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Second Quarter Revenue Jumps 24.1 Percent for Canada’s Finning

Aug. 12, 2022
Finning posted $2.289 billion in second quarter 2022 revenue, compared to $1.845 billion in second quarter of 2021, a 24.1-percent increase.

Finning posted $2.289 billion in second quarter 2022 revenue, compared to $1.845 billion in second quarter of 2021, a 24.1-percent increase.

In Canada, net revenue increased by 15 percent compared to the second quarter of 2021, driven by product support as well as higher new equipment and rental revenues. Rental revenue increased 32 percent compared to the second quarter of 2021, reflecting strong customer demand in all sectors and higher utilization rates. Product support revenue jumped 23 percent from the second quarter of 2021, with increased spending by mining customers and strong volumes in construction reflecting high equipment utilization and successful execution of Finning’s strategy to grow construction product support market share. EBIT as a percentage of net revenue increased 10 percent, up 70 basis points from the second quarter of 2021, primarily because of a higher proportion of product support in the revenue mix.

Invested capital increased by $750 million from Q4 2021, driven primarily by higher inventory levels.

“We are pleased with our strong execution and performance in the second quarter, which demonstrates our significantly improved earnings capacity,” said Scott Thomson, CEO of Finning International. “One year on from our June 2021 investor day, we are very proud to have exceeded targets we set out through focused execution of our simple plan to drive product support, reduce costs, and reinvest to compound our EPS. Over the last four quarters we have grown our product support business by 14 percent compared to the four quarters ended Q2 2021, delivered 17-percent SG&A this quarter, and reinvested $341 million in strategic acquisitions and share repurchases resulting in EPS of $2.66.

“Following our strong EPS growth of 52 percent in the first half of 2022 compared to Adjusted EPS in the first half of 2021, we expect demand conditions to remain favorable for the remainder of 2022. Underpinned by our large and diverse backlog, continued growth in product support, and disciplined operational execution, we are projecting above mid-teens EPS growth in the second half of 2022 compared to the second half of 2021. While activity levels remain robust, we are closely monitoring leading indicators and the impact of ongoing supply chain, labor, inflation, and interest rate challenges on our customer activity levels. We remain focused on actively managing these risks and are capturing growth opportunities in a very disciplined manner.

"Our business model is robust and our strong performance in recent years is a huge credit to the efforts of our great people. From delivering approximately $900 million of free cash flow during a very challenging 2020 to delivering $2.66 EPS over the last four quarters, the full-cycle resilience of our business model and step-change improvement in our execution have been on full display. Sustainable improvements in our operating model efficiency, inventory management practices, and proactive deployment of our digital capabilities make us confident that we will continue to successfully navigate a very dynamic global business environment going forward.”

Strong demand across Western Canada

Finning expects elevated energy prices, project backlogs, healthy customer balance sheets and high machine utilization to continue supporting a strong demand environment across Western Canada. It expects stable mining activity in Chile to continue driving demand for maintenance and replacement of maturing equipment fleets. It expects Chile will remain an attractive place to invest as electrification trends drive increasing global demand for copper.

In the U.K. and Ireland, Finning expects demand for its power systems business to remain robust, including in the data center market. It has a solid backlog of power systems projects for deliveries in the second half of 2022 and in 2023 and is well positioned to capture further opportunities in the growing data center market. The addition of Hydraquip, which Finning acquired in March 2022, is expected to contribute to the structural improvement in the U.K and Ireland’s profitability going forward.

Finning International Inc. is the world’s largest Caterpillar dealer. Headquartered in Surrey, British Columbia, it provides Caterpillar equipment, rental, parts, services, and performance solutions in Western Canada, Chile, Argentina, Bolivia, the United Kingdom, and Ireland.

Finning is No. 21 on the RER 100.