Finning International ((TSE:FTT)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Finning International presented a balanced sentiment, highlighting significant achievements such as revenue growth, backlog expansion, and product support improvements. However, these were tempered by challenges in used equipment sales, increased SG&A expenses, and specific market issues in South America and the construction sector. The company’s strategic focus on cost control and capital efficiency suggests a proactive approach to overcoming these hurdles.
Revenue Growth
Finning International reported a sequential revenue growth of 6% from Q1 2025, reaching $2.6 billion. This increase underscores the company’s strong business performance and market resilience, showcasing its ability to navigate through varying market conditions.
Record Equipment Backlog
The company achieved a new milestone with its equipment backlog reaching $3 billion at the end of June. This marks the fifth consecutive quarter of backlog growth, setting a new record and demonstrating sustained demand for Finning’s offerings.
Canadian Market Strength
Order intake in Canada saw an impressive increase of over 80% compared to the same quarter last year. This growth was significant across all segments, particularly in construction, indicating a robust market presence in the region.
Product Support Revenue Growth
Product support revenue experienced growth across all regions, with Canada and South America both seeing a 4% increase. This was driven by strong mining activity, highlighting the company’s effective support services.
Power Systems Backlog Expansion
The Power Systems backlog exceeded $1 billion, reflecting an 88% increase from the previous year. This growth was driven by diversified orders in prime power, oil and gas, and data center segments, showcasing the company’s expanding footprint in these areas.
Adjusted EPS Improvements
Finning’s adjusted EPS rose to $1.01, a 5% increase from Q2 2024. This improvement was supported by lower finance costs and share repurchases, indicating effective financial management.
Used Equipment Sales Decline
There was a notable 43% decline in used equipment sales compared to Q2 2024. This drop was primarily due to the absence of large one-off packages that were present in the previous year.
Higher SG&A Costs
The SG&A margin increased to 15.5%, driven by a significant rise in long-term incentive plan expenses. This reflects a 44% appreciation in share price, indicating strong market confidence.
Challenges in South America
The EBIT margin in South America declined by 30 basis points due to a higher proportion of lower-margin mining equipment sales and potential labor cost pressures. This highlights ongoing challenges in the region.
Construction Market Softness
New equipment sales in Canada were down 3% from Q2 2024, reflecting slower activity in the construction sector. This indicates ongoing challenges in this market segment.
Forward-Looking Guidance
Looking ahead, Finning International aims to maximize product support, enhance full-cycle resilience, and pursue growth in rental, used, and power systems. The company maintains a strategic focus on cost and capital optimization, positioning itself for continued success despite current challenges.
In summary, Finning International’s earnings call reflected a balanced outlook, with strong achievements in revenue and backlog growth, countered by challenges in specific sectors. The company’s strategic initiatives in cost control and capital efficiency are expected to drive future growth and resilience.