Finning positioned for ongoing supply constraints
23 May 2022
Canada-headquartered Finning International is upping its rebuild and used equipment focus amid predictions that supply constraints will impact equipment availability for the foreseeable future; the leading Cat dealer is also closely monitoring inflationary pressures.
The news comes with the recent release of Finning’s first quarter 2022 results, which showed marked revenue hikes compared to the previous corresponding period.
Q1 2022 revenue of C$2.0 billion was up 22% from Q1 2021, driven by increased market activity, with the company’s operations in the Americas driven by mining activity, and those in the UK and Ireland by construction and major infrastructure projects.
Operations in Finning’s home market, Canada, showed revenue up 14% from Q1 2021, driven by product support and higher new equipment and rental revenues.
Used equipment sales were below Q1 2021 mostly due to a large fleet of used mining equipment delivered in Q1 2021 and tight used equipment availability in Q1 2022.
Product support revenue was up 18% from Q1 2021 while new equipment sales were up 11%, driven largely by mining activity.
Rental revenue was up 54% from Q1 2021, reflecting strong customer demand in a constrained supply environment in Q1 2022, compared to softer market conditions including certain pipeline and construction work stoppages in Q1 2021.
The Canadian market also saw continued support for Finning customers in reaching their emissions reduction targets by providing alternative fuel engines, including Caterpillar Tier 4 DGB (Dynamic Gas Blending) engines sold in Western Canada. The engines allow oil and gas customers to substitute up to 85% of diesel with natural gas and are capable of operating with up to 20% hydrogen blend, resulting in cost savings and emissions reduction.
The South America operations saw net revenue increase by 18% from Q1 2021, with higher activity across all sectors, especially in mining.
In the UK & Ireland, net revenue increased by 35% from Q1 2021, driven by new equipment deliveries to construction customers, including HS2, and stronger product support activity in all sectors. New equipment sales were up 63% and product support revenue was up 10% from Q1 2021.
Scott Thomson, president and CEO of Finning International said the company was “pleased with the strong start to 2022 as our global teams remain focused on capturing market opportunities in a disciplined manner and executing on our plan to grow product support, reduce costs, and reinvest free cash flow to compound our earnings. Our Q1 2022 product support revenue was up significantly across all our regions and market sectors compared to Q1 2021.
“We continued to build a healthy inventory position to support backlog delivery, grow our rebuild business, and provide used and rental options to meet our customers’ needs as equipment availability remained constrained. We are actively managing inflationary pressures through our continued focus on productivity gains, resulting in improved operating leverage in all regions compared to Q1 2021.
“The market outlook remains positive in all our regions, supported by strong commodity prices, public and private sector investment, and economic growth forecasts. With a very strong equipment backlog, increasing arrival of inventory, and growing demand for product support, we are ramping up for increased activity for the remainder of the year and targeting above mid-teens EPS growth in 2022,” Thompson said.
Constraints in the global supply chain are expected to continue impacting availability of new equipment and parts for most of the year.
“To meet our customers’ needs in this environment, we continue to offer rebuilds and rental options, and proactively source used equipment. Our data-driven inventory forecasting and improved supply chain efficiencies position us well to successfully navigate industry-wide supply constraints.”