VANCOUVER, British Columbia, Nov. 05, 2018 (GLOBE NEWSWIRE) -- Finning International Inc. (TSX: FTT) (“Finning” or the “Company”) reported third quarter 2018 results today. All monetary amounts are in Canadian dollars unless otherwise stated.
Q3 2018 HIGHLIGHTS
All comparisons are to restated Q3 2017 results(1) unless indicated otherwise.
“We delivered a strong quarter in Canada and the UK & Ireland, marked by improved operating margins and higher return on invested capital. Although economic conditions in Argentina are extremely challenging, we achieved strong revenue growth in Chile, driven by new equipment deliveries in mining, and our profitability in Chile continued to be solid and in line with our expectations,” said Scott Thomson, president and CEO of Finning International.
“Our solid equipment order intake and backlog reflect continued broad-based market strength in western Canada and the UK & Ireland. In Canada, our September order intake was the highest in 2018. In Chile, increased copper production and the aging machine population bode well for our mining business. In addition, large-scale infrastructure projects planned in each of our regions provide significant opportunities,” continued Mr. Thomson.
“We expect to generate strong free cash flow(3) in the fourth quarter, driven by significant equipment deliveries. Given our view there is a disconnect between our share price and fundamental value, our plan is to repurchase up to $100 million worth of our shares by the end of 2018, subject to receipt of regulatory approvals,” concluded Mr. Thomson.
Q3 2018 FINANCIAL SUMMARY
All comparisons are to restated Q3 2017 results(1) unless indicated otherwise.
| Quarterly Overview $ millions, except per share amounts | Q3 2018 | Q3 2017 Restated(1) | % change |
| Revenue | 1,755 | 1,538 | 14 |
| EBIT | 93 | 100 | (7) |
| EBIT margin | 5.3% | 6.5% | |
| EBITDA(2)(3) | 142 | 146 | (3) |
| EBITDA margin(3) | 8.1% | 9.5% | |
| Net income | 25 | 50 | (49) |
| EPS | 0.15 | 0.29 | (49) |
| Free cash flow | (49) | 22 | (328) |
Included in Q3 2018 and Q3 2017 results are the following significant items that management does not consider indicative of operational and financial trends either by nature or amount. These significant items are summarized below and described in more detail on page 7 of the Company’s management discussion and analysis dated November 5, 2018 (MD&A).
Q3 2018 EBIT and EBITDA by Operation $ millions, except per share amounts | Canada | South America | UK & Ireland | Corporate & Other | Finning Total | EPS | |
| EBIT / EPS Write-off of the investment in Energyst Tax impact of devaluation of Argentine peso | 78 - - | 37 - - | 15 - - | (37) 30 - | 93 30 - | 0.15 0.18 0.12 | |
| Adjusted EBIT(3)(4) / Adjusted EPS | 78 | 37 | 15 | (7) | 123 | 0.45 | |
| EBIT margin | 8.6% | 6.7% | 5.1% | - | 5.3% | ||
| Adjusted EBIT margin(3)(4) | 7.0% | ||||||
| EBITDA | 104 | 52 | 23 | (37) | 142 | ||
| EBITDA margin | 11.4% | 9.3% | 7.7% | - | 8.1% | ||
| Adjusted EBITDA(3)(4) | 104 | 52 | 23 | (7) | 172 | ||
| Adjusted EBITDA margin(3)(4) | 9.7% | ||||||
Q3 2017 EBIT and EBITDA by Operation $ millions, except per share amounts | Canada | South America | UK & Ireland | Corporate & Other | Finning Total | EPS | |
| EBIT / EPS | 57 | 48 | 9 | (14) | 100 | 0.29 | |
| Redemption costs on early debt repayment | - | - | - | - | - | 0.04 | |
| Adjusted EPS | 0.33 | ||||||
| EBIT margin | 7.7% | 8.6% | 3.5% | - | 6.5% | ||
| EBITDA | 82 | 61 | 16 | (13) | 146 | ||
| EBITDA margin | 11.2% | 11.2% | 6.0% | - | 9.5% | ||
| Invested Capital(3) and ROIC(2)(3) | Q3 2018 | Q4 2017 restated(1) | Q3 2017 restated(1) |
| Invested capital ($ millions) | |||
| Consolidated | 3,431 | 2,830 | 3,095 |
| Canada | 1,889 | 1,621 | 1,746 |
| South America (U.S. dollars) | 906 | 784 | 857 |
| UK & Ireland (U.K. pound sterling) | 239 | 147 | 186 |
| Invested capital turnover(3) (times) | 2.14 | 2.09 | 2.01 |
| Working capital to sales ratio(3) | 26.7% | 27.4% | 28.6% |
| Inventory turns(3) (times) | 2.58 | 2.82 | 2.60 |
| Adjusted ROIC (%) | |||
| Consolidated | 14.5 | 13.1 | 11.8 |
| Canada | 16.0 | 13.2 | 12.0 |
| South America | 16.4 | 18.1 | 16.5 |
| UK & Ireland | 14.0 | 12.8 | 12.9 |
Q3 2018 HIGHLIGHTS BY OPERATION
All comparisons are to restated Q3 2017 results(1) unless indicated otherwise. All numbers are in functional currency: South America – U.S. dollar; UK & Ireland – U.K. pound sterling.
Canada
South America
United Kingdom & Ireland
CORPORATE AND BUSINESS DEVELOPMENTS
Dividend
The Board of Directors has approved a quarterly dividend of $0.20 per share, payable on December 6, 2018 to shareholders of record on November 22, 2018. This dividend will be considered an eligible dividend for Canadian income tax purposes.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
| $ millions, except per share amounts | Three months ended Sep 30 | Nine months ended Sep 30 | |||||||
| 2018 | 2017 restated(1) | % change fav (unfav) | 2018 | 2017 restated(1) | % change fav (unfav) | ||||
| New equipment | 711 | 530 | 34 | 1,918 | 1,511 | 27 | |||
| Used equipment | 78 | 80 | (1) | 252 | 249 | 2 | |||
| Equipment rental | 68 | 63 | 8 | 175 | 168 | 4 | |||
| Product support | 894 | 862 | 4 | 2,798 | 2,585 | 8 | |||
| Other | 4 | 3 | 11 | 10 | |||||
| Total revenue | 1,755 | 1,538 | 14 | 5,154 | 4,523 | 14 | |||
| Gross profit | 449 | 405 | 11 | 1,355 | 1,220 | 11 | |||
| Gross profit margin | 25.6% | 26.4% | 26.3% | 27.0% | |||||
| SG&A | (330) | (307) | (8) | (1,003) | (945) | (6) | |||
| SG&A as a percentage of revenue | (18.9)% | (20.0)% | (19.5)% | (20.9)% | |||||
| Equity earnings of joint ventures & associate | 4 | 2 | 10 | 6 | |||||
| Other (expenses) income | (30) | - | (30) | 2 | |||||
| EBIT | 93 | 100 | (7) | 332 | 283 | 18 | |||
| EBIT margin | 5.3% | 6.5% | 6.4% | 6.2% | |||||
| Adjusted EBIT | 123 | 100 | 23 | 355 | 283 | 26 | |||
| Adjusted EBIT margin | 7.0% | 6.5% | 6.9% | 6.2% | |||||
| Net income | 25 | 50 | (49) | 177 | 152 | 16 | |||
| Basic EPS | 0.15 | 0.29 | (49) | 1.05 | 0.90 | 16 | |||
| Adjusted EPS | 0.45 | 0.33 | 35 | 1.32 | 0.94 | 40 | |||
| EBITDA | 142 | 146 | (3) | 470 | 422 | 11 | |||
| EBITDA margin | 8.1% | 9.5% | 9.1% | 9.3% | |||||
| Adjusted EBITDA | 172 | 146 | 17 | 493 | 422 | 17 | |||
| Adjusted EBITDA margin | 9.7% | 9.5% | 9.5% | 9.3% | |||||
| Free cash flow | (49) | 22 | (328) | (340) | (185) | (83) | |||
| Sep 30, 2018 | Dec 31, 2017 restated(1) | ||||||||
| Invested capital | 3,431 | 2,830 | |||||||
| Invested capital turnover (times) | 2.14 | 2.09 | |||||||
| Net debt to invested capital(3) | 38.4% | 30.2% | |||||||
| ROIC | 13.7% | 13.1% | |||||||
| Adjusted ROIC | 14.5% | 13.1% | |||||||
n/m – not meaningful
To access Finning's complete Q3 2018 results in PDF, please visit our website at https://www.finning.com/en_CA/company/investors.html
Q3 2018 INVESTOR CALL
The Company will hold an investor call on November 6, 2018 at 9:00 am Eastern Time. Dial-in numbers: 1-800-319-4610 (Canada and US), 1-416-915-3239 (Toronto area), 1-604-638-5340 (international). The call will be webcast live and archived for three months at https://www.finning.com/en_CA/company/investors.html.
About Finning
Finning International Inc. (TSX: FTT) is the world’s largest Caterpillar equipment dealer delivering unrivalled service to customers for 85 years. Finning sells, rents, and provides parts and service for equipment and engines to help customers maximize productivity. Headquartered in Vancouver, B.C., the Company operates in Western Canada, Chile, Argentina, Bolivia, the United Kingdom and Ireland.
Contact information
Mauk Breukels
Vice President, Investor Relations and Corporate Affairs
Phone: (604) 331-4934
Email: mauk.breukels@finning.com
https://www.finning.com
Footnotes
(1) The 2017 comparative results described in this news release have been restated to reflect the Company’s adoption of IFRS 15, Revenue from Contracts with Customers and IFRS 9, Financial Instruments effective for the financial year beginning January 1, 2018. More information on the impact of this adoption can be found in note 1 of the Company’s interim condensed consolidated financial statements.
(2) Earnings Before Finance Costs and Income Taxes (EBIT); Basic Earnings per Share (EPS); Earnings Before Finance Costs, Income Taxes, Depreciation and Amortization (EBITDA); Selling, General & Administrative Expenses (SG&A); Return on Invested Capital (ROIC).
(3) These financial metrics, referred to as “non-GAAP financial measures”, do not have a standardized meaning under International Financial Reporting Standards (IFRS), which are also referred to herein as Generally Accepted Accounting Principles (GAAP), and therefore may not be comparable to similar measures presented by other issuers. For additional information regarding these financial metrics, including definitions and reconciliations from each of these non-GAAP financial measures to their most directly comparable measure under GAAP, where available, see the heading “Description of Non-GAAP Financial Measures and Reconciliations” in the Company’s Q3 2018 management discussion and analysis (the Interim MD&A). Management believes that providing certain non-GAAP financial measures provides users of the Company’s consolidated financial statements with important information regarding the operational performance and related trends of the Company's business. By considering these measures in combination with the comparable IFRS measures set out in the Interim MD&A, management believes that users are provided a better overall understanding of the Company's business and its financial performance during the relevant period than if they simply considered the IFRS measures alone.
(4) Certain 2018 and 2017 financial metrics were impacted by significant items management does not consider indicative of operational and financial trends either by nature or amount; these significant items are described on pages 7, 13 and 31-32 of the Interim MD&A. The financial metrics that have been adjusted to take into account these items are referred to as “Adjusted” metrics.
Forward-Looking Disclaimer
This report contains statements about the Company’s business outlook, objectives, plans, strategic priorities and other statements that are not historical facts. A statement Finning makes is forward-looking when it uses what the Company knows and expects today to make a statement about the future. Forward-looking statements may include terminology such as aim, anticipate, assumption, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, project, seek, should, strategy, strive, target, and will, and variations of such terminology. Forward-looking statements in this report include, but are not limited to, statements with respect to: expectations with respect to continued broad-based market strength in western Canada and the UK & Ireland; increased copper production and aging machine population in Chile benefitting the Company’s mining business in South America; significant opportunities from large-scale infrastructure projects planned in each of the regions in which the Company operates; expectation of strong free cash flow in Q4 2018, driven by significant equipment inventory deliveries; and plans to repurchase up to $100 million worth of the Company’s shares by the end of 2018. All such forward-looking statements are made pursuant to the ‘safe harbour’ provisions of applicable Canadian securities laws.
Unless otherwise indicated by us, forward-looking statements in this report reflect Finning’s expectations at the date in this MD&A. Except as may be required by Canadian securities laws, Finning does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from the expectations expressed in or implied by such forward-looking statements and that Finning’s business outlook, objectives, plans, strategic priorities and other statements that are not historical facts may not be achieved. As a result, Finning cannot guarantee that any forward-looking statement will materialize. Factors that could cause actual results or events to differ materially from those expressed in or implied by these forward-looking statements include: general economic and market conditions; foreign exchange rates; commodity prices; the level of customer confidence and spending, and the demand for, and prices of, Finning’s products and services; Finning’s ability to maintain its relationship with Caterpillar; Finning’s dependence on the continued market acceptance of its products, including Caterpillar products, and the timely supply of parts and equipment; Finning’s ability to continue to improve productivity and operational efficiencies while continuing to maintain customer service; Finning’s ability to manage cost pressures as growth in revenue occurs; Finning’s ability to negotiate satisfactory purchase or investment terms and prices, obtain necessary regulatory or other approvals, and secure financing on attractive terms or at all; Finning’s ability to manage its growth strategy effectively; Finning’s ability to effectively price and manage long-term product support contracts with its customers; Finning’s ability to reduce costs in response to slowing activity levels; Finning’s ability to attract sufficient skilled labour resources as market conditions, business strategy or technologies change; Finning’s ability to negotiate and renew collective bargaining agreements with satisfactory terms for Finning’s employees and the Company; the intensity of competitive activity; Finning’s ability to raise the capital needed to implement its business plan; regulatory initiatives or proceedings, litigation and changes in laws or regulations; stock market volatility; changes in political and economic environments for operations; the occurrence of one or more natural disasters, pandemic outbreaks, geo-political events, acts of terrorism or similar disruptions; fluctuations in defined benefit pension plan contributions and related pension expenses; the availability of insurance at commercially reasonable rates or that the amount of insurance coverage will be adequate to cover all liability or loss incurred by Finning; the potential of warranty claims being greater than Finning anticipates; the integrity, reliability and availability of, and benefits from information technology and the data processed by that technology; and Finning’s ability to protect itself from cybersecurity threats or incidents. Forward-looking statements are provided in this report for the purpose of giving information about management’s current expectations and plans and allowing investors and others to get a better understanding of Finning’s operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.
Forward-looking statements made in this report are based on a number of assumptions that Finning believed were reasonable on the day the Company made the forward-looking statements including but not limited to (i) that general economic and market conditions will be maintained; (ii) that the level of customer confidence and spending, and the demand for, and prices of, Finning’s products and services will be maintained; (iii) Finning’s ability to successfully execute its plans and intentions; (vi) Finning’s ability to attract and retain skilled staff; (iv) market competition; (v) the products and technology offered by the Company’s competitors; and (vi) that our current good relationships with Caterpillar, our suppliers, service providers and other third parties will be maintained. Refer in particular to the Outlook section of this MD&A for forward-looking statements. Some of the assumptions, risks, and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this report are discussed in Section 4 of the Company’s current AIF and in the annual MD&A for the financial risks.
Finning cautions readers that the risks described in the MD&A and the AIF are not the only ones that could impact the Company. Additional risks and uncertainties not currently known to the Company or that are currently deemed to be immaterial may also have a material adverse effect on Finning’s business, financial condition, or results of operation.
