Finning’s Canadian rental business drops 19% in Q1

Finning International said rental revenue in its home market of Canada, an important market for the company, was down 19% year-on-year in the first quarter of 2021.

The Caterpillar dealer said the drop was due to work stoppages at pipeline and construction sites to mitigate the spread of Covid-19. However, net revenue in Canada increased by 2%, driven by strong used equipment sales, particularly in mining.

Its total equipment rental revenues in the quarter, including activities in Canada, the UK and South America, were down 15% to C$45 million. Rental sales in South America were 3% lower at C$8 million, but were up 25% to C$10 million.

Overall, the company said business was strengthening, with lead times for new equipment and growing demand causing it to focus on rebuilds and re-sale of used equipment to capture market recovery.

The increase in new and used equipment sales for the quarter contributed to what Finning described as a strong result, offset by lower product support revenue due to Covid-19 restrictions in Chile and Canada.

First quarter 2021 revenue of C$1.6 billion was up 2% compared to the same period in 2020, and higher in all operations.

In the South American business, despite a second Covid-19 wave in Chile, Finning delivered a strong quarter, with EBIT of 8.6% as a percentage of net revenue.

Scott Thomson, president and CEO, said that after the quarter completed, the South American business had also been buoyed by a notice of award from Chilean state-owned copper mining company, Codelco.

“In South America, we are very pleased to build on our long-term relationship with Codelco to deliver and support the new Caterpillar ultra-class truck fleet at its Radomiro Tomic mine and pilot Caterpillar’s autonomous solution at the Ministro Hales mine,” he said.

In the UK & Ireland, the first quarter result was underpinned by strong orders in construction, including additional orders for the HS2 project and from a backlog of power systems projects for data centre customers.

Thomson said the backlog was at record levels, with the highest consolidated equipment backlog since the same quarter in 2018. This was up 33% from the final quarter of 2020 and, on March 31, 2021, up 57% from December 31 to $1.2 billion.

In addition to the build-up of equipment backlog in all Finning’s regions, strengthening product support activity through the first quarter was also encouraging, he said.

Vaccine rollouts across all regions pointed to increased momentum for a market recovery in the second half of 2021, he said. “I am confident that we have positioned the business for strong performance going forward.

“We expect our business to continue demonstrating improved earnings capacity in the upcoming quarters as we execute on our profitability drivers.

“Despite slower than anticipated vaccine rollout in Canada and continued challenges related to Covid-19, we expect our 2021 earnings to exceed 2019.”