INVESTOR PRESENTATION Scott Thomson, President and CEO Mauk - - PowerPoint PPT Presentation
INVESTOR PRESENTATION Scott Thomson, President and CEO Mauk - - PowerPoint PPT Presentation
INVESTOR PRESENTATION Scott Thomson, President and CEO Mauk Breukels, VP Investor Relations Toronto November 26, 2018 Disclosures Forward-looking information This presentation includes forward - looking information (as defined in
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
- ut 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been furnished for information only and is accurate at the time of presentation on November 26, 2018, but may later be superseded by more current information.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
- ther 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
- f 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 Ireland BC 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
- f 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
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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
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Earnings T
- rque
Leverage of incremental revenue
- n 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.
VISION
Leveraging our global expertise and insight, we are a trusted partner in transforming our customers’ performance.
VALUES
We 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
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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 ENTERPRISE LEAN & 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
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Finning Digital - Path to Demonstrable Growth
DRIVE PARTS CHANNEL SHIFT
Volume Online
LIFT CHANNEL
Capabilities
DRIFT UP
Customer Share
GET CONNECTED
New & Retrofit (Cat and non-Cat)
EXPAND
Services
DELIVER INSIGHTS
Data and Domain Driven
PARTNER
Deliver Outcomes
ADVISE ON PERFORMANCE
Analyze & Recommend
INFORM ON PERFORMANCE
Visibility 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 FOCUS
Improve Core Processes
MARKET FOCUS
Performance Solutions
Digital Investments
Success Based Funding
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10 20 30 2016 2017 2018 E
Digital Investment ($ millions)
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
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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 0.5x 4.0
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 ~$20 million FCF ↑ 0.1 turns
Caterpillar Autonomy Solution
Superior T echnology / Over 20% Productivity Improvement
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Caterpillar Global Autonomous Truck Population
Truck population 55 Support equipment population 100+ Productivity improvement vs. manned fleet >20%
Fortescue Solomon World’s Largest CAT Supported Autonomous Mine
Customers: 6 vs. 3 competition’s Sites: 7 vs. 6 competition’s Largest Population by end of 2018
3 13 31 55 76 114 50 100 150 200 250 2012 2013 2014 2015 2016 2017 2018 E
* Competition 115 Trucks
200+
*
CUSTOMER CENTRICITY
SCALABLE ~100 trucks vs. 30 from competition 250+ auxiliary vs. 30 from competition AUTOMATED FUELING not available from competition RETROFIT CAPABILITY TODAY Caterpillar 793 F and 797 F; Komatsu 930-E4 FASTER than manned & competition DYNAMIC ASSIGNMENT TECHNOLOGY superior to fixed assignment technology INTEROPERABLE with manned & competitive fleets ADVANCED FLEET PRODUCTION SYSTEM
74 63 54 70 118
40 80 120 160 200 2013 2014 2015 2016 2017 2018 E
Net Capital Expenditures ($ 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 ~$1.8 billion
Dividend Debt repayment ~90% Bucyrus related Increase in cash Acquisition of Saskatchewan dealer Share repurchases
- Process and technology
investments
- Ultra-class mining vehicles
- Digital and e-commerce
capabilities
RUN - rental, used, new equipment
80-90
0.60 0.69 0.73 0.73 0.75 0.80
0.40 0.50 0.60 0.70 0.80 0.90 2013 2014 2015 2016 2017 2018
Dividend ($ per share) – 6% CAGR
2013 to 2017 - annual dividend paid; 2018 - indicated annual dividend
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