investor presentation - finningnov 26, 2018 · investor presentation toronto november 26, 2018 ......
TRANSCRIPT
INVESTOR PRESENTATION
Toronto
November 26, 2018
Scott Thomson, President and CEO
Mauk Breukels, VP Investor Relations
Disclosures
Forward-looking information
This presentation includes “forward-looking information” (as defined in applicable Canadian securities legislation) that is based on
expectations, estimates and projections that management believes are reasonable as of the date of this presentation, but may ultimately turn
out to be incorrect.
Wherever possible, words such as “anticipate”, “believe”, “expect”, “intend”, “project”, “plan”, “forecast”, “opportunity”, “target”,
“potential” and similar words, as well as any number or year followed by “E” (which stands for “estimated”) have been used to identify these
forward-looking statements. Information in this presentation has been furnished for information only and is accurate at the time of
presentation on November 26, 2018, but may later be superseded by more current information. Except as required by law, Finning does not
undertake any obligation to update the information, whether as a result of new facts becoming known, future events occurring or otherwise.
Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results,
performance or achievements of Finning to be materially different from any future results, performance or achievements expressed or
implied by the forward-looking information in this presentation. Important information identifying and describing such risks, uncertainties and
other factors is contained in Finning’s most recently filed annual information form (under the headings “Forward-Looking Information” and
“Key Business Risks”) and in the management’s discussion and analysis of financial results (MD&A) portions of Finning’s most recent annual
and quarterly financial reports (under the headings “Risk Factors and Management” and “Forward-Looking Disclaimer”). These documents
may be accessed on the Finning website at www.finning.com (in the financial reports section on the Investors page) or the SEDAR website at
www.sedar.com.
Non-GAAP financial measures
This presentation includes the “non-GAAP financial measures” which do not have a standardized meaning under International Financial
Reporting Standards (IFRS) or 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 our most recent 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 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.
2 Monetary amounts are in Canadian dollars and from continuing operations unless noted otherwise
Largest Caterpillar dealer
Unrivalled service for 85 years
Diversified customer base
~13,200 employees
Finning Overview
Page 3
Santiago
Bolivia
Argentina
Chile
Cannock
United Kingdom
IrelandBC AB
YT
Edmonton
Vancouver
head office
NWT
SK
NU
Product
support
54%New
equipment
37%
Used
equipment
5%
Rental
4%
YTD 2018(2)
revenue by line
of business
Construction
40%
Mining
27%
Power
Systems
23%
Government
3%
Forestry
3%
Other
4%
YTD 2018(2) new
equipment sales
by industry
Canada
52%
South
America
32%
UK & Ireland
16%
YTD 2018(2)
revenue
by region
(1) At November 22, 2018
(3) See description of non-GAAP financial measures in Q3 2018 MD&A
(4) See description of significant items in Q3 2018 MD&A
(2) Year to date / nine months ended September 30, 2018
Financial Statistics - YTD 2018(2)
Revenue 5.2B
EBITDA(3) 470M
Adjusted EBITDA(3)(4) 493M
EPS 1.05
Adjusted EPS(3)(4) 1.32
Invested capital(3) 3.4B
ROIC(3) 13.7%
Adjusted ROIC(3)(4) 14.5%
Market Statistics(1) - FTT (TSX)
Share price 27.44
Market Cap 4.6B
S&P/DBRS rating BBB(+/high)
Annual dividend / share 0.80
Dividend yield 2.9%
Improved Performance
4
1.70 1.80
3.54
1.98 2.01
3.30
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Canada South America UK & Ireland
Invested Capital Turnover (times)
2016 Q3 2018
(1) See description of significant items in 2016 and Q3 2018 MD&A
5.5%
8.4%
1.8%
8.2%7.8%
4.7%
0%
2%
4%
6%
8%
10%
Canada South America UK & Ireland
Adjusted EBIT Margin(1)
2016 YTD 2018
32.2%
30.4%
26.7%
2.38
2.49
2.58
2.00
2.20
2.40
2.60
2.80
3.00
24%
26%
28%
30%
32%
34%
2015 2016 Q3 2018
Working Capital Efficiency
Working Capital to Sales Ratio (%)
Inventory Turns (times)
9.3%
15.0%
5.9%
16.0% 16.4%
14.0%
0%
5%
10%
15%
20%
Canada South America UK & Ireland
Adjusted ROIC(1)
2016 Q3 2018
EARNINGS
TORQUE
CAPITAL
EFFICIENCIES
Cost Control
Operational Efficiency
Supply Chain
Improvements
(3) Year to date / nine months ended September 30, 2018
(3)
(2)
(2)
(2) Q3 2018 and YTD 2018 results in South America were negatively impacted by a severe market downturn in Argentina
Investor Value Proposition – Improving ROIC
Revenue Growth
Directionally consistent with previous upcycles; key growth drivers provide upside
KEY GROWTH DRIVERS
Markets
Infrastructure Opportunities
Copper Mining Outsized Growth
Power Systems
Product
Support
Customer Support Agreements
Digital / E-Commerce
Lead Generation Tool
Rebuilds
Integrated Knowledge Centre(s)
Caterpillar
/ Finning
Ultra-Class Mining Vehicles
Autonomy
Life Cycle Value Machines
Underground
RUN
Complementary Acquisitions
RUN - rental, used, new equipment
5
Earnings Torque
Leverage of incremental revenue on fixed cost
Capital Efficiencies
Supply chain improvements and capital discipline
Free Cash Flow Delivery
Positive free cash flow through the cycle
PURPOSE
We believe in partnering and
innovating to build and power
a better world.
VISIONLeveraging our global expertise and
insight, we are a trusted partner in
transforming our customers’ performance.
VALUESWe are trusted
We are collaborative
We are innovative
We are passionate
Strategic Framework
Customer Centricity
Lean & Agile Global Finning
Global Supply Chain
Digital Enterprise
Growth and Diversification
GLOBAL STRATEGIC PRIORITIES
6
ERP
Data Driven
Decision
Making
Investment Aligned with 2018-2020 Priorities
CAT
Complementary
M&A
Global
Supply Chain
• Forecast to Cash
• Centralized
Procurement
Ultra-Class
Mining
Vehicles
• Autonomy
• Electric Drive
RUN
Strategy
CUSTOMER
CENTRICITY
DIGITAL
ENTERPRISELEAN & AGILE SUPPLY CHAIN
GROWTH &
DIVERSIFICATION
Asset Light
Footprint
Disciplined
Processes
Omni-Channel
e-commerce
Connected
Assets
Performance
Solutions
RUN - Rental, Used, New
Product Support
• Condition Monitoring
• Data-driven Lead
Generation
• Rebuild Opportunities
• Customer Support
Agreements
• Integrated Knowledge
Centre
Data and
Analytics
7
Finning Digital - Path to Demonstrable Growth
DRIVE PARTS CHANNEL SHIFTVolume Online
LIFT CHANNEL Capabilities
DRIFT UPCustomer Share
GET CONNECTEDNew & Retrofit (Cat and non-Cat)
EXPANDServices
DELIVER INSIGHTSData and Domain Driven
PARTNERDeliver Outcomes
ADVISE ON PERFORMANCEAnalyze & Recommend
INFORM ON PERFORMANCEVisibility and Monitoring
Parts and Service Digital Commerce
Equipment Connectivity
Performance Solutions
Over last three years we have invested in digital – and grown the key value performance metrics significantly
BUILD DIGITAL ASSETS“On the Edge” Talent, Connectivity
INTERNAL VALUE FOCUSImprove Core Processes
MARKET FOCUSPerformance Solutions
Digital Investments
Success Based Funding
8
0
10
20
30
2016 2017 2018 E
Digital Investment
($ millions)
0
50
100
150
2015 2016 2017 2018 E
Performance Solutions
Revenue ($ millions)
0%
20%
40%
60%
80%
2015 2016 2017 2018 E
Connected Assets
% of addressable population
0%
10%
20%
30%
2015 2016 2017 2018 E
Online Parts
% of addressable opportunity
Supply Chain Improvements
500
550
600
650
700
750
800
2013 2017
New Equipment Inventory ($ millions)
~600
23%
3.0
3.2
3.4
3.6
3.8
4.0
4.2
2013 2017 Potential
3.6
New Equipment Turns (times)
0.4x
0.5x
4.1
9
NEW EQUIPMENT
End-to-End Process Improvement
Improved Demand and Supply Planning
Advanced Technology in Key Processes
PARTS
Improved Inventory Management
Reduced Network Routes and Touches
Increased Direct Shipments to Customers
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
4.0
4.2
2013 2017 Potential
3.5
0.8x
0.5x4.0
Key Performance Drivers
500
550
600
650
700
750
2013 2017
~650
10%
Parts Inventory($ millions)
Parts Turns(times)
~$20 million
FCF
↑ 0.1
turns
~$20 million
FCF
↑ 0.1
turns
Caterpillar Autonomy Solution
Superior Technology / Over 20% Productivity Improvement
10
Caterpillar Global Autonomous Truck Population
Truck population 55
Support equipment population 100+
Productivity improvement vs. manned fleet >20%
Fortescue Solomon World’s Largest
CAT Supported Autonomous Mine
Customers: 6 vs. 3 competition’s
Sites: 7 vs. 6 competition’s
Largest Population by end of 2018
313
31
55
76
114
0
50
100
150
200
250
2012 2013 2014 2015 2016 2017 2018 E
* Competition 115 Trucks
200+
*
CUSTOMER
CENTRICITY
SCALABLE
~100 trucks vs. 30 from competition
250+ auxiliary vs. 30 from competition
AUTOMATED FUELING
not available from competition
RETROFIT CAPABILITY TODAY
Caterpillar 793 F and 797 F;
Komatsu 930-E4
FASTER
than manned & competition
DYNAMIC ASSIGNMENT
TECHNOLOGY
superior to fixed assignment technology
INTEROPERABLE
with manned & competitive fleets
ADVANCED FLEET
PRODUCTION SYSTEM
7463
54
70
118
0
40
80
120
160
200
2013 2014 2015 2016 2017 2018 E
Net Capital Expenditures ($ millions)
Capital Allocation
Goal - Positive Free Cash Flow Through the Cycle
150-200
GROWTH
Technology
Ultra-Class Mining Vehicles
RUN
Complementary Acquisitions
SHAREHOLDERS
Dividends
Share Repurchases
Uses of Cash (2013-2017)
Free Cash Flow
~$1.8 billion
Dividend
Debt repayment
~90% Bucyrus related
Increase in cash
Acquisition of
Saskatchewan dealer
Share
repurchases
Process and technology
investments
Ultra-class mining vehicles
Digital and e-commerce
capabilities
RUN - rental, used, new equipment
80-90
0.60
0.69
0.73 0.730.75
0.80
0.40
0.50
0.60
0.70
0.80
0.90
2013 2014 2015 2016 2017 2018
Dividend ($ per share) – 6% CAGR
2013 to 2017 - annual dividend paid; 2018 - indicated annual dividend11
INVESTOR PRESENTATION
Toronto
November 26, 2018
Scott Thomson, President and CEO
Mauk Breukels, VP Investor Relations