May 9, 2008

Maintaining growth during U.S. economic slowdown poses biggest challenge for Finning, new CEO says

VANCOUVER

The new boss at Finning International Inc., the world’s largest Caterpillar heavy equipment dealer, believes maintaining growth in this “time of uncertainty” will be his first challenge.

Finning CEO and president Mike Waites, who was officially handed the role this week at the company’s annual shareholder meeting, said while booming commodity prices have been good for Finning’s business a U.S.-led slowdown can’t be ignored.

“The short-term challenge is to deliver on the plan in a time of uncertainty,” said Waites in an interview.

“The core business is there for us so it’s executing in times of uncertainty. Longer term is how do we keep the growth coming.”

Waites, who replaces outgoing CEO Doug Whitehead, said he is bullish on the growth potential in South America.

“We need to spend a bit more time on how we’ll pursue that,” said Waites, who has served as the company’s chief financial officer since 2006.

Finning is a major supplier of heavy trucks, bulldozers and other giant vehicles used in the booming oilsands sector of northern Alberta.

About 60 per cent of Finning’s business is in Western Canada, and 20 per cent in both the United Kingdom and South America.

Mining represents about 40 per cent of Finning’s business, oil and gas about 20 per cent and the remainder in general construction and forestry.

On Tuesday, the Vancouver-based company announced the signing of a $360-million contract to supply heavy equipment to Suncor Energy Inc. and announced a slight increase in first-quarter profit.

Finning reported earnings of $70.8 million, up 1.3 per cent from a year earlier, as revenue grew 3.9 per cent to $1.43 billion from $1.37 billion. Earnings per share advanced by a penny to 40 cents.

Finning said the negative impact of the much stronger Canadian dollar, compared to the same quarter last year, was 10 cents per share.

“This is the largest foreign exchange headwind that we have had to contend with in any quarter-over-quarter comparison,” Waites said, adding the strong loonie is a “considerable hurdle for us to overcome.”

While the first-quarter results are “modestly below” the results for the same period last year, Waites said the company is sticking to its full-year earnings guidance of $1.70 to $1.80 per share.

The Suncor purchase includes 22 giant Caterpillar 797B mining trucks and 19 D11T and five D8T bulldozers. The equipment is to be delivered to the oilsands operator this year and next, and the deal includes 10 years of support.

The deal will expand Suncor’s fleet of massive mining trucks to 67 units, 51 of which will be 797s — the biggest mining trucks in the world — along with 16 model 793 units.

“Growth in mining activity in the oilsands continues to be very strong, and Finning’s position as the major supplier of large mobile mining equipment and as the key service partner to the oilsands producers continues to expand,” Waites said.

He said there are currently 120 of the 797 haul trucks operating in the Alberta oilsands, and that Finning plans to deliver more than 65 additional 797s in 2008.

As he gave his last address as CEO at the annual meeting this week, Whitehead attributed the company’s success over the last decade to the strong Caterpillar brand, booming commodity prices and previous management’s decision to move away from the forestry sector and more heavily into oil and gas.

Canadian Press

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