Finning International last week reported record quarterly revenues of almost CA $1.6 billion (about U.S. $1.27 billion according to current exchange rates) for the fourth quarter of 2008, a 7.3-percent increase compared with the fourth quarter of 2007. The jump was driven by strong demand for customer support services, particularly in Canada and South America. However, as a result of non-recurring costs and charges in the fourth quarter of 2008, Finning posted a loss from continuing operations before interest and taxes of CA $84.5 million, and fourth-quarter net loss from continuing operations of CA $106.8 million or 62 cents per diluted share.
The non-recurring costs included a non-cash goodwill impairment charge as a result of deterioration in market conditions, and restructuring costs in connection with the business support integration in the U.K., as well as the restructuring of Hewdenâ€™s national depot network. Charges also resulted from cost-cutting actions in the fourth quarter.
Excluding the non-recurring costs, diluted earnings per share from continuing operations for Q408 would have been 33 cents per share, a 15.4-percent decrease compared with the fourth quarter of 2007.
â€śFourth-quarter earnings were solid at 33 cents and consistent with expectations, excluding non-recurring items,â€ť said Mike Waites, Finning president and CEO. â€śRevenues were at record levels and free cash flow (before dividends) was also very strong at $152 million. While challenging business conditions will impact 2009 revenues, we have acted quickly and decisively to reduce our costs and adjust our staffing levels where needed.â€ť
Waites added, however, that Finningâ€™s large fleet of Caterpillar equipment provides the company with good customer support growth. â€śWe achieved $1.9 billion of customer support revenues in 2008, well on our way to achieving our target of $2.3 billion of customer support revenues in 2010. Our balance sheet is healthy and our net debt to net debt plus equity ratio is expected to be towards the lower end of our target range of 40 to 50 percent by the end of 2009.â€ť
Canadian equipment rental volume for 2008 was CA $296.7 million (about U.S. $236 million at current exchange rates), up from CA $290.1 million in 2007.
Finningâ€™s strong fourth-quarter revenues were primarily driven by strong demand from mining customers. In the U.K., revenues were down in the fourth quarter compared with the previous year, with reduced new equipment sales and lower rental activity in the Hewden rental business, partially offset by higher customer support service revenues at Finningâ€™s U.K. dealerships.
Finningâ€™s global order book or backlog is about CA $1.5 billion at the end of the fourth quarter of 2008, compared with $1.7 billion at the end of Q407, and the September 2008 level of $2 billion, as a result of global economic conditions. Finning has reduced and cancelled some orders with Caterpillar in Q408 to align its inventory orders with slower demand.
For the full year of 2008, revenue from continuing operations increased 5.8 percent to almost $6 billion. EBIT of $236.7 million from continuing operations included non-recurring charges. Annual revenue jumped 9.6 percent at Finningâ€™s Canadian operations, reflecting growth in most lines of business, particularly new equipment sales and customer support services. The results of 2008 were negatively impacted by higher variable operating costs in part to support the growth in the Alberta oil sands.
Finning International sells rents and provides customer support services for Caterpillar in Western Canada (Alberta, British Columbia, the Northwest Territories, Yukon Territory, and a portion of Nunavut), the U.K., Argentina, Bolivia, Chile and Uruguay. The company is based in Vancouver, B.C., Canada. It is No. 10 on the RER 100.