VANCOUVER, British Columbia, Aug. 08, 2018 (GLOBE NEWSWIRE) — Finning International Inc. (TSX:FTT) (“Finning” or the “Company”) reported second quarter 2018 results today. All monetary amounts are in Canadian dollars unless otherwise stated.
Q2 2018 HIGHLIGHTS
All comparisons are to restated Q2 2017 results(1) unless indicated otherwise.
- EPS(2) of $0.48 per share was up 44% as revenues increased by 9%.
- Product support revenues were up 11% – strong activity across all regions.
- Canada’s revenues were up 15% reflecting strong market activity, and EBIT(2) margin improved by 150 basis points to 8.5%, driven by leverage on fixed costs.
- South America’s revenues increased by 11% in functional currency, driven by 24% revenue growth in Chile.
- Invested capital turnover(3) and working capital to sales ratio(3) improved as a result of higher sales coupled with supply chain efficiencies.
- Adjusted return on invested capital(3)(4) was 14.2%, the highest since Q2 2015.
“I am pleased with the strong earnings leverage and improved return on invested capital we delivered this quarter. We expect positive market momentum to continue in our key regions. Significant infrastructure projects in Western Canada and the mining recovery in Chile are expected to provide further upside in 2019. Our focus remains on growing our business in a profitable and capital-efficient manner,” said Mr. Scott Thomson, president and CEO of Finning International.
Q2 2018 FINANCIAL SUMMARY
All comparisons are to restated Q2 2017 results(1) unless indicated otherwise. There were no significant items in Q2 2018 and Q2 2017.
$ millions, except per share amounts
|Q2 2018||Q2 2017
|Free cash flow(3)||(28||)||(131||)||79|
|Q2 2018 EBIT and EBITDA by Operation
$ millions, except per share amounts
|EBIT / EPS||77||47||14||(12||)||126||0.48|
|Q2 2017 EBIT and EBITDA by Operation
$ millions, except per share amounts; restated(1)
|EBIT / EPS||55||42||13||(13||)||97||0.33|
- Revenue was up 9%, with higher revenues in all lines of business except used equipment. New equipment sales increased by 12%, driven mostly by higher sales in construction and mining in Canada. Product support revenues grew by 11% as a result of improved customer activity in the Canadian construction and South American mining industries. Used equipment sales were down 19% (lower in all regions), reflecting a tighter supply environment. Rental revenues increased by 6%.
- Gross profit increased by 10%. Gross profit margin of 26.9% was slightly ahead of 26.6% in Q2 2017 on improved margins in rental, service, and new equipment.
- SG&A(2) costs as a percentage of revenue declined by 100 basis points from Q2 2017 to 19.9%, mostly due to lower SG&A as a percentage of revenue in Canada. EBIT was up 30% to $126 million and EBIT margin increased by 120 basis points to 7.3%, driven largely by improved profitability in Canada.
- EPS of $0.48 per share was up 44% from $0.33 per share in Q2 2017, reflecting higher EBIT from increased revenues in Canada and South America and improved profitability in all operations.
- Q2 2018 free cash flow was ($28) million use of cash compared to ($131) million use of cash in Q2 2017 as a result of higher EBITDA and improved collections.
|Invested Capital(3) and ROIC(2)(3)||Q2 2018|| Q4 2017
| Q2 2017
|Invested capital ($ millions)|
|South America (U.S. dollars)||890||784||807|
|UK & Ireland (U.K. pound sterling)||214||147||182|
|Invested capital turnover (times)||2.13||2.09||1.97|
|Working capital to sales ratio||26.9||%||27.4||%||29.1||%|
|Inventory turns(3) (times)||2.57||2.82||2.52|
|Adjusted ROIC (%)|
|UK & Ireland||13.2||12.8||13.9|
- Excluding the impact of foreign exchange, invested capital was up 17% from Q4 2017, primarily due to higher inventory requirements to meet stronger demand across most markets. A decrease in accounts payable balances in South America due to timing and investment in rental equipment in Canada also contributed to higher invested capital levels compared to Q4 2017.
- Invested capital turnover and working capital to sales ratio improved from Q4 2017, driven mostly by higher sales.
- Adjusted ROIC increased by 110 basis points from Q4 2017, driven mostly by Canada, and was the highest Adjusted ROIC since Q2 2015.
Q2 2018 HIGHLIGHTS BY OPERATION
All comparisons are to restated Q2 2017 results(1) unless indicated otherwise. All numbers are in functional currency: South America – U.S. dollar; UK & Ireland – U.K. pound sterling.
- Revenues were up 15%, reflecting strong market activity. New equipment sales increased by 29% with higher deliveries to construction and mining customers, while used equipment sales were 16% lower due to constrained supply of used equipment. Product support revenues were up 13%, driven primarily by stronger demand for parts in the construction sectors.
- SG&A as a percentage of revenue declined by 210 basis points, reflecting leverage of incremental revenues on fixed costs and cost discipline. As a result, EBIT of $77 million increased by 39% and EBIT margin of 8.5% improved by 150 basis points from Q2 2017.
- Revenues were up 11%, reflecting strong growth in Chile – up 24%. Product support revenues increased by 14%, driven by Chilean mining. New equipment sales were up 9%. Higher sales in all sectors in Chile were partly offset by lower construction sales in Argentina due to economic uncertainty and reduced government infrastructure spending.
- EBIT increased by 16%; EBIT margin was 8.5%, up from 8.1% in Q2 2017.
United Kingdom & Ireland
- Revenues declined by 5% largely due to delayed new equipment deliveries to certain construction customers. Product support revenues were up 2%, driven by higher parts sales, particularly in power systems.
- EBIT was up 10% and EBIT margin increased by 70 basis points to 5.3% due to improved margins in most lines of business, a higher proportion of product support in the revenue mix, and more parts sales through lower-cost e-commerce channels.
CORPORATE AND BUSINESS DEVELOPMENTS
The Board of Directors has approved a quarterly dividend of $0.20 per share, payable on September 6, 2018 to shareholders of record on August 23, 2018. This dividend will be considered an eligible dividend for Canadian income tax purposes.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
|$ millions, except per share amounts||Three months ended June 30||Six months ended June 30|
|Gross profit margin||26.9||%||26.6||%||26.6||%||27.3||%|
|SG&A as a percentage of revenue||(19.9||)%||(20.9||)%||(19.8||)%||(21.4||)%|
|Equity earnings of joint ventures & associate||5||5||6||4|
|Adjusted EBIT margin(3)(4)||7.3||%||6.1||%||6.8||%||6.1||%|
|Adjusted EBITDA margin(3)(4)||9.9||%||9.1||%||9.4||%||9.2||%|
|Free cash flow||(28||)||(131||)||79||(291||)||(207||)||(41||)|
|June 30, 2018||Dec 31, 2017
|Invested capital turnover (times)||2.13||2.09|
|Net debt to invested capital(3)||37.0||%||30.2||%|
To download Finning’s complete Q2 2018 results in PDF, please open the following link: http://resource.globenewswire.com/Resource/Download/dc00b55b-3898-4d62-ab53-06549f2aa1f6
Q2 2018 INVESTOR CALL
The Company will hold an investor call on August 8, 2018 at 11:00 am Eastern Time. Dial-in numbers: 1-800-319-4610 (Canada and US), 1-416-915-3239 (Toronto area), 1-604-638-5340 (international). The call will be webcast live and archived for three months at http://www.finning.com/en_CA/company/investors.html. Finning no longer provides a phone playback recording; please use the webcast to access the archived call.
Finning International Inc. (TSX:FTT) is the world’s largest Caterpillar equipment dealer delivering unrivalled service to customers for 85 years. Finning sells, rents, and provides parts and service for equipment and engines to help customers maximize productivity. Headquartered in Vancouver, B.C., the Company operates in Western Canada, Chile, Argentina, Bolivia, the United Kingdom and Ireland.
Vice President, Investor Relations and Corporate Affairs
Phone: (604) 331-4934
|(1)||The 2017 comparative results described in this earnings release have been restated to reflect the Company’s adoption of IFRS 15, Revenue from Contracts with Customers and IFRS 9, Financial Instruments effective for the financial year beginning January 1, 2018. More information on the impact of this adoption can be found in note 1 of the Company’s interim condensed consolidated financial statements.|
|(2)||Earnings Before Finance Costs and Income Taxes (EBIT); Basic Earnings per Share (EPS); Earnings Before Finance Costs, Income Taxes, Depreciation and Amortization (EBITDA); Selling, General & Administrative Expenses (SG&A); Return on Invested Capital (ROIC).|
|(3)||These financial metrics, referred to as “non-GAAP financial measures”, do not have a standardized meaning under International Financial Reporting Standards (IFRS), which are also referred to herein as 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 the Company’s Q2 2018 management discussion and analysis (the Interim 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 Interim 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.|
|(4)||Certain 2018 and 2017 financial metrics were impacted by significant items management does not consider indicative of operational and financial trends either by nature or amount; these significant items are described on page 30-32 of the Interim MD&A. The financial metrics which have been adjusted to take into account these items are referred to as “Adjusted” metrics.|