Finning reports fourth-quarter revenue jump
Feb. 17, 2011 – Finning International Inc. reported solid Q4 2010 results, which were in line with the company's expectations and its positive medium-term outlook.
Feb. 17, 2011 – Finning International Inc. reported solid Q4 2010 results, which were in line with the company's expectations and its positive medium-term outlook. Finning achieved Q4 2010 revenues of $1.4 billion, a 26 per cent increase from Q4 2009. Earnings before interest and income taxes (EBIT) of $79 million doubled from Q4 2009 and EBIT margin of 5.8 per cent was significantly higher than 3.7 per cent in Q4 2009. The stronger results were primarily driven by improved profitability in Canada. Basic earnings per share (EPS) grew by 123% to $0.29 and included an impairment charge on investments of $0.04 per share and IT system implementation costs of $0.03 per share ($0.02 per share in Q4 2009).
For the full year 2010, Finning's revenues increased by four per cent from 2009 to $4.6 billion, driven by record product support activity. Modestly higher annual revenues combined with higher gross margins and a streamlined cost structure resulted in improved operating leverage and an 11 per cent increase in EBIT from 2009 to $275 million. EBIT margin improved to 5.9 per cent from 5.5 per cent in 2009. Basic EPS grew by nine per cent to $1.00 and included non-operational charges of $0.21 per share ($0.08 per share in 2009).
In May 2010, the company completed the strategic realignment of its UK operations by selling Hewden, its UK rental business. This transaction resulted in an after-tax loss of $244 million or $1.43 per share. As a result, the total 2010 basic loss per share was $0.46 compared to $0.77 earnings per share in 2009. The results of operations of Hewden have been reclassified as discontinued operations for periods prior to sale. All numbers in this earnings release are from continuing operations and exclude the results of Hewden, including the loss on sale. The sale of Hewden positions our core UK dealership business for future success.
"The fourth quarter results were in line with expectations and provided a solid finish to a successful year. Free cash flow totaled $265 million for the year exceeding our target. Since the fourth quarter of 2008, the beginning of the recession, the company has generated over $900 million in free cash flow, significantly strengthening the balance sheet," said Mike Waites, president and CEO of Finning International Inc. "We are well-positioned to capitalize on growth opportunities. We expect good top line growth in 2011 and beyond, reflecting robust commodity markets. And we are continuing to invest in our product line up and service capability to support customer demand. I am confident that we will drive margin expansion and achieve our EBIT growth projections."
Order activity continued to be strong in the fourth quarter resulting in a consolidated order backlog of $1.3 billion, six per cent higher than at September 30, 2010. Led by mining and a continued increase in new orders from the construction sector, the consolidated backlog increased in each consecutive quarter in 2010 and more than doubled from the end of 2009. The significantly higher backlog in each operation provides improved visibility into 2011 and beyond and supports the Company's expectation for a strong medium-term outlook.
Consolidated revenues are projected to grow on average at 10 percent per annum over the next three years. In 2011, mining deliveries are scheduled towards the latter part of the year, which are expected to drive stronger results in the second half.
Consolidated earnings growth is forecast to outpace revenue growth. The Company expects to make ongoing progress towards achieving a 10 percent consolidated EBIT margin in the medium term.
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