Finning International Inc. (TSX: FTT) (“Finning”, “the Company”,
“we”, “our” or “us”) reported first quarter 2021 results today. All
monetary amounts are in Canadian dollars unless otherwise stated.
HIGHLIGHTSAll comparisons are to Q1 2020
results unless indicated otherwise.
- Q1 2021 EPS(1)
of $0.43 represented a 30% increase from Q1 2020 and included $0.05
of Canada Emergency Wage Subsidy (“CEWS”) and $0.03 from the final
return on our investment in Energyst. Q1 2021 Adjusted EPS(2)(3)
was $0.35, up 6% from $0.33 in Q1 2020.
- Q1 2021 revenue
of $1.6 billion and net revenue(2) of $1.5 billion were up 2%
compared to Q1 2020, higher in all operations. An increase in new
and used equipment sales was partly offset by lower product support
revenue, mostly due to the impact of COVID-19 restrictions in Chile
and Canada.
- SG&A(1) was
down by $11 million or 3% compared to Q1 2020 reflecting savings
from global cost and efficiency initiatives. Excluding long-term
incentive plan (“LTIP”) expense in Q1 2021 and LTIP benefit in Q1
2020, first quarter SG&A was down $35 million or 10% year over
year.
- South America
delivered a strong quarter despite difficult operating conditions
due to a second wave of COVID-19 in Chile. Q1 2021 EBIT(1) as a
percentage of net revenue(2) was 8.6%. Q1 2021 Adjusted
ROIC(1)(2)(3) was 14.4%, the highest since Q3 2018.
- Subsequent to
the quarter, our South American operation received a notice of
award from Chilean state-owned copper mining company, Codelco, to
deliver new trucks, product support, and an autonomous technology
pilot to its mining operations in northern Chile.
- In the UK &
Ireland, Q1 2021 backlog(2) was at record levels, driven by strong
order intake(2) in construction, including additional orders for
the HS2 project, and a significant backlog of power systems
projects for data centre customers.
- Consolidated
equipment backlog increased by 57% from December 31, 2020 to $1.2
billion at March 31, 2021, the highest backlog since Q4 2018.
Consolidated order intake was up by 33% from Q4 2020, the highest
since Q1 2018, with all operations reporting a significant increase
in order intake.
- Q1 2021 free
cash flow(2) was a use of cash of $20 million compared to a use of
cash of $50 million in Q1 2020. Over the last twelve months, we
have generated $900 million in free cash flow, significantly
strengthening our balance sheet.
“We are encouraged by the build-up of equipment
backlog in all our regions and product support activity
strengthening through the first quarter. We are seeing strong
quoting activity for equipment and product support across all
market sectors. In the UK & Ireland, we have secured additional
equipment orders for HS2. 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. We continued to navigate through COVID-19
restrictions in all our operations to safely provide service to our
customers while positioning our business for an improving demand
environment. We are optimistic about market recovery gaining
momentum in the second half of 2021 as the vaccine rollout ramps up
in each of our regions,” said Scott Thomson, president and CEO of
Finning International.
“I am confident that we have positioned the
business for strong performance going forward. In 2021, we expect
to benefit from operating leverage in a recovering market, product
support growth in all regions, significant progress towards our
mid-cycle target of 17% SG&A as a percentage of net revenue(2),
and the effective allocation of capital. 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,”
concluded Scott Thomson, president and CEO of Finning
International.
Q1 2021 FINANCIAL SUMMARY
|
Quarterly Overview $ millions, except per share
amounts |
Q1 2021 |
|
Q1 2020 |
|
% change |
|
|
Revenue |
1,596 |
|
1,558 |
|
2 |
|
|
Net revenue |
1,469 |
|
1,439 |
|
2 |
|
|
EBIT |
108 |
|
94 |
|
15 |
|
|
EBIT as a percentage of net revenue |
7.4 |
% |
6.6 |
% |
|
|
|
EBITDA(1)(2) |
185 |
|
170 |
|
9 |
|
|
EBITDA as a percentage of net revenue(2) |
12.6 |
% |
11.8 |
% |
|
|
|
Net income |
70 |
|
54 |
|
30 |
|
|
EPS |
0.43 |
|
0.33 |
|
30 |
|
|
Free cash flow |
(20 |
) |
(50 |
) |
60 |
|
Q1 2021 EBIT and EBITDA by Operation$ millions,
except per share amounts |
Canada |
South America |
UK & Ireland |
Corporate & Other |
Finning Total |
EPS |
|
EBIT / EPS |
69 |
|
41 |
|
7 |
|
(9 |
) |
108 |
|
0.43 |
|
CEWS support |
(10 |
) |
- |
|
- |
|
- |
|
(10 |
) |
(0.05 |
) |
Return on investment in Energyst |
- |
|
- |
|
- |
|
(5 |
) |
(5 |
) |
(0.03 |
) |
Adjusted EBIT(2)(3) / Adjusted EPS |
59 |
|
41 |
|
7 |
|
(14 |
) |
93 |
|
0.35 |
|
Adjusted EBIT as a percentage of net revenue(2)(3) |
7.7 |
% |
8.6 |
% |
3.2 |
% |
n/m(1) |
6.3 |
% |
|
|
Adjusted EBITDA(2)(3) |
105 |
|
61 |
|
17 |
|
(13 |
) |
170 |
|
|
|
Adjusted EBITDA as a percentage of net revenue(2)(3) |
13.6 |
% |
12.8 |
% |
7.9 |
% |
n/m |
|
11.6 |
% |
|
|
|
Q1 2020 EBIT and EBITDA by Operation$ millions,
except per share amounts |
Canada |
South America |
UK & Ireland |
Corporate & Other |
|
Finning Total |
|
EPS |
|
|
EBIT / EPS |
60 |
|
38 |
|
1 |
|
(5 |
) |
94 |
|
0.33 |
|
|
EBIT as a percentage of net revenue |
7.9 |
% |
7.8 |
% |
0.5 |
% |
n/m |
|
6.6 |
% |
|
|
|
EBITDA |
103 |
|
60 |
|
11 |
|
(4 |
) |
170 |
|
|
|
EBITDA as a percentage of net revenue |
13.7 |
% |
12.4 |
% |
5.2 |
% |
n/m |
|
11.8 |
% |
|
|
Q1 2021 INVESTED CAPITAL(2) AND
ROIC(2) SUMMARYAll comparisons are to Q1
2020 results unless indicated otherwise.
- Excluding the
impact of foreign exchange, invested capital decreased by $575
million from March 31, 2020 driven primarily by improved inventory
management in all operations and lower property, plant, and
equipment.
- Inventory
turns(2) of 2.83 increased by 26% from Q1 2020 to the highest level
since 2012. Working capital to net revenue ratio(2) of 25.9% was
down by 300 basis points from Q1 2020, driven by significantly
improved working capital(2) performance in South America and the UK
& Ireland.
- Adjusted ROIC
in South America was up 220 basis points from Q1 2020, driven by
improved working capital performance, including the monetization of
excess inventory. On a consolidated basis, lower Adjusted ROIC
compared to Q1 2020 reflects challenging market conditions due to
COVID-19 impacts.
|
Invested Capital and ROIC |
Q1 2021 |
|
Q1 2020 |
|
|
Invested capital ($ millions) |
|
|
|
Consolidated |
3,177 |
|
3,883 |
|
|
Canada |
1,832 |
|
2,093 |
|
|
South America (US dollars) |
781 |
|
937 |
|
|
UK & Ireland (UK pound sterling) |
202 |
|
243 |
|
|
Invested capital turnover(2) (times) |
1.78 |
|
1.83 |
|
|
Working capital to net revenue ratio |
25.9 |
% |
28.9 |
% |
|
Inventory ($ millions) |
1,593 |
|
2,152 |
|
|
Inventory turns (dealership) (times) |
2.83 |
|
2.25 |
|
|
Adjusted ROIC (%) |
|
|
|
Consolidated |
10.0 |
|
12.0 |
|
|
Canada |
10.8 |
|
14.2 |
|
|
South America |
14.4 |
|
12.2 |
|
|
UK & Ireland |
7.6 |
|
8.4 |
|
Q1 2021 HIGHLIGHTS BY OPERATIONAll comparisons
are to Q1 2020 results unless indicated otherwise. All numbers are
in functional currency: Canada – Canadian dollar; South America –
US dollar; UK & Ireland – UK pound sterling (GBP).
Canada
- Net revenue
increased by 2%, driven by strong used equipment sales,
particularly in mining. In response to improving customer demand
and extended lead times for new equipment, we have increased our
focus on rebuilds and re-sale of used equipment to capture market
recovery.
- Product support
revenue declined by 4% due to the continued capital and cost
constraints of our customers in the oil sands and softer market
conditions in construction at the start of the quarter compared to
Q1 2020. Compared to Q4 2020, product support revenue increased by
4%, driven by improved demand and stronger rebuild activity in the
construction sectors.
- Rental revenue
was down 19% year over year due to work stoppages at certain
pipeline and construction sites to mitigate the spread of
COVID-19.
- We continued to
qualify for CEWS and recognized $10 million of this wage subsidy in
Q1 2021, which is included in other income and excluded from our
adjusted earnings. Support from the CEWS program has allowed us to
preserve jobs, as well as rehire and retrain our workforce. We have
rehired close to 150 technicians since June 2020. Our OEM
Remanufacturing facility in Edmonton has returned to a 3-shift
operation, and we have been able to continue delivering our
apprentice program throughout the pandemic. Our strong financial
position is enabling us to make strategic investments early in the
recovery cycle, including capacity expansions and the construction
of new facilities in partnership with local Indigenous
communities.
- Adjusted EBIT
as a percentage of net revenue was 7.7%, down 20 basis points
compared to Q1 2020 due to a decline in gross profit as a
percentage of net revenue mostly from a lower proportion of product
support in the revenue mix. SG&A decreased by 7% from Q1 2020
on higher revenues, reflecting cost savings from restructuring
activities and improved operating efficiencies.
- 4Refuel
delivered strong performance, with a 3% increase in net revenue and
a 21% increase in Adjusted EBITDA compared to Q1 2020. We are
accelerating revenue synergies between Finning and 4Refuel. As part
of 4Refuel’s growing relationship with AECON, in addition to
equipment, we will be supplying fuel to Kicking Horse Canyon
Constructors Joint Venture over the next three years for highway
upgrades through the Kicking Horse Canyon in British Columbia.
South America
- Net revenue was
up 7% from Q1 2020, driven by a 58% increase in new equipment sales
reflecting improved activity in the construction and mining
sectors, including deliveries to Teck’s QB2 project.
- Product support
revenue was down 3%, impacted by COVID-19 restrictions in Chilean
mining operations which led to lower copper production in the
quarter. Chile copper production in Q1 2021 declined by 2% from Q1
2020 and was down 7% from Q4 2020.
- Despite
difficult operating conditions due to a second wave of COVID-19 in
Chile, South America delivered a strong quarter. EBIT as a
percentage of net revenue was 8.6%, up 80 basis points from Q1
2020, reflecting improved execution to capture growth opportunities
and increased operating efficiencies. Adjusted ROIC was 14.4%, the
highest since Q3 2018, driven by improved working capital
performance, including the sale of excess inventory.
- Subsequent to
the quarter, we received a notice of award from Codelco to supply
22 Caterpillar 797F off-highway trucks to the Radomiro Tomic open
pit copper mine and support the fleet under a 5-year maintenance
and repair contract. We expect to start delivering the trucks in
the second half of 2021. In addition, we have secured a 5-year
extension of our existing product support contract with Codelco’s
Ministro Hales copper mine, which operates 39 Caterpillar
ultra-class trucks, 6 Caterpillar shovels, and a fleet of
Caterpillar support equipment. We will also work closely with
Caterpillar and Codelco’s Ministro Hales Division to pilot
Caterpillar’s AHS (Autonomous Haulage System) to enable autonomous
operations at the Ministro Hales copper mine.
United Kingdom & Ireland
- Net revenue was
up by 2% from Q1 2020, driven by higher product support revenue and
power systems project deliveries to data centre customers.
- EBIT as a
percentage of net revenue was 3.2% compared to 0.5% in Q1 2020,
driven by a shift in revenue mix to product support and improved
operating efficiencies.
- The record
backlog in the UK & Ireland reflects strong order intake in
construction, including additional equipment orders related to HS2,
and a significant backlog of power systems projects for data centre
customers.
Q1 2021 MARKET UPDATE AND BUSINESS OUTLOOK
The discussion of our expectations relating to
the market and business outlook in this section is forward-looking
information that is based upon the assumptions and subject to the
material risks discussed under the heading “Forward-Looking
Information Caution” at the end of this news release. Actual
outcomes and results may vary significantly.
Canada
In the oil sands, our customers are increasing
production while remaining disciplined on capital expenditures,
which is expected to drive improved demand for rental equipment and
increased fleet utilization. We expect higher product support
activity in the oil sands in 2021 compared to 2020. Our expectation
assumes sustainment of strong oil prices and that the Alberta
government will not re-impose oil production curtailments. The
improved outlook for copper, precious and base metals is expected
to continue supporting increased mining activity in Western Canada.
We are actively quoting on multiple requests for proposals for
equipment and product support, including projects in the Golden
Triangle of British Columbia, which represent significant
greenfield opportunities. The large and aging mining equipment
population is expected to drive opportunities for future fleet
renewals, rebuilds, autonomy conversions, and continued demand for
product support. We are also well positioned to help our mining
customers reduce cost per ton and improve operating efficiencies
through initiatives such as autonomy and leveraging our technology
solutions. Approximately 7% of large and ultra-class Caterpillar
off-highway trucks operated by our mining customers in Western
Canada are currently autonomous, and we expect this ratio to
increase to 10% by the end of 2021.
The federal and provincial governments’ fiscal
stimulus programs are expected to have a positive impact on
construction activity as major projects are awarded. Significant
private sector investment in LNG and power projects are expected to
continue to drive demand for equipment, product support, heavy
rentals, and prime and standby electric power generation in 2021.
We are seeing an increase in order intake for construction
equipment and are capturing increased product support market share
in the construction sector by leveraging our rebuild programs and
technology solutions. We expect improved utilization of our heavy
rental equipment at pipeline construction sites during the second
quarter as our customers have resumed work. Although COVID-19
restrictions at customer sites have eased, high infection rates
continue to pose a near-term risk given slower than expected
vaccine rollout in western Canada.
South America
We remain optimistic about mining recovery in
Chile. We are actively quoting on multiple opportunities for new
mining equipment and autonomous solutions for both brownfield
expansions and greenfield projects. According to Cochilco, the
Chilean Copper Commission, Chile’s portfolio of mining projects
includes about US$20 billion of investment in brownfield project
expansions over the next two years.
In the near term, COVID-19 restrictions are
expected to continue to limit the capacity of mining operations. We
are monitoring the mining industry’s response to a second wave and
expect mining product support revenue to recover in the second half
of 2021 as customers resume major maintenance work. We reached
agreements with our own unions, and we are closely monitoring our
customers’ upcoming union negotiations.
The outlook for the Chilean construction
industry is positive, supported by the government’s public
investment in infrastructure. We are seeing improved customer
activity and order intake in the construction markets in Chile. We
continue to monitor the political and economic reform process in
Chile leading up to general elections in November 2021.
In Argentina, we expect recovery in construction
activity in 2021 and stable activity in gold mining and oil and
gas. We expect the overall business environment in Argentina to
remain challenging, and are actively managing key risks, including
ARS devaluation.
UK & Ireland
The outlook for general construction equipment
markets in the UK has improved, driven by optimism about a
post-COVID economic recovery, a ramp-up of HS2 construction
activity, and the UK government’s tax incentives. Our backlog at
March 31, 2021 includes £83 million of equipment orders related to
HS2, and we expect to start delivering equipment to this project in
Q2 2021.
Strong demand for our power systems solutions,
particularly in the data centre market, is expected to continue. We
expect power systems project deliveries to accelerate in the second
half of 2021 and into 2022.
Improved Earnings Capacity in a Recovery
Our overall outlook for 2021 remains positive,
underpinned by our strong backlog. We are optimistic about market
recovery gaining momentum in the second half of 2021 as the
COVID-19 vaccine rollout ramps up in each of our regions. However,
we expect 2021 revenue to remain below 2019 levels.
In 2021, we expect to benefit from several
profitability drivers, including operating leverage in a recovering
market, product support growth in all regions, significant progress
towards our mid-cycle SG&A target, and effective allocation of
capital. Despite slower than anticipated vaccine rollout in Canada
and continued challenges related to COVID-19, we expect our 2021
earnings to exceed 2019.
We expect to deliver strong annual free cash
flow in 2021. However, with increased inventory purchases and
related cash usage, our annual EBITDA to free cash flow
conversion(2) is projected to be modestly below 50% for the
year.
CORPORATE AND BUSINESS DEVELOPMENTS
Dividend
The Board of Directors has approved a quarterly
dividend of $0.205 per share, payable on June 10, 2021 to
shareholders of record on May 27, 2021. This dividend will be
considered an eligible dividend for Canadian income tax
purposes.
Renewal of Share Repurchase Program
We have received approval from the Toronto Stock
Exchange ("TSX") to renew our normal course issuer bid (“NCIB”) to
purchase for cancellation up to 8,000,000 of our common shares,
representing approximately 5% of the total common shares issued and
outstanding of 162,393,066 common shares as at May 7, 2021.
The NCIB, which will begin on May 13, 2021 and
end no later than May 12, 2022, will be conducted through the
facilities of the TSX or other Canadian marketplaces or alternative
trading systems, if eligible, and will conform to their rules and
regulations.
Our Board of Directors believe that, from time
to time, the purchase by Finning of its common shares represents a
desirable use of its available cash to increase shareholder
value.
The average daily trading volume of our common
shares over the six-month period ending April 30, 2021, as
calculated in accordance with TSX rules, was 385,026 common shares.
Consequently, under TSX rules, we will be allowed to purchase
daily, through the facilities of the TSX, a maximum of 96,256
common shares representing 25% of such average daily trading
volume, subject to certain exceptions for block purchases. All
shares purchased pursuant to the normal course issuer bid will be
cancelled.
Purchases under the normal course issuer bid
will be made by means of open market transactions or such other
means as the TSX may permit. The price to be paid by Finning for
any common share will be the market price at the time of
acquisition, plus brokerage fees, or such other price as the TSX
may permit.
Under the current NCIB, which expires on May 10,
2021, we obtained approval to purchase up to 8,000,000 common
shares. We did not purchase any common shares under the current
NCIB.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
$
millions, except per share amounts |
Three months ended March 31 |
|
2021 |
|
2020 |
|
% changefav (unfav) |
|
New equipment |
403 |
|
353 |
|
14 |
|
Used equipment |
103 |
|
68 |
|
51 |
|
Equipment rental |
45 |
|
53 |
|
(15 |
) |
Product support |
887 |
|
934 |
|
(5 |
) |
Net fuel and other |
31 |
|
31 |
|
- |
|
Net revenue |
1,469 |
|
1,439 |
|
2 |
|
Gross profit |
407 |
|
418 |
|
(3 |
) |
Gross
profit as a percentage of net revenue(2) |
27.7 |
% |
29.1 |
% |
|
SG&A |
(314 |
) |
(325 |
) |
3 |
|
SG&A
as a percentage of net revenue |
(21.4 |
)% |
(22.6 |
)% |
|
Equity
earnings of joint ventures |
- |
|
1 |
|
|
Other
income |
15 |
|
- |
|
|
EBIT |
108 |
|
94 |
|
15 |
|
EBIT as
a percentage of net revenue |
7.4 |
% |
6.6 |
% |
|
Adjusted
EBIT |
93 |
|
94 |
|
(2 |
) |
Adjusted
EBIT as a percentage of net revenue |
6.3 |
% |
6.6 |
% |
|
Net income |
70 |
|
54 |
|
30 |
|
Basic
EPS |
0.43 |
|
0.33 |
|
30 |
|
Adjusted EPS |
0.35 |
|
0.33 |
|
6 |
|
EBITDA |
185 |
|
170 |
|
9 |
|
EBITDA
as a percentage of net revenue |
12.6 |
% |
11.8 |
% |
|
Adjusted
EBITDA |
170 |
|
170 |
|
- |
|
Adjusted
EBITDA as a percentage of net revenue |
11.6 |
% |
11.8 |
% |
|
Free cash flow |
(20 |
) |
(50 |
) |
60 |
|
|
Mar 31, 2021 |
Dec 31, 2020 |
Invested
capital |
3,177 |
|
3,067 |
|
Invested
capital turnover (times) |
1.78 |
|
1.68 |
|
Net debt
to EBITDA ratio(2) |
1.3 |
|
1.2 |
|
Net debt
to Adjusted EBITDA ratio(2)(3) |
1.5 |
|
1.4 |
|
ROIC |
12.5 |
% |
11.4 |
% |
Adjusted ROIC |
10.0 |
% |
9.6 |
% |
To access Finning's complete Q1 2021 results in
PDF, please visit our website at
https://www.finning.com/en_CA/company/investors.html
Q1 2021 INVESTOR CALLThe
Company will hold an investor call on May 11, 2021 at 10:00 am
Eastern Time. Dial-in numbers: 1-800-319-4610 (Canada and US),
1-416-915-3239 (Toronto area), 1-604-638-5340 (international). The
investor call will be webcast live and archived for three months.
The webcast and accompanying presentation can be accessed at
https://www.finning.com/en_CA/company/investors.html.
ABOUT FINNINGFinning
International Inc. (TSX: FTT) is the world’s largest Caterpillar
equipment dealer delivering unrivalled service to customers for 88
years. Finning sells, rents, and provides parts and service for
equipment and engines to help customers maximize productivity.
Headquartered in Vancouver, B.C., the Company operates in Western
Canada, Chile, Argentina, Bolivia, the United Kingdom and
Ireland.
CONTACT INFORMATIONAmanda HobsonSenior Vice
President, Investor Relations and Treasury Phone:
604-331-4865Email:
amanda.hobson@finning.com https://www.finning.com
FOOTNOTES
(1) |
|
Earnings Before Finance Costs and Income Taxes (EBIT); Basic
Earnings per Share (EPS); Earnings Before Finance Costs, Income
Taxes, Depreciation and Amortization (EBITDA); Selling, General
& Administrative Expenses (SG&A); Return on Invested
Capital (ROIC); not meaningful (n/m). |
|
|
|
(2) |
|
These financial metrics, referred to as “non-GAAP financial
measures”, do not have a standardized meaning under International
Financial Reporting Standards (IFRS), which are also referred to
herein as Generally Accepted Accounting Principles (GAAP), and
therefore may not be comparable to similar measures presented by
other issuers. For additional information regarding these financial
metrics, including definitions and reconciliations from each of
these non-GAAP financial measures to their most directly comparable
measure under GAAP, where available, see the heading “Description
of Non-GAAP Financial Measures and Reconciliations” in the
Company’s Q1 2021 management discussion and analysis (MD&A).
Management believes that providing certain non-GAAP financial
measures provides users of the Company’s MD&A and consolidated
financial statements with important information regarding the
operational performance and related trends of the Company's
business. By considering these measures in combination with the
comparable IFRS financial measures (where available) set out in the
MD&A, management believes that users are provided a better
overall understanding of the Company's business and its financial
performance during the relevant period than if they simply
considered the IFRS financial measures alone. |
|
|
|
(3) |
|
Certain financial metrics were impacted by significant items
management does not consider indicative of operational and
financial trends either by nature or amount; these significant
items are described on pages 5 and 24-25 of the MD&A. The
financial metrics that have been adjusted to take into account
these items are referred to as “Adjusted” metrics. |
FORWARD-LOOKING INFORMATION CAUTION
This news release contains information that is
forward-looking. Information is forward-looking when we use what we
know and expect today to give information about the future. In
particular, the discussion under the heading “Q1 2021 Market Update
and Business Outlook” section of this news release is
forward-looking information and is subject to this disclaimer
including the assumptions and material risk factors referred to
below. Forward-looking information in this news release includes,
but is not limited to, the following: our expectations to start
delivering trucks to Codelco’s Radomiro Tomic copper mine in the
second half of 2021 and related to piloting Caterpillar’s AHS
technology to enable autonomous operations at Codelco’s Ministro
Hales copper mine; that we are optimistic about market recovering
gaining momentum in the second half of 2021 (based on our
assumption about COVID-19 vaccine rollout ramping up in each of our
regions); that we have positioned the business for strong
performance going forward; our expectation that in 2021 we will
benefit from operating leverage in a recovering market, product
support growth in all regions, significant progress towards our
mid-cycle target of 17% SG&A as a percentage of net revenue,
and the effective allocation of capital; our expectation that our
business will continue demonstrating improved earnings capacity in
the upcoming quarters as we execute on our profitability drivers;
our expectation that our 2021 earnings will exceed 2019; our
supply, through 4Refuel, of fuel to Kicking Horse Canyon
Constructors Joint Venture over the next three years for highway
upgrades through the Kicking Horse Canyon in British Columbia; the
Canadian income tax treatment of the quarterly dividend; and
potential purchases of our common shares under our normal course
issuer bid. All such forward-looking statements are made pursuant
to the ‘safe harbour’ provisions of applicable Canadian securities
laws.
Unless we indicate otherwise, forward-looking
information in this news release reflects our expectations at the
date in this news release. Except as may be required by Canadian
securities laws, we do not undertake any obligation to update or
revise any forward-looking information, whether as a result of new
information, future events, or otherwise.
Forward-looking information, by its very nature,
is subject to numerous risks and uncertainties and is based on a
number of assumptions. This gives rise to the possibility that
actual results could differ materially from the expectations
expressed in or implied by such forward-looking information and
that our business outlook, objectives, plans, strategic priorities
and other information that is not historical fact may not be
achieved. As a result, we cannot guarantee that any forward-looking
information will materialize. Factors that could cause actual
results or events to differ materially from those expressed in or
implied by this forward-looking information include: the impact and
duration of the COVID-19 pandemic and measures taken by governments
and businesses in response; general economic and market conditions
and economic and market conditions in the regions where we operate;
foreign exchange rates; commodity prices; the impact of changes in
the UK’s trade relationship with the European Union as a result of
Brexit; the level of customer confidence and spending, and the
demand for, and prices of, our products and services; our ability
to maintain our relationship with Caterpillar; our dependence on
the continued market acceptance of our products, including
Caterpillar products, and the timely supply of parts and equipment;
our ability to continue to sustainably reduce costs and improve
productivity and operational efficiencies while continuing to
maintain customer service; our ability to manage cost pressures as
growth in revenue occurs; our ability to negotiate satisfactory
purchase or investment terms and prices, obtain necessary
regulatory or other approvals, and secure financing on attractive
terms or at all; our ability to manage our growth strategy
effectively; our ability to effectively price and manage long-term
product support contracts with our customers; our ability to reduce
costs in response to slowing activity levels; our ability to drive
continuous cost efficiency in a recovering market; our ability to
attract sufficient skilled labour resources as market conditions,
business strategy or technologies change; our ability to negotiate
and renew collective bargaining agreements with satisfactory terms
for our employees and us; the intensity of competitive activity;
our ability to raise the capital needed to implement our business
plan; regulatory initiatives or proceedings, litigation and changes
in laws or regulations; stock market volatility; changes in
political and economic environments in the regions where we carry
on business; our ability to respond to climate change-related
risks; the occurrence of natural disasters, pandemic outbreaks,
geo-political events, acts of terrorism, social unrest or similar
disruptions; fluctuations in defined benefit pension plan
contributions and related pension expenses; the availability of
insurance at commercially reasonable rates and whether the amount
of insurance coverage will be adequate to cover all liability or
loss that we incur; the potential of warranty claims being greater
than we anticipate; the integrity, reliability and availability of,
and benefits from, information technology and the data processed by
that technology; and our ability to protect our business from
cybersecurity threats or incidents, and with respect to our normal
course issuer bid, our share price from time to time and our
decisions about use of capital. Forward-looking information is
provided in this news release for the purpose of giving information
about management’s current expectations and plans and allowing
investors and others to get a better understanding of our operating
environment. However, readers are cautioned that it may not be
appropriate to use such forward-looking information for any other
purpose.
Forward-looking information made in this news
release is based on a number of assumptions that we believed were
reasonable on the day the information was given, including but not
limited to the specific assumptions stated above; that we will be
able to successfully manage our business through the current
challenging times involving the effects of the COVID-19 response
and low and/or volatile commodity prices and successfully implement
our COVID-19 risk management plans; An undisrupted market recovery,
for example, undisrupted by COVID-19 impacts, commodity price
volatility or social unrest; the successful execution of our
profitability drivers; that our cost actions to drive earnings
capacity in a recovery can be sustained; that commodity prices will
remain at constructive levels; that our customers will not curtail
their increasing capital expenditures; that general economic and
market conditions will improve; that the level of customer
confidence and spending, and the demand for, and prices of, our
products and services will be maintained; our ability to
successfully execute our plans and intentions; our ability to
attract and retain skilled staff; market competition will remain at
similar levels; the products and technology offered by our
competitors will be as expected; that identified opportunities for
growth will result in revenue; consistent and stable legislation in
the various countries in which we operate; no disruptive changes in
the technology environment and that our current good relationships
with Caterpillar, our customers and our suppliers, service
providers and other third parties will be maintained; sustainment
of strengthened oil prices and the Alberta government will not
re-impose production curtailments; quoting activity for requests
for proposals for equipment and product support is reflective of
opportunities; and strong recoveries particularly in Chile and the
UK. Some of the assumptions, risks, and other factors which could
cause results to differ materially from those expressed in the
forward-looking statements contained in this news release are
discussed in our current AIF and in our annual MD&A for the
financial risks, including for updated risks related to the
COVID-19 pandemic.
We caution readers that the risks described in
the AIF and in the annual and most recent quarterly MD&A are
not the only ones that could impact the Company. We cannot
accurately predict the full impact that COVID-19 will have on our
business, results of operations, financial condition or the demand
for our services, due in part to the uncertainties relating to the
ultimate geographic spread of the virus, the severity of the
disease, the duration of the outbreak, the steps our customers and
suppliers may take in current circumstances, including slowing or
halting operations, the duration of travel and quarantine
restrictions imposed by governments of affected countries and other
steps that may be taken by such governments to respond to the
pandemic. Additional risks and uncertainties not currently known to
us or that are currently deemed to be immaterial may also have a
material adverse effect on our business, financial condition, or
results of operation.
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