Finning’s Rental and Sales Revenues Decline in Q4 and Full Year 2015
Finning International, the world’s largest Caterpillar dealer, post CDN $1.518 billion (about U.S. $1.102 billion) in revenue for the fourth quarter of 2015 compared to $1.803 billion in the fourth quarter of 2014, a 16-percent decline. The decline was particularly driven by a 28-percent decrease in new equipment sales. Gross profit slid 22 percent as a result of lower revenues, lower margins on equipment and rental and a $36 million impairment on aged, customized, and industry-specific inventory and other assets caused by prolonged weak market conditions, particularly in the mining and oil-and-gas sectors.
In Canada, revenues declined by 26 percent in the quarter from a year ago, with lower revenues in all lines of business. New equipment sales slid 46 percent, while rental revenues plunged 31 percent, because of weaker demand and increased competition for short-term rentals.
Revenues dropped 11 percent in the quarter in South America and 11 percent in the United Kingdom and Ireland.
Consolidated revenue for the full year for the company was CDN $6.19 billion compared to $6.918 billion in 2014, a 10.5-percent decline. Canada totaled $3.054 billion in revenue, compared to $3.634 billion in 2014, a 16-percent slide. Equipment rental in Canada posted $194 million compared to $261 million in 2014, a 25.7-percent plunge.
In December, Finning sold its business in Uruguay for $30 million. Earlier in the year, Finning acquired Kramer, a Caterpillar dealership in Saskatchewan. Finning now covers the Canadian provinces of British Columbia, Alberta, Saskatchewan (beginning July 1, 2015), Yukon, the Northwest Territories and a portion of Nunavut, as well as Chile, Argentina, Bolivia, England, Scotland, Wales, Northern Ireland and the Republic of Ireland.
“Finning continues to generate relatively consistent EBITDA and strong free cash flow despite very challenging market conditions,” said Scott Thomson, president and CEO of Finning International. “This, combined with our ongoing efforts to right-size our business and implement sustainable operating improvements, enables us to maintain a strong balance sheet and dividends throughout the business cycle. Notwithstanding this progress, we are not immune to the challenges facing our customers across our key markets and geographies. Our performance in the fourth quarter was impacted by a number of one-time items, which reflect the difficult realities of our marketplace."
Thomson said the company is on track to achieve a $150 million permanent SG&A cost savings. “And we expect additional structural cost savings from the workforce reductions announced today to address further declines in commodity prices and activity levels,” he noted. The company reduced its workforce by about 13 percent in 2015.
