60 3.40 3.20 3.00 2.80 2.60 2.40 2.20 2.00 1998 1999 2000 2001 2002 Inventory turns - Parts Inventory turns - New Equipment
Slide 20: Strategic Criteria
Strategies/Growth Opportunities 19 Strategic Criteria Growth +15% per year Market Share +30% ROE +20%
Slide 21: Finning's Formula
Strategies/Growth Opportunities 20 Finning’s Formula • Lever CAT’s world renowned brand name • Solve difficult customer problems • Drive to commanding market shares • Maximize parts, service, rental revenue • Leadership through clear financial expectations/metrics • Transfer formula to other geograp
Slide 22: Growth Sweet Spots
Strategies/Growth Opportunities 21 Growth “Sweet Spots” Western Canada • Oil Sands - $87 billion projects announced • Arctic Gas Pipeline - $50 billion project South America “Southern Cone” • Chile copper - world low cost region • Argentina, Bolivia, Uruguay – mining, oil and gas, construction Power
Slide 23: 2002 Achievements
Strategies/Growth Opportunities 22 2002 Achievements Western Canada • Albian Sands Energy (23 CAT 797 trucks - $100 million; Support equipment - $33 million; Maintenance and Repair Contract - $150 million) Chile • Codelco Norte Division - $39 million • Los Pelambres 6 x 797 trucks - $27 million Powe
Slide 24: Finning South America
Strategies/Growth Opportunities 23 Finning South America BOLIVIA LA PAZ SANTA CRUZ 2002 Revenue: $555 million IQUIQUE Employees: 2,289 Branches: 22 ANTOFAGASTA SALTA TUCUMÁN RESISTENCIA COPIAPO Tymaq Key Industry Segments: ALUMBRERA mining, oil & gas, construction, COQUIMBO Centro Vial Paraná Maquin
Slide 25: The Year Ahead
2003 Outlook 24 The Year Ahead • Modest economic recovery in 2003 • Commodity prices and exchange rates stable • Overall revenue up 5–10% • Continued focus on cost containment and balance sheet management • Net income (normalized) up 5-10% - assuming “business as usual”
Slide 26: The Year Ahead
2003 Outlook 25 The Year Ahead • Strategic investment – Information technology (DBSi in UK) – Facilities (797 support in Canada, Chile) • Strategic acquisitions – Small, accretive – Market share enhancing • Southern Cone integration • Succession plans addressed • New geography planning • UK integrat
Slide 27: Capital Expenditures
2003 Outlook 26 Capital Expenditures • 2003 “Maintenance” Capex in line with previous years – $50 million per year (gross) - $20-30 million net • Additional investment in 2003 primarily related to 797 mining truck (approx. $75 million) – New Component Rebuild Centre in Canada – Mildred Lake expansio
Slide 28: Summary
27 Summary • Record net income in 2002 • Modest economic recovery in 2003 – 5-10% top and bottom line growth (business as usual) – Strategic investments in IT and facilities • Solid revenue and share price growth over the long run • Excellent global, industry and revenue stream diversification • Pro
Slide 29: Disclaimer
28 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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