Finning International ((TSE:FTT)) has held its Q4 earnings call. Read on for the main highlights of the call.
Maximize Your Portfolio with Data Driven Insights:
- Leverage the power of TipRanks' Smart Score, a data-driven tool to help you uncover top performing stocks and make informed investment decisions.
- Monitor your stock picks and compare them to top Wall Street Analysts' recommendations with Your Smart Portfolio
Finning International’s recent earnings call highlighted a year of robust growth and strategic execution for 2024. The company achieved record revenues, with significant performance improvements in South America and the Power Systems segment. Despite these successes, challenges persist in the Canadian market and rental business due to construction sector softness. Overall, the sentiment during the call was positive, driven by substantial achievements and growth in key business areas.
Record Net Revenue Growth
Finning International marked a significant milestone in 2024 by increasing its net revenues by 6% compared to 2023, reaching $10.1 billion. Notably, product support revenue hit a record high of $5.5 billion, underscoring the company’s strong financial performance.
Strong Equipment Sales
The company experienced impressive growth in equipment sales, with new equipment sales rising over 10% and used equipment sales increasing nearly 30%. Additionally, the backlog grew by over $550 million, reflecting strong market demand.
Improvements in South America
South America emerged as a key growth area with an 8% year-over-year increase in product support revenue in Q4 2024, excluding currency impacts. This growth was supported by the addition of nearly 350 net new technicians during the year.
SG&A Cost Management
Finning International achieved a new low in SG&A as a percentage of net revenue, reducing it to 16.3%. This demonstrates the company’s ongoing commitment to cost management and operational efficiency.
Free Cash Flow and Earnings
The company delivered significant free cash flow of $865 million and adjusted earnings per share of $3.80, highlighting its strong financial health and ability to generate cash.
Power Systems Growth
Power Systems revenue saw a remarkable 14% increase year-over-year, with a 70% surge in the backlog to approximately $860 million, indicating robust growth prospects in this segment.
Canadian Market Challenges
Despite the company’s overall success, the Canadian market faced challenges, with EBIT down 17% from Q4 2023. This decline was attributed to slower activity in construction and a higher proportion of lower-margin mining equipment deliveries.
Rental Revenue Decline
Rental revenue experienced a 14% decrease due to a reduced fleet size and lower utilization levels, primarily driven by softer construction activity in Canada.
UK and Ireland Market Softness
The UK and Ireland markets continued to experience soft conditions, with expectations for new construction equipment demand to remain low. This softness poses ongoing challenges for the business in these regions.
Forward-Looking Guidance
Looking ahead, Finning International remains focused on several strategic priorities. The company aims to sustain growth in used equipment and power systems, backed by a notable 70% increase in the Power Systems backlog. Efforts to manage working capital and cost efficiencies across regions will continue, with a strong emphasis on maximizing product support and enhancing the U.S. rental and power businesses in 2025.
In summary, Finning International’s earnings call reflected an overall positive sentiment, driven by record revenues and strategic growth in key areas. Despite challenges in the Canadian market and rental business, the company’s robust performance in South America and Power Systems highlights its potential for future success. Investors and stakeholders can take confidence in Finning’s strategic focus and growth prospects as they navigate the year ahead.
