November 13, 2009

Finning International makes deeper cuts in Canada amid oilsands slump

VANCOUVER

Heavy equipment dealer Finning International Inc. is making deeper cuts in Canada after reporting a 66 per cent drop in third-quarter profit, including a larger-than-expected slowdown in the oilsands.

Finning, the world’s largest Caterpillar equipment dealer, said it’s in the process of cutting another $50 million in annual costs across its global operations, the majority in Canada.

It said a severe slowdown in the oil and gas sector is largely to blame for the falloff in new and used equipment sales and rental revenues.

The company has cut about 1,200 jobs in Canada since its employment peak in September 2008.

“It has been very hard on our people,” Finning Canada president Dave Parker said during a conference call with investors on Tuesday.

“I hope we are done. I think we are positioned for what is coming at us in 2010.”

The company is reducing costs in Canada by combining some of its operations in regions such as northern Alberta and southern B.C. It will reduce its number of Canadian branches to five, from the previous 12.

The company will also reorganize those operations and start working under a new business model.

Finning said it expects to take a restructuring charge of between $5 million to $10 million from its Canada operations, mostly in the fourth quarter.

The reductions are on top of $150 million in annual savings it had already targeted across its global operations a year ago, when it began making drastic cuts as a result of the recession.

At the end of last year, Finning said it had cut about 700 of its more than 12,000 employees worldwide.

“The market dealt us a pretty tough hand in the third quarter,” Finning International president and chief executive Mike Waites told investors. “We responded swiftly and aggressively.”

Waites said the company was also expecting more construction business from the federal infrastructure program in the quarter, but believes that will come in future quarters.

Vancouver-based Finning reported a profit of $22 million or 13 cents per share for the quarter ended Sept. 30.

That compared to a profit of $65 million or 37 cents per share for the same quarter last year.

Revenues fell 27 per cent to $1.07 billion compared to $1.46 billion a year ago.

Finning, which does most of its business in Western Canada, South America and the United Kingdom, has been hit hard by the recession as mining, oil and gas and other companies that use its equipment either put projects on hold, or cut costs.

In Canada, revenues fell 35 per cent year-over-year, dragged down by a 50 per cent drop in new equipment sales. Used equipment sales and rental revenues were down by 38 per cent and 31 per cent, respectively.

Finning is also continuing a strategic review of its Hewden operations in the U.K., including a potential sale.

Canadian Press

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