Finning International last week reported first-quarter revenue of CAD $1.365 billion (about U.S. $1.164 billion) down 4.6 percent from CAD $1.430 billion for the same period in 2008. Equipment rental worldwide was CAD $140.2 million (about U.S. $119.6 million) compared with $176.5 million for the year-ago period, a decrease of 20.6 percent.
Customer support service revenues for all Finning regions grew 16 percent from CAD $427.8 million in Q108 to CAD $496.3 million this year.
EBIT was CAD $75.6 million in the first quarter of 2009, down 31.1 percent year over year, while first-quarter net income was CAD $45 million, a 35-percent decline from the same period last year.
â€śClearly business conditions were dramatically different this quarter versus last year,â€ť said Mike Waites, Finningâ€™s president and CEO. â€śEquipment sales were down, as expected, however, customer support service revenue increased by 16 percent due to a growing installed base of machines from previous sales and as existing machines work longer. In addition, our cost reduction initiatives began to take hold, which are expected to result in annualized cost savings of approximately $150 million.â€ť
In the first quarter, Finning posted lower revenues from the Canadian and U.K. operations of the company, partially offset by strong revenues from the companyâ€™s South American operations, which established record first-quarter revenues. Revenue growth in South America â€” Finning is the Caterpillar dealer in Argentina, Chile, Uruguay, and Bolivia â€” was driven primarily by strong demand from mining customers in both new equipment and customer support service revenues. In Canada, revenues dropped 10.1 percent compared to the first quarter of 2008, with lower new equipment revenues, partly offset by increasing revenues in customer support services. In the U.K., revenues declined 19.6 percent in local currency with reduced new equipment sales and lower rental revenues.
Gross profit decreased 3.8 percent to CAD $393.9 million in the first quarter of 2009, compared with the first quarter of 2008. However, quarterly gross profit margin (gross profit as a percentage of revenue) increased slightly because of the increase in service revenues.
In western Canada, the mining industry, including the Alberta oil sands region, and the heavy construction sector remain active, although at lower levels than in 2008. Heavy construction customers are expected to benefit from significant infrastructure spending once the large government-sponsored projects get started. Equipment demand for the general construction, forestry, and conventional oil and gas industries has weakened and the company expects similar conditions at least through 2009.
Based in Vancouver, B.C., Finning is No. 11 on the new RER 100.