Finning International last week reported second-quarter 2011 revenues of CDN $1.5 billion, a 39-percent increase from $1.1 billion in Q2 2010, and record quarterly basic earnings per share of $0.48, up 129 percent compared with Q2 2010. Equipment rental revenues totaled CDN $81.8 million, 38-percent higher than $59.1 million in the same period last year. Canadian rental revenue in the second quarter was $57.9 million, a 46-percent improvement from $39.6 million a year ago.
Earnings before interest and income taxes of $120 million were up 91 percent from $63 million in Q210 and EBIT margin of 8.1 percent was significantly higher than 5.9 percent in the year-ago period. Improved EBIT margin performance reflected higher profitability in Canada and the U.K. and 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,” said Mike Waites, president and CEO of Finning International. “I am particularly pleased that we were able to deliver record earnings while continuing to advance our strategic initiatives. 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."
Results for the first half of the year of $2.76 billion, a 36-percent leap from $2.03 billion in the first half of 2010, 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, Finning anticipates that short-term challenges with its new ERP system, coupled with the five-week labor stoppage in B.C. will impact its Q3 2011 results in Canada.
Finning’s global backlog was more than $1.7 billion at the end of Q211, up 13.6 percent from March 2011. The consolidated backlog has increased in each consecutive quarter since September 2009, driven primarily by the mining and construction sectors. The company’s new order intake in the second quarter of 2011 was the highest in more than three years, and was up 16.2 percent from the first quarter of 2011.
All regions are affected by the pressure on the supply chain resulting from strengthened market conditions, the company said. The impact of longer lead times from Caterpillar Inc., its key supplier, is being partially mitigated by the Finning’s efforts to find solutions to meet customers’ equipment needs. Such solutions include renting equipment, selling used equipment, repairing or rebuilding equipment, and utilizing the entire Caterpillar dealer network to source equipment. Finning continues to work closely with Caterpillar and customers to ensure that equipment demands can be met.
The outlook for mining, construction and power systems markets for 2012 and 2013 remains strong. The company continues to emphasize its commitment to drive ongoing profitability improvement and is making solid progress toward achieving its 10-percent EBIT margin target in 2013.
"The record earnings attest to our consistent execution and the strength of our business,” Waites said. “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."Based in Vancouver, B.C., Canada, Finning is the Caterpillar dealer for western Canada, the U.K., Ireland, Chile, Argentina, Bolivia and Uruguay. Its Canadian rental division, based in Edmonton, Alberta, is No. 9 on the new RER 100.