Strong mining market activity in Canada and Chile has helped major Caterpillar dealer Finning International lift June-quarter revenue by 21% year-on-year to C$2.8 billion. The company remains positive about the outlook for the full year.
Finning said its $2.4 billion equipment backlog at the end of June, compared with $2.7b three months earlier, reflected a 40% quarter-on-quarter increase in deliveries in the period.
Equipment backlog was up from $2.1b at June 30, 2022, “driven by mining and power systems, which represent about 40% and 25% of our equipment backlog, respectively”.
Finning CEO Kevin Parkes said earnings growth on the back of climbing product support revenue reflected “the combination of our expanding installed equipment base and disciplined execution of our product support strategy” and saw adjusted return on invested capital (ROIC) rise above 20% for the first time.
“The performance of our South American business was particularly strong in Q2,” Parkes said.
“Strategic wins with large mining customers are helping drive increased activity in our mining business, with product support revenue up 34% in functional currency compared to Q2 2022 and adjusted ROIC above 26%.
“We are excited about both near and long-term growth opportunities in South America.”
Parkes said 36% higher net revenue in Canada was boosted by an 84% surge in new equipment sales, led by mining deliveries to oil sands customers. Product support revenue rose by 24%, led by mining, including increasing rebuild activity.
“Our outlook for western Canada is positive, supported by healthy order activity, record equipment backlog, and continued strong demand for product support across all sectors,” Parkes said.
“In the mining and energy sectors, constructive commodity prices and improved customer capital budgets are driving investment in renewal of aging fleets and growing demand for product support, including component remanufacturing and equipment rebuilds.
“Our outlook for Chile mining remains strong, supported by growing demand for copper and improving political clarity.
“We are encouraged by the recent government approvals of large-scale brownfield expansions and increasing customer confidence to invest into brownfield and greenfield projects.
“We are seeing robust quoting activity, and we have received significant orders from our mining customers after June 30 which will be added to our equipment backlog in Q3 2023.
“We also expect continued strong demand for mining product support and technology solutions.
“About half our construction business in Chile is related to the mining sector where we continue to see strong demand from large contractors supporting mining operations. We expect infrastructure construction activity in Chile to remain stable.”