VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 12, 2011) - Finning International Inc. (TSX:FTT) -
Q2 2011 HIGHLIGHTS
Finning International Inc. (TSX:FTT) reported record quarterly basic earnings per share (EPS) of $0.48, up 129% over Q2 2010. Finning achieved Q2 2011 revenues of $1.5 billion, a 39% increase from Q2 2010. Earnings before interest and income taxes (EBIT) of $120 million were up by 91% from Q2 2010 and EBIT margin of 8.1% was significantly higher than 5.9% in Q2 2010. Improved EBIT margin performance reflected higher profitability in Canada and the UK & Ireland, as well as a solid performance in South America.
"Our outstanding performance in the second quarter reflects continued strong demand for our products and services coupled with significant improvement in our operating leverage. I am particularly pleased that we were able to deliver record earnings while continuing to advance our strategic initiatives," said Mike Waites, president and CEO of Finning International Inc. "As we progressed through the second quarter, we continued to focus on building our customer service capabilities and developing opportunities for growth. Importantly, we entered into preliminary negotiations with Caterpillar regarding the potential purchase of certain distribution rights related to their recently announced Bucyrus acquisition. Aligned with our focus on operational excellence, we introduced a new enterprise resource planning system in our Canadian operations. This represents an important first step in a phased company-wide launch that will significantly enhance our ability to provide superior customer service while supporting our growth objectives."
"The record earnings attest to our consistent execution and the strength of our business. As we look ahead, we are monitoring the current volatility in capital markets closely and are well positioned to adjust as necessary. We see significant opportunities for Finning and remain confident in our ability to deliver long-term sustainable growth," concluded Mike Waites.
Results for the first half of the year have exceeded the Company's expectations, driven by record product support revenues and exceptionally strong new equipment sales. The Company expects active market conditions to continue through the second half of the year. However, the Company anticipates that short-term challenges with its new enterprise resource planning (ERP) system, coupled with the five-week labour stoppage in B.C. will impact its Q3 2011 results in Canada.
The outlook for mining, construction and power systems markets for 2012 and 2013 remains strong. The Company is committed to driving ongoing profitability improvement and is making solid progress toward achieving its 10% EBIT margin target in 2013.
Q2 2011 FINANCIAL SUMMARY (from continuing operations)
Beginning with Q1 2011, the Company's financial results are reported under IFRS (International Financial Reporting Standards)(1).
C$ millions, except per share amounts (unaudited) | Three months ended June 30 | |||
2011 | 2010 | % change | ||
Revenue | 1,481 | 1,065 | 39 | |
Earnings before interest and income taxes (EBIT) (2) | 120 | 63 | 91 | |
Net income | 82 | 36 | 129 | |
Basic EPS | 0.48 | 0.21 | 129 | |
Earnings before interest, income taxes, depreciation and amortization (EBITDA) (2) |
160 |
98 |
64 |
|
Free cash flow (2)(3) | (227 | ) | 15 | n/m |
Q2 2011 HIGHLIGHTS BY OPERATIONS
Canada
South America
United Kingdom and Ireland (continuing operations)
CORPORATE AND BUSINESS DEVELOPMENTS
Bucyrus Distribution Business
Finning has entered into preliminary discussions with Caterpillar regarding the possible purchase of certain distribution assets owned by Caterpillar through its recently completed acquisition of Bucyrus, a leading manufacturer of high productivity mining equipment for the surface and underground mining industries. Due to the preliminary nature of these discussions, no assurance can be given that any transaction will occur or concerning the terms, conditions or timing of any such transaction. If those discussions are successful and a definitive agreement is entered into between Finning and Caterpillar, Finning will provide appropriate disclosure regarding the terms of the arrangement. Until such time, Finning does not intend to provide any further comments regarding the progress of negotiations or the terms of any potential agreement.
Dividend
The Board of Directors approved a quarterly dividend of $0.13 per share; payable on September 9, 2011, to shareholders of record on August 26, 2011.This dividend will be considered an eligible dividend for Canadian income tax purposes.
SELECTED CONSOLIDATED FINANCIAL INFORMATION: Q2 2011 |
(from continuing operations unless otherwise stated, C$ millions, except per share amounts) |
Three months ended June 30 | Six months ended June 30 | |||||||||||||
Revenue | 2011 | 2010 | % change | 2011 | 2010 | % change | ||||||||
New equipment | 689.2 | 409.3 | 68 | 1,238.0 | 753.2 | 64 | ||||||||
Used equipment | 71.0 | 82.7 | (14 | ) | 122.6 | 145.3 | (16 | ) | ||||||
Equipment rental | 81.8 | 59.1 | 38 | 160.1 | 125.5 | 28 | ||||||||
Product support | 635.7 | 511.8 | 24 | 1,228.2 | 1,003.4 | 22 | ||||||||
Other | 2.9 | 2.1 | 38 | 6.3 | 4.5 | 40 | ||||||||
Total revenue | 1,480.6 | 1,065.0 | 39 | 2,755.2 | 2,031.9 | 36 | ||||||||
Gross profit | 440.0 | 330.1 | 33 | 837.3 | 621.6 | 35 | ||||||||
Gross profit margin(4) | 29.7 | % | 31.0 | % | 30.4 | % | 30.6 | % | ||||||
SG&A | (315.8 | ) | (260.8 | ) | (21 | ) | (602.1 | ) | (500.0 | ) | (20 | ) | ||
SG&A as a percentage of revenue | (21.3 | )% | (24.5 | )% | (21.9 | )% | (24.6 | )% | ||||||
Equity earnings | 1.0 | 0.8 | 1.8 | 0.7 | ||||||||||
Other expenses | (5.6 | ) | (7.5 | ) | 25 | (10.8 | ) | (15.5 | ) | 30 | ||||
EBIT(2) | 119.6 | 62.6 | 91 | 226.2 | 106.8 | 112 | ||||||||
EBIT margin(5) | 8.1 | % | 5.9 | % | 8.2 | % | 5.3 | % | ||||||
Income from continuing operations | 81.9 | 35.7 | 129 | 153.4 | 62.2 | 147 | ||||||||
Loss from discontinued operations, net of tax | - | (123.2 | ) | - | (125.0 | ) | ||||||||
Net income (loss) | 81.9 | (87.5 | ) | 153.4 | (62.8 | ) | ||||||||
Basic earnings (loss) per share (EPS) | ||||||||||||||
from continuing operations | 0.48 | 0.21 | 129 | 0.89 | 0.36 | 147 | ||||||||
from discontinued operations | - | (0.72 | ) | - | (0.73 | ) | ||||||||
Total basic earnings (loss) per share | 0.48 | (0.51 | ) | 0.89 | (0.37 | ) | ||||||||
EBITDA(2) | 160.1 | 97.7 | 64 | 307.6 | 184.1 | 67 | ||||||||
Free Cash Flow*(2)(3) | (226.8 | ) | 14.6 | n/m | (383.2 | ) | 116.5 | n/m |
June 30, 11 | Dec 31, 10 | |||
Total assets | 3,645.0 | 3,429.7 | ||
Total shareholders' equity | 1,290.9 | 1,203.0 | ||
Net debt to total capital(6) | 45.6 | % | 35.3 | % |
* Free cash flow from Hewden has been included in the figures for periods prior to the sale. |
To download Finning's complete Q2 2011 results in PDF, please open the following link: http://media3.marketwire.com/docs/FinningQ211results.pdf
To download the CEO and CFO certification letters once they have been filed on SEDAR, please open the following link: http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00001068
Q2 2011 RESULTS INVESTOR CALL
Management will hold an investor conference call on Friday, August 12 at 11:00 am Eastern Time. Dial-in numbers: 1-866-223-7781 (anywhere within Canada and the U.S.) or (416) 340-8018 (for participants dialing from Toronto and overseas).
The call will be webcast live and subsequently archived at www.finning.com. Playback recording will be available at 1-800-408-3053 from 1:00 pm Eastern Time on August 12 until August 19. The pass code to access the playback recording is 4463383 followed by the number sign.
ABOUT FINNING
Finning International Inc. (TSX:FTT) is the world's largest Caterpillar equipment dealer delivering unrivalled service to customers since 1933. Finning sells, rents and services equipment and engines to help customers maximize productivity. Headquartered in Vancouver, B.C., the Company operates in western Canada, Chile, Argentina, Bolivia, Uruguay, as well as in the United Kingdom and Ireland.
Footnotes
Forward-Looking Disclaimer
This report 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 about the future. Forward-looking statements may include words such as aim, anticipate, assumption, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, project, seek, should, strategy, strive, target, and will. Forward-looking statements in this report include, but are not limited to, statements with respect to: expectations with respect to the economy and associated impact on the Company's financial results; expected revenue and SG&A levels and EBIT growth; anticipated generation of free cash flow (including projected net capital and rental expenditures), and its expected use; anticipated defined benefit plan contributions; the expected target range of Debt Ratio; the expected quantitative impact on the 2010 consolidated statements of financial position and statements of income and comprehensive income of the Company's transition to IFRS effective January 1, 2010; and the impact on new and revised IFRS that have been issued but are not yet effective. All such forward-looking statements are made pursuant to the 'safe harbour' provisions of applicable Canadian securities laws.
Unless otherwise indicated by us, forward-looking statements in this report describe our expectations at August 12, 2011. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans, strategic priorities and other statements that are not historical facts may not be achieved. As a result, we cannot guarantee that any forward-looking statement will materialize. Factors that could cause actual results or events to differ materially from those expressed in or implied by our forward-looking statements include: general economic and market conditions; foreign exchange rates; commodity prices; the level of customer confidence and spending, and the demand for, and prices of, our products and services; our dependence on the continued market acceptance of Caterpillar's products and Caterpillar's timely supply of parts and equipment; our ability to continue to improve productivity and operational efficiencies while continuing to maintain customer service; our ability to manage cost pressures as growth in revenues occur; our ability to attract sufficient skilled labour resources to meet growing product support demand; our ability to negotiate and renew collective bargaining agreements with satisfactory terms for our employees and the Company; the intensity of competitive activity; our ability to raise the capital we need to implement our business plan; regulatory initiatives or proceedings, litigation and changes in laws or regulations; stock market volatility; changes in political and economic environments for operations; the integrity, reliability, and availability of technology and the data processed by that technology; new or amended IFRS or interpretations that become effective prior to the inclusion of the Company's financial statement of position in its first annual audited IFRS financial statements. Forward-looking statements are provided in this report for the purpose of giving information about management's current expectations and plans and allowing investors and others to get a better understanding of our operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.
Forward-looking statements made in this report are based on a number of assumptions that we believed were reasonable on the day we made the forward-looking statements. Refer in particular to the Outlook section of the MD&A. Some of the assumptions, risks, and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this report are discussed in the Company's current Annual Information Form (AIF) in Section 4.
We caution readers that the risks described in the AIF are not the only ones that could impact us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition, or results of operations.
Except as otherwise indicated by us, forward-looking statements do not reflect the potential impact of any non-recurring or other unusual items or of any dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date hereof. The financial impact of these transactions and non-recurring and other unusual items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business
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