Revenues Drop in Q3 for Finning, But Company Remains Profitable
Revenues continued to drop in the third quarter for Finning, the world’s largest Caterpillar dealer, which posted CDN $1.333 billion (about U.S. 994 million) in the quarter, compared to $1.517 billion in the third quarter of 2015, a 12.1 percent dip. However, operational improvements and cost reductions enabled Canadian operations to maintain profitability.
Significant progress in the U.K. and Ireland to lower the cost structure and improve capital efficiency resulted in an EBIT margin of 3.8 percent. And South American operations achieved significant improvement in adjusted ROIC driven by sustained profitability and reduced invested capital.
Strong free cash flow of $163 million in the third quarter and $257 million year-to-date reflected improved management of working capital for Finning.
“The sustainable improvements and cost reductions we have made across our organization contributed to a solid third quarter,” said Finning International president and CEO Scott Thomson. “I am particularly pleased with our increased profitability in these times of competitive and challenging market conditions. Our ongoing commitment to managing the factors we control is also reflected in our continued focus on safety, optimizing our supply chain, improving service delivery and earning customer loyalty, which is an an all-time high since we began the journey to transform our business and deliver greater customer value.
“Going forward, we will continue to position Finning to deliver significantly improved results when demand normalizes. We remain focused on managing working capital more effectively and continuously optimizing our supply chain to generate positive free cash flow through the cycle. The substantial free cash flow we are generating this year will further strengthen our balance sheet and provide capital allocation flexibility.”
Product support declined by 13 percent for Finning, driven mostly by lower parts sales in the non-mining sectors in Canada and lower parts and service revenues in South America’s mining industry. New equipment sales decreased by 9 percent because of timing of equipment deliveries in the oil sands, as well as weaker market activity in Alberta and Saskatchewan, partly offsetting higher new equipment sales in the U.K. and Ireland and South America.
Rental revenue declined in the quarter to $61 million, compared to $85 million in the third quarter a year ago, a 29-percent slide. For the first nine months of the year, rental revenue was $170 million, a 24-percent plunge compared to $224 million for the first nine months of 2015.
Total revenue for Finning for the first nine months of the year was $4.137 billion, compared to $4.738 billion in the same period of 2015, a 13-percent slide.
About the Author
Michael Roth
Editor
Michael Roth has covered the equipment rental industry full time for RER since 1989 and has served as the magazine’s editor in chief since 1994. He has nearly 30 years experience as a professional journalist. Roth has visited hundreds of rental centers and industry manufacturers, written hundreds of feature stories for RER and thousands of news stories for the magazine and its electronic newsletter RER Reports. Roth has interviewed leading executives for most of the industry’s largest rental companies and manufacturers as well as hundreds of smaller independent companies. He has visited with and reported on rental companies and manufacturers in Europe, Central America and Asia as well as Mexico, Canada and the United States. Roth was co-founder of RER Reports, the industry’s first weekly newsletter, which began as a fax newsletter in 1996, and later became an online newsletter. Roth has spoken at conventions sponsored by the American Rental Association, Associated Equipment Distributors, California Rental Association and other industry events and has spoken before industry groups in several countries. He lives and works in Los Angeles when he’s not traveling to cover industry events.