Major Americas Caterpillar dealer Finning International expects to see recent growth continue in the first half of 2023, underpinned by its record C$2.5 billion (US$1.86b) order backlog, after reporting 2022 full-year net revenues of C$8.21b (US$6.11b), up 23% year-on-year.
The backlog was 35% higher than 12 months earlier, “driven by higher order intake in mining and power systems”, Finning said.
The company said December-quarter (Q4) net revenue of C$2.4b, up 34% yoy, reflected large new equipment volume and strong product support growth rates”.
“Significant mining deliveries in Canada and South America drove new equipment sales growth of 52% compared to Q4 2021,” it said.
Canada contributes about half and South America one-third of Finning’s revenues.
Mining directly accounts for about half of Canada-based Finning’s revenues and more than 40% of the December 2022 backlog.
New equipment sales grew 28% yoy in 2022 to C$2.79b (US$2.08b).
Given construction and infrastructure market uncertainties, mining is set to become more pivotal to Finning’s results this year.
Finning CEO Kevin Parkes said the company expected market activity across western Canada to remain healthy, “supported by the strength in the mining and energy sectors”.
“Constructive commodity prices and improved capital budgets are expected to drive investment in renewal of aging fleets and product support opportunities in the oil sands and other mining,” he said.
“We expect to see growing demand for component remanufacturing, equipment rebuilds, and autonomy implementation as mining customers are looking to extend the life of their assets and improve productivity.”
Finning’s power systems backlog in Canada was at its highest levels since 2014.
In South America, the company was closely monitoring Chile’s constitutional reform process, including approval of a proposal for a revised mining royalty framework.
“We are encouraged by the latest moderated proposal. However, we expect the timing of investment decisions related to greenfield and new expansion projects to remain uncertain until the new royalty proposal is approved,” Parkes said.
“Longer term, we expect Chile will remain an attractive place to invest as electrification trends drive increasing global demand for copper.
“We expect a strengthening copper price to support positive mining outlook in Chile in 2023.
“Mining deliveries are expected to be driven by our recent wins with BHP and Codelco, as well as committed medium-term investment in fleet replacements across our mining customer base.
“We also expect to see continued strong demand for mining product support and technology solutions, including autonomy.”
However, slowing economic growth and higher interest rates were expected to continue impacting construction activity in Chile in 2023.
Mining accounts for more than 65% of Finning’s South America sales; Chile circa-80% of regional business.
Chile’s copper commission (Cochilco) has estimated capital investment in the country’s copper industry could top US$74b between 2022 and 2031. More than half of c53 projects slated for investment in the period are in Chile’s Antofagasta and Atacama mining regions.
“Looking ahead, we are mindful of the uncertain global business environment, including slowing rates of growth, and we are reinforcing our mid-cycle operating cost and capital model,” Parkes said.
“On balance, we see constructive demand conditions in our diverse end markets where we expect strength in mining and energy sectors to more than offset slowing construction markets in the UK and South America.”