Finning International this week reported worldwide second-quarter revenues of almost CA$1.165 billion (about U.S. $1.072 billion), a 24 percent year-over-year decrease. Equipment rental dropped 29 percent, from CA$176.1 million in the second quarter of 2008 to CA$124.5 million (about U.S. $114.5 million).
Free cash flow of CA$140 million was an improvement compared to the second quarter of 2008 when Finning had a CA$38 million free-cash-flow loss. Net debt to capital improved to 46 percent at the end of the quarter compared with 49 percent at the end of the first quarter. Available committed credit facilities increased to about CA $450 million.
In Finning’s Canadian operations, second-quarter revenues dropped 31 percent year over year, affected primarily by an almost 50-percent decline in new equipment sales. The economic downturn resulted in lower demand for new equipment in mining, construction, forestry and conventional oil and gas industries. New equipment deliveries to the oil sands in Alberta declined compared to the record level Finning experienced in 2008. Product support revenues dropped 9 percent year over year, while parts revenues and margins remained solid.
“We have focused our attention on driving improvements in cash-flow generation and balance sheet liquidity as well as cost reduction initiatives during these uncertain times,” said Mike Waites, Finning’s president and CEO. “We are also focusing on improving our consolidated EBIT margin and capitalizing on opportunities, including mining and power systems. Product support revenues and margins remained steady. Our South American operations continue to produce outstanding results. During the quarter, the economy in the U.K. took another step down. The U.K. dealership has remained profitable, but the Hewden results continue to disappoint. A strategic review is underway at Hewden with a view of assessing alternatives with our overall goal of maximizing shareholder value."
Because of the uncertain economic situation, Finning declined to provide revised guidance on expected revenue levels for 2009. Finning’s global backlog was $0.6 billion at the end of the second quarter, compared with the March 2009 level of $0.9 billion and December 2008 level of $1.5 billion.
Based in Vancouver, Finning is No. 11 on the RER 100. The company is the Caterpillar dealer for western Canada, the U.K., Chile, Argentina, Uruguay and Bolivia.