Finning Posts Canadian Revenue Increase of 17 Percent for 2018
Canadian and international Caterpillar dealer Finning posted a strong finish to the year in Canada with record quarterly revenue of $1 billion. Adjusted return on invested capital was 16.2 percent, 300 basis points up from 2017, driven by improved profitability and capital efficiencies. Finning’s United Kingdom and Ireland operations delivered a solid fourth quarter and strong 2018 results, led by higher revenues and improved operating margins. EBIT margin in 2018 rose 80 basis points to 4.4 percent.
Overall the company posted total revenue of $1.842 billion in the fourth quarter compared to $1.733 billion in last year’s fourth quarter, a 6.3-percent increase. For the full year, Finning had total revenue of $6.996 billion compared to $6.256 billion a year ago, an 11.8-percent hike.
Worldwide equipment rental revenue in the fourth quarter was $64 million, up from $60 million in last year’s fourth, a 6.7-percent increase. For the full year, rental revenue was $239 million compared to $228 million in 2017, a 4.8-percent increase.
“We finished the year with mixed results in a strong demand environment,” said Finning CEO Scott Thomson. “I am pleased with our operating performance in Canada and the U.K. & Ireland, highlighted by continued improvement in return on invested capital, and the efforts to get Argentina back to break-even profitability by the end of the year. In addition, for the sixth consecutive year, we delivered positive free cash flow despite top-line revenue growth of 12 percent. In South America, the new ERP system implementation reduced our speed of processing customer parts orders. Parts velocity will be increasing throughout Q1 2019, and we expect to return to normal revenue run rates in Q2 2019.
“While demand for our products and services remains strong, we are cognizant of the potential impact of international trade tensions, Brexit, and reduced capital spending in Western Canada. We will focus on controlling what we can with a focus on costs, inventory, and capital spending. Despite the uncertainty, we expect 2019 to show low revenue growth relative to 2018, with continued improvement in return on invested capital across all regions.”
In Canada total revenues were up 17 percent, driven by a 44-percent increase in new equipment sales from strong mining deliveries and higher market activity in construction, primarily in British Columbia. Product support revenues increased by 6 percent, reflecting strong demand for equipment rebuilds in mining and robust market activity in construction and oil & Gas. Rental revenues increased by 11 percent.
In South America, conversely, revenues dropped 17 percent, impacted by an estimated U.S. $50 million shortfall in mining product support revenues because of lower transactional velocity with the implementation of the new ERP system in Chile, as well as significantly lower revenues in Argentina.
In the U.K. and Ireland, revenues increased by 13 percent with higher revenues in all lines of business. New equipment sales jumped 7 percent, driven by increased activity in power systems and product support revenues which leaped 14 percent.
About the Author
Michael Roth
Editor
Michael Roth has covered the equipment rental industry full time for RER since 1989 and has served as the magazine’s editor in chief since 1994. He has nearly 30 years experience as a professional journalist. Roth has visited hundreds of rental centers and industry manufacturers, written hundreds of feature stories for RER and thousands of news stories for the magazine and its electronic newsletter RER Reports. Roth has interviewed leading executives for most of the industry’s largest rental companies and manufacturers as well as hundreds of smaller independent companies. He has visited with and reported on rental companies and manufacturers in Europe, Central America and Asia as well as Mexico, Canada and the United States. Roth was co-founder of RER Reports, the industry’s first weekly newsletter, which began as a fax newsletter in 1996, and later became an online newsletter. Roth has spoken at conventions sponsored by the American Rental Association, Associated Equipment Distributors, California Rental Association and other industry events and has spoken before industry groups in several countries. He lives and works in Los Angeles when he’s not traveling to cover industry events.