Vancouver, B.C., Canada-based Caterpillar dealer Finning posted $1.402 billion in international revenue in the first quarter, down from $1.494 billion in the first quarter of 2016, a 6-percent decline. Nonetheless, its Canadian operations achieved the highest profitability compared to its last six quarters, driven by stronger product support revenue and a reduced cost structure.
Finning’s South America operations reported its highest EBIT since the fourth quarter of 2015, with strong new equipment sales in Argentina and solid product support in Chile. Reduced cost structure and higher revenues resulted in improved performance in the U.K and Ireland. Equipment backlog rose by 60 percent from the fourth quarter of 2016 to more than $700 million, driven mostly by improved order intake in Canada.
“Our first quarter results provide a solid start to the year, reflecting strong execution to advance our operational priorities and the positive impact of a reduced cost base across our operations,” said Scott Thomson, president and CEO of Finning International. “Despite an encouraging increase in equipment backlog, we expect new equipment markets to remain soft and competitive in the near term. Given continued uncertainty in our territories, we maintain our expectation that 2017 revenue will be essentially flat relative to last year.
“Despite continued top line pressures, each of our regions is achieving meangful progress in working capital efficiencies, driven in large part by improvement in our equipment supply chain This gives me confidence in our ability to demonstrate a significantly improved return on invested capital when demand recovers.”
Revenues declined 19 percent in Canada, primarily because of lower new equipment sales which dropped 53 percent compared to a strong first quarter of 2016, which included large mining deliveries in the oil sands and construction equipment deliveries to Site C in British Columbia. Product support revenues jumped 12 percent primarily the result of higher parts sales in the oil sands region and other mining segments, as customers were resuming maintenance following a period of deferrals. Improved activity in the pipeline and oil and gas sectors also contributed to stronger product support.
Revenues increased 16 percent in South America – 21 percent in functional currency – on stronger new equipment sales which more than doubled year over year. This was driven mostly by higher construction sales in Argentina, as well as delivery of large machines to mining customers. The U.K. and Ireland capitalized on healthy market activity, particularly in quarrying, infrastructure and power generation.
On an international level, equipment rental declined 10 percent, from about $56 million in the first quarter of 2016 to $51 million in the recently concluded quarter.
