Finning International (FTT) Q3 2024 earnings summary

Executive summary

• Q3 2024 net revenue rose 4% year-over-year to $2.5 billion, with new equipment revenue up 7% and product support up 2%; strong growth in South America and resilient profitability in UK & Ireland, while Canada faced margin challenges.

• Adjusted EBIT was $203 million (8.0% of net revenue), down 19% year-over-year, mainly due to lower Canadian margins and one-time severance and receivable loss charges.

• Adjusted EPS was $0.93, a 13% decrease year-over-year, reflecting lower earnings in Canada.

• Free cash flow reached $346 million for the quarter and $746 million over the last 12 months, driven by improved invested capital velocity and inventory reduction.

• Equipment backlog increased to $2.3 billion, up 4% sequentially, supported by strong mining and power systems orders.

Financial highlights

• Gross profit margin was 24.2%, down 210 bps year-over-year, mainly due to lower Canadian margins.

• SG&A as a percentage of net revenue was 16.8%; excluding one-time items, 16.2%.

• Adjusted EBIT by region: South America $104M (10.9% margin), Canada $94M (7.5%), UK & Ireland $20M (6.3%).

• New equipment sales up 7% year-over-year, used equipment up 24%, product support up 2%, rental revenue down 12%.

• $19 million in severance costs and a $14 million loss on receivables from a mining customer in Canada.

Outlook and guidance

• Product support growth targets to 2025 withdrawn due to slower-than-expected growth in Canada and UK & Ireland; focus remains on maximizing product support in each region.

• South America expected to maintain strong product support and mining growth into 2025 and beyond, supported by capacity investments and technician hiring.

• Canadian outlook is mixed, with some green shoots in construction and mining, but continued headwinds in used and rental markets.

• UK & Ireland expected to see soft new equipment demand but growing contributions from used equipment and power systems.

• Company remains focused on cost control, capital efficiency, and achieving a sustainably higher ROIC.