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Investor Day<br />
Strategic Overview<br />
Mike Waites, President and CEO<br />
December 13, 2012
Executive Team<br />
Juan Carlos Villegas<br />
EVP and COO<br />
<strong>Finning</strong> <strong>International</strong><br />
Neil Dickinson<br />
Managing Director<br />
<strong>Finning</strong> UK & Ireland<br />
Andy Fraser<br />
President<br />
<strong>Finning</strong> Canada<br />
Marcello Marchese<br />
President<br />
<strong>Finning</strong> South America<br />
Dave Smith<br />
EVP and CFO<br />
<strong>Finning</strong> <strong>International</strong><br />
Rebecca Schalm<br />
SVP, Human Resources<br />
<strong>Finning</strong> <strong>International</strong><br />
2
Unique Value Proposition<br />
• Geographic and industry<br />
diversification<br />
Product Support Revenue<br />
10 year CAGR ~11%<br />
• Strong market positions<br />
• Copper mining in Chile<br />
3.0<br />
$ Billions<br />
2.7<br />
• Oil sands in Canada<br />
2.5<br />
2.4<br />
• Large installed equipment<br />
base drives resilient product<br />
support<br />
• Investment in product support<br />
capacity and capability<br />
2.0<br />
1.5<br />
1.0<br />
1.0<br />
1.1<br />
1.2<br />
1.3<br />
1.6<br />
1.7<br />
1.9 1.9<br />
2.1<br />
• Canada: OEM, COE,<br />
Fort McKay<br />
0.5<br />
• FINSA: La Negra Truck Shop<br />
and PDC, Antofagasta CRC<br />
0.0<br />
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 LTM*<br />
• UK & Ireland: Damar<br />
Recession<br />
* Last twelve months ended September 30, 2012<br />
3
Strategy Map<br />
Mining Solutions<br />
Power Systems<br />
Ultimate<br />
Global<br />
Solutions<br />
Provider<br />
Intermediate<br />
Operational<br />
Excellence<br />
S<br />
T<br />
R<br />
A<br />
T<br />
E<br />
G<br />
I<br />
C<br />
Vision<br />
Providing unrivalled services that earn<br />
customer loyalty, we will be CAT’s best<br />
global business partner.<br />
Core/BCP<br />
Leadership<br />
Operational<br />
Excellence 5 x S<br />
Acquisition(s)<br />
Safety<br />
Sales & Solutions<br />
Service & Parts<br />
Supply Chain<br />
Operating<br />
Leverage<br />
Short-term<br />
Solidify<br />
Foundation<br />
G<br />
R<br />
O<br />
W<br />
T<br />
H<br />
Disciplined Growth<br />
Balance Sheet Deleverage<br />
Systems<br />
EBIT Improvement<br />
High Performance/<br />
Engagement<br />
4
Achievements<br />
Relentless Focus<br />
Meeting our Commitments<br />
Targets<br />
Bucyrus<br />
• Acquisition and transition<br />
Progress<br />
Successful; accretive to EPS<br />
Canada business recovery<br />
• EBIT margin improvement<br />
From (0.3%) in Q3 2011 to 7.8% in Q3 2012<br />
Revenue growth<br />
• 12-15% including Bucyrus Up 19% YTD ending Sep 30, 2012<br />
Return on Equity<br />
• >18% 21.9% LTM ended Sep 30, 2012<br />
EBIT margin expansion<br />
• 9-10% in 2013<br />
7.8% in Q3 2012<br />
Free Cash Flow<br />
• Essentially break-even<br />
Net Debt to Total Capital<br />
• 35 - 45%<br />
Expect modest net usage of cash in FY12<br />
Expect above target range in 2012<br />
5
Outlook<br />
• Expect constructive business<br />
conditions in key markets<br />
• Mining to remain active supported by<br />
relatively strong oil and copper prices<br />
• Uncertain outlook for equipment sales<br />
• Customers becoming more cautious,<br />
delaying some purchasing decisions<br />
• Expect continued strong demand for<br />
product support<br />
• Large and aging equipment population<br />
• Robust level of equipment utilization<br />
6
Revenue Drivers<br />
• Product support growth<br />
• New products and services<br />
• Bucyrus - full suite of mining products<br />
• CAT 795 electric drive truck<br />
• UK & Ireland Power Systems - Damar,<br />
Komptech<br />
• Chile - truck dump bodies<br />
• New technologies<br />
• Remote condition monitoring<br />
• C175 engine<br />
• Gas fuel substitution<br />
• Grow market share as equipment<br />
availability has improved<br />
7
Driving Value<br />
• Operational excellence focus<br />
• Supply chain management<br />
• Service productivity and profitability<br />
• SG&A improvements<br />
• Priorities<br />
• Operating leverage<br />
• Sequential EBIT margin expansion<br />
• Committed to 9-10%<br />
• Sustain strong ROE<br />
• Drive return on investments made<br />
• Strengthen balance sheet<br />
8
Summary<br />
• Sustainable competitive advantage<br />
• Continued focus on operational excellence<br />
• Operating with caution<br />
• Driving value in slow growth environment<br />
9
Investor Day<br />
Financial Outlook<br />
Dave Smith, EVP and CFO<br />
December 13, 2012
Financial Targets<br />
Earnings Growth<br />
• Sequential EBIT margin<br />
expansion<br />
• Committed to 9-10%<br />
Strengthen balance sheet<br />
• Significant free cash flow<br />
• Net debt to total capital<br />
target: 35-45%<br />
Drive return on invested<br />
capital<br />
• ROE target: >18%<br />
Grow dividends<br />
• Consistent with<br />
sustainable growth<br />
2
EBIT Margin Journey<br />
• Continue to improve operating leverage<br />
• Fundamental shift to 20-30% higher profitability<br />
• Reduction in volatility<br />
10 year EBIT margin<br />
range 5-8%<br />
EBIT margin target<br />
3
Investment in COE<br />
Bucyrus acquisition<br />
Balance Sheet<br />
• Strong EBITDA to drive significant free cash flow<br />
• Lower capex<br />
• Improve working capital metrics<br />
• Deleverage balance sheet – within target range in 2013<br />
60<br />
%<br />
Net Debt to Total Capital Ratio<br />
50<br />
40<br />
Target<br />
Range<br />
30<br />
20<br />
10<br />
0<br />
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012<br />
Sep<br />
4
Return on Invested Capital<br />
• Improve return on assets<br />
• Significant investments<br />
over past few years<br />
• Bucyrus<br />
• ERP<br />
• Branch network, CRCs, PDCs<br />
• Digesting and making<br />
these assets work<br />
• Improving working capital<br />
• Focus on asset performance<br />
by market segment and<br />
line of business<br />
• Target ROE consistently >18%<br />
%<br />
24<br />
21<br />
18<br />
15<br />
12<br />
9<br />
6<br />
3<br />
0<br />
Return on Equity<br />
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 LTM*<br />
* Last twelve months ended September 30, 2012<br />
Periods prior to 2010 are adjusted to represent ROE under IFRS<br />
5
Dividends<br />
• Important component of total<br />
shareholder return<br />
• Committed to grow<br />
dividends, consistent with<br />
sustainable growth<br />
• 10 year average payout ratio<br />
~30%<br />
• Current quarterly dividend<br />
= $0.14<br />
• Current dividend yield ~2.5%<br />
$<br />
0.60<br />
0.50<br />
0.40<br />
0.30<br />
0.20<br />
0.10<br />
0.00<br />
Annual Dividends<br />
0.55<br />
0.51<br />
0.47<br />
0.43 0.44<br />
0.36<br />
0.28<br />
0.18 0.20 0.22<br />
0.15<br />
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012<br />
6
2013 Financial Outlook<br />
• Revenue<br />
• Flat to 10% growth<br />
over 2012<br />
• 10 year CAGR ~ 8%<br />
• Earnings per share<br />
• Earnings to grow at<br />
higher rate than revenue<br />
• 10 year CAGR ~8%<br />
• Balance sheet<br />
• Net debt to total capital<br />
ratio within 35-45%<br />
by end of 2013<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0.0<br />
$<br />
2.0<br />
1.6<br />
1.2<br />
0.8<br />
0.4<br />
0.0<br />
$ Billions<br />
3.2<br />
Revenue<br />
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 LTM*<br />
0.86 0.86<br />
3.6 3.8<br />
0.73<br />
4.3<br />
4.9<br />
Basic EPS<br />
0.91<br />
1.32<br />
5.7 5.6<br />
1.57<br />
1.38<br />
4.5 4.6<br />
Recession<br />
0.92<br />
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 LTM*<br />
* Last twelve months ended September 30, 2012<br />
Results from continuing operations<br />
1.06<br />
5.9<br />
1.51<br />
6.7<br />
1.76<br />
7
Key Financial Focus Areas<br />
• Improve earnings growth and quality<br />
• Drive return on invested capital<br />
• Deleverage balance sheet<br />
• Grow dividends<br />
8
Investor Day<br />
Operational Excellence<br />
Juan Carlos Villegas, EVP and COO<br />
December 13, 2012
Strategy Map<br />
Mining Solutions<br />
Power Systems<br />
Ultimate<br />
Global<br />
Solutions<br />
Provider<br />
Intermediate<br />
Operational<br />
Excellence<br />
S<br />
T<br />
R<br />
A<br />
T<br />
E<br />
G<br />
I<br />
C<br />
Vision<br />
Providing unrivalled services that earn<br />
customer loyalty, we will be CAT’s best<br />
global business partner.<br />
Core/BCP<br />
Leadership<br />
Operational<br />
Excellence 5 x S<br />
Acquisition(s)<br />
Safety<br />
Sales & Solutions<br />
Service & Parts<br />
Supply Chain<br />
Operating<br />
Leverage<br />
Short-term<br />
Solidify<br />
Foundation<br />
G<br />
R<br />
O<br />
W<br />
T<br />
H<br />
Disciplined Growth<br />
Balance Sheet Deleverage<br />
Systems<br />
EBIT Improvement<br />
High Performance/<br />
Engagement<br />
2
Operational Excellence<br />
Customer Centric<br />
Culture<br />
Operational Discipline<br />
and Efficiency<br />
• Maintain local customer focus<br />
• Align organizational structure to strategy<br />
• Consistently apply leading practices which add value<br />
• Leverage expertise of <strong>Finning</strong>’s regions<br />
• Share learning across organization<br />
• Focus on margin expansion<br />
3
Strategy Map - Operational Excellence<br />
Intermediate step in our strategy<br />
Safety<br />
Operational<br />
Excellence<br />
Operational<br />
Excellence<br />
5 x S<br />
Sales & Solutions<br />
Service & Parts<br />
Supply Chain<br />
Operating<br />
Leverage<br />
Systems<br />
4
Safety<br />
• Strong safety performance = solid culture and competitive advantage<br />
• Employee opinion on safety scores – top 10% of global organizations<br />
• Good example of cultural change and best practices sharing<br />
• Embedded process and standardization<br />
2.5<br />
Lost Time Injuries (LTI) per 200,000 work hours<br />
2.0<br />
1.5<br />
1.0<br />
0.5<br />
0<br />
02 03 04 05 06 07 08 09 10 11 12<br />
5
Sales and Solutions<br />
• Enhanced focus on market<br />
segmentation and analysis<br />
• Leveraging power systems<br />
leadership globally<br />
• New businesses<br />
and solutions<br />
• Bucyrus<br />
• Truck dump bodies<br />
• Damar<br />
• Komptech<br />
• Technology services<br />
• Fintech<br />
• Finsight<br />
• Remote condition monitoring<br />
6
Sales and Solutions – Bucyrus Update<br />
• Transition plans well executed in all regions<br />
• Retained knowledge, capabilities and talent<br />
• Successful transfer to ERP platform<br />
• <strong>Finning</strong> used by CAT as best practice<br />
• Making solid integration progress<br />
• Bundling equipment: recent deals<br />
in Chile and UK<br />
• Service business stronger than expected<br />
• Priority: working with CAT to further develop parts business<br />
• Accretive to earnings in first year<br />
• Reviewing opportunities for operating synergies<br />
7
Service and Parts<br />
• Service productivity<br />
• Customer centric culture to be balanced with operating discipline<br />
• Leverage asset investments from past five years: La Negra, COE<br />
and Fort MacKay<br />
• Lean manufacturing applied to our business - Caterpillar<br />
Production System (CPS)<br />
• Capacity planning and equipment scheduling<br />
• Global service productivity team<br />
• Application of shared learning and best practices<br />
• Experts from each region working together to enhance global<br />
performance<br />
• Outcome: improved customer service and profitability<br />
8
Supply Chain<br />
• Building sustainable, efficient and consistent supply chain<br />
• Standardized, rigorous processes with common metrics<br />
• Sharing leading practices across the regions<br />
• Regional leads are Global Supply Chain Council members<br />
• End-to-end processes include Caterpillar<br />
• Improving inventory planning process<br />
• Sustainable benefits<br />
• Faster inventory turns while maintaining service levels<br />
• Shorter cash-to-cash cycle<br />
• Reduced working capital levels over business cycle<br />
• Improved asset utilization<br />
• Improving customer service and satisfaction<br />
9
Systems<br />
• Continuous improvement of systems and processes<br />
• Leverage technology – applications and geography<br />
• Drive ERP business case benefits<br />
• Working capital and inventory<br />
management<br />
• Improved productivity<br />
• Integrate technologies<br />
• Condition monitoring<br />
• Safety<br />
• E-commerce business<br />
• Phased implementation in UK & Ireland and South America<br />
• Transfer experience and learning from Canada to other<br />
regions<br />
10
Summary<br />
• Operational excellence across all regions - key driver of<br />
sustainable improvement in operating profitability and<br />
customer loyalty<br />
• Consistent processes transferable and scalable<br />
• Focus on largest margin impacts<br />
• Supply chain<br />
• Service productivity<br />
• SG&A improvements<br />
• Sharing best practices<br />
• Bucyrus integration<br />
• Global Supply Chain Council<br />
• Global Power Systems<br />
11
Investor Day<br />
Andy Fraser, President, <strong>Finning</strong> Canada<br />
December 13, 2012
<strong>Finning</strong> Canada<br />
• Revenue:<br />
• 2011: $2.9 billion<br />
• YTD Sep 2012: $2.5 billion<br />
• EBIT:<br />
• 2011: $170 million<br />
• YTD Sep 2012: $162 million<br />
• Industries:<br />
• Mining (including oil sands)<br />
• Construction<br />
• Power systems<br />
• Petroleum / oil & gas<br />
• Forestry<br />
• Employees: ~5,800<br />
Yukon<br />
Western Canada<br />
British<br />
Columbia<br />
Northwest<br />
Territories<br />
Fort McMurray<br />
(4 branches + Fort McKay)<br />
Edmonton<br />
(OEM, PDC)<br />
Vancouver<br />
Alberta<br />
Red Deer<br />
(COE)<br />
2
<strong>Finning</strong> Canada Revenue Profile<br />
Revenue<br />
by Line of Business<br />
Product Support<br />
Revenue by Industry<br />
New Equipment<br />
Sales by Industry<br />
Used Rental<br />
Equipment 8%<br />
5%<br />
Power Systems<br />
8%<br />
Forestry<br />
4%<br />
Petroleum<br />
11%<br />
Other<br />
5%<br />
Product<br />
Support<br />
43%<br />
New<br />
Equipment<br />
44%<br />
Construction<br />
27%<br />
Mining<br />
65%<br />
Power<br />
Systems<br />
12%<br />
Construction<br />
36%<br />
Mining<br />
32%<br />
Product support for petroleum and forestry<br />
is allocated among above key industries<br />
Other includes government and industrial<br />
YTD ending September 30, 2012<br />
3
Operational Excellence<br />
• Entering the phase of continuous improvement of systems and processes<br />
• Focus on ERP system optimization and ease of use<br />
• Enabling working capital efficiencies and improving asset performance<br />
• Driving supply chain initiatives<br />
• Improving forecasting capability for equipment and parts<br />
• Reducing uncommitted equipment inventory<br />
• <strong>Inc</strong>reasing inventory turns (new Spokane Caterpillar parts distribution center)<br />
• Improving service productivity<br />
• Introducing lean manufacturing approach (Caterpillar Production System)<br />
• Focus on improved service utilization through technology<br />
• People<br />
• Safety: LTIF* = 0.18<br />
• Employee engagement: record participation in 2012<br />
• Training: technical, safety, leadership<br />
• Organizational alignment to support operational excellence<br />
* Lost Time Injury Frequency - YTD ending September 30, 2012<br />
4
Oil Sands Product Support<br />
• Five oil sands branches<br />
• New oil sands service facility (Fort McKay)<br />
• 16 bays; 160,000 sq. ft.<br />
• $110M investment: 2011 and 2012<br />
• Operational in Q4 2012<br />
• Regional training centre<br />
• Two parts warehouses (Mildred Lake<br />
and Fort McMurray)<br />
• Parts distribution center (Edmonton)<br />
• OEM - component remanufacturing facility (Edmonton)<br />
• COE - equipment assembly and rebuild facility (Red Deer)<br />
New Fort McKay oil sands service facility<br />
• Multiple field service locations; over 200 fully equipped field service trucks<br />
• ~1,100 regional employees, including ~550 mechanics and apprentices<br />
• Oil sands revenue: 2011 >$900 million; 2012 projected >$1 billion<br />
5
Oil Sands Mining Fleet Growth<br />
Equipment Type<br />
Caterpillar Units<br />
at Jun 30, 2012<br />
Total Units<br />
at Jun 30, 2012<br />
<strong>Finning</strong>’s<br />
Market Share<br />
Additional CAT<br />
Units Projected<br />
Jun 2012 to 2017<br />
400 Ton Trucks (797)<br />
250<br />
278<br />
90%<br />
104<br />
320 – 340 Ton Trucks (795/MT5300)<br />
131<br />
10<br />
240 Ton Trucks (793)<br />
158<br />
182<br />
87%<br />
64<br />
100 – 200 Ton Trucks (777-789)<br />
408<br />
416<br />
98%<br />
157<br />
Ultra Large Tractors (D11 & D10)<br />
293<br />
322<br />
91%<br />
139<br />
Large Tractors (D9 & D8)<br />
255<br />
287<br />
89%<br />
70<br />
Ultra Large Graders (24)<br />
90<br />
90<br />
100%<br />
57<br />
Large Graders (16)<br />
85<br />
86<br />
99%<br />
46<br />
Total<br />
1,539<br />
1,792<br />
647<br />
Projections include existing projects and expansions, as well as contractor equipment for:<br />
Syncrude (Base & Aurora), Suncor (Steepbank & Millennium), Shell/Albian (Muskeg River<br />
& Jackpine), CNRL (Horizon), Exxon/Imperial (Kearl)<br />
6
Construction and Power Systems<br />
• Heavy construction<br />
• Continued investment in infrastructure<br />
• Alberta – ring roads, airports, LRT in Calgary and Edmonton<br />
• British Columbia – Evergreen Line Rapid Transit, Coquitlam to Vancouver;<br />
Interior to Lower Mainland (ILM) Transmission Project, Nicola to Coquitlam<br />
• Numerous pipeline projects in Western Canada through 2020<br />
• Forestry<br />
• US housing starts improving<br />
• Diversified markets<br />
• Power systems<br />
• Petroleum / oil & gas<br />
• Slower activity due to lower well fracturing and servicing<br />
• EPG and rental power<br />
• Solid demand, particularly in mining<br />
• Strong customer value proposition with integrated product offering<br />
7
Opportunities<br />
• Sustainable product support growth<br />
• Large and aging equipment population<br />
• Strong demand for component remanufacturing and machine rebuilds<br />
• Fort McKay oil sands facility to support producers and contractors<br />
• Oil sands remain active<br />
• Mining equipment population for existing projects expected to grow by<br />
~40% over next 5 years<br />
• Drills, Shovels & Mining Systems*<br />
• Complete mining product offering<br />
• Significant product support opportunity<br />
• Solid demand from heavy construction<br />
and power systems<br />
• Gaining market share with improved<br />
equipment availability<br />
* Former Bucyrus business<br />
8
2013 Priorities – Consistent Execution<br />
• Continue to improve operating<br />
profitability<br />
• Drive operational excellence<br />
• Improve working capital performance<br />
• <strong>Inc</strong>rease service productivity<br />
• Integrate and grow new Drills,<br />
Shovels & Mining Systems business<br />
• Execute on Fort McKay – game<br />
changer<br />
• Gain market power in construction<br />
and pipeline<br />
• Operating with caution<br />
9
Market Outlook<br />
• Expect stable oil sands activity<br />
• Robust product support business, including component<br />
remanufacturing and machine overhaul<br />
• Producers taking more balanced view on capital projects and<br />
expansions<br />
• Other mining<br />
• Solid demand from copper and thermal coal<br />
• Metallurgical coal customers remain cautious<br />
• Favourable outlook for heavy construction in BC and Alberta<br />
• Significant infrastructure projects underway<br />
• Mining and energy related construction projects, including pipelines<br />
• Oil & gas and forestry activity expected to be similar to 2012<br />
10
Summary<br />
• Key markets remain constructive<br />
• Capturing revenue opportunities in slow growth environment<br />
• Monitoring customer activity closely<br />
• Managing business with more conservatism<br />
• Leveraging investments to deliver customer value<br />
• Growing parts and service business for Drills, Shovels &<br />
Mining Systems<br />
• Developing and training people<br />
• Focus on rigorous and consistent execution<br />
• Driving operational excellence<br />
• Improving EBIT margin performance<br />
11
Investor Day<br />
Marcello Marchese, President, <strong>Finning</strong> South America<br />
December 13, 2012
<strong>Finning</strong> South America<br />
• Revenue:<br />
• 2011: US$2.1 billion<br />
• YTD Sep 2012: US$1.7 billion<br />
• EBIT:<br />
• Chile – 76%, Argentina – 18%,<br />
Bolivia – 4%, Uruguay – 2%<br />
• 2011: US$195 million<br />
• YTD Sep 2012: US$161 million<br />
• Industries:<br />
• Mining (copper, gold)<br />
• Construction / general machinery<br />
• Power systems<br />
• Employees: ~7,500<br />
US$ Millions<br />
2,400<br />
2,000<br />
1,600<br />
1,200<br />
800<br />
400<br />
0<br />
282<br />
US$ Millions<br />
220<br />
200<br />
180<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
Revenue<br />
407<br />
671<br />
EBIT<br />
832 890<br />
1,240 1,398 1,305<br />
1,622<br />
2,245<br />
2,141<br />
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 LTM*<br />
29<br />
43<br />
65<br />
77<br />
96<br />
118<br />
139 134<br />
145<br />
195<br />
216<br />
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 LTM*<br />
* Last twelve months ended September 30, 2012<br />
2
FINSA Revenue Profile<br />
Revenue<br />
by Line of Business<br />
Product Support<br />
Revenue by Industry<br />
New Equipment<br />
Sales by Industry<br />
Used<br />
Equipment<br />
2%<br />
Rental<br />
3%<br />
Power Systems<br />
6%<br />
Construction<br />
13%<br />
Power<br />
Systems<br />
13%<br />
Other<br />
3%<br />
Product<br />
Support<br />
51%<br />
New<br />
Equipment<br />
44%<br />
Mining<br />
81%<br />
Construction<br />
45%<br />
Mining<br />
39%<br />
Other incudes forestry, industrial,<br />
government<br />
YTD ending September 30, 2012<br />
3
Operational Excellence<br />
• Strategic approach to supply chain management<br />
• Working capital initiatives – focus on inventory<br />
• End-to-end planning processes<br />
• Leveraging investment in product support infrastructure<br />
• Lean manufacturing approach (Caterpillar Production System)<br />
• Improved shop utilization/throughput<br />
• Expanded Component Rebuild Centre capacity<br />
• People and high-performance culture<br />
• Safety: LTIF* = 0.26<br />
• Employee engagement - 85% in 2012<br />
• Training - new technical training centre in Antofagasta<br />
* Lost Time Injury Frequency - YTD ending September 30, 2012<br />
4
Chilean Mining<br />
• Chilean mining investment projected at ~US$ 70 billion<br />
over next 5 years*<br />
• Strong mining outlook balanced by industry growth challenges:<br />
• Shortages of skilled people<br />
• Environmental considerations (e.g. fresh water consumption)<br />
• Energy requirements<br />
• Strong and growing product support business<br />
• 19 MARC and LPP contracts covering 60-70% of equipment population<br />
• Mining product support market share ~90%<br />
• Robust mining projects portfolio<br />
• Large and expanding machine population<br />
• Mining equipment market share 50-60%<br />
* Source: Cochilco<br />
5
FINSA Mining Fleet Growth<br />
Equipment Type<br />
Caterpillar Units<br />
at Dec 31, 2012<br />
Total Units<br />
at Dec 31, 2012<br />
<strong>Finning</strong>’s<br />
Market Share<br />
Additional CAT<br />
Units Projected<br />
2013 to 2017<br />
Ultraclass Trucks Size (797-795)<br />
232<br />
571<br />
41%<br />
211<br />
Large Mining Trucks (793 – 777)<br />
879<br />
1,390<br />
63%<br />
383<br />
Large Wheel Loaders (994 – 992)<br />
172<br />
270<br />
64%<br />
55<br />
Large Wheel Dozers (854 – 824)<br />
149<br />
267<br />
56%<br />
49<br />
Track-Type Tractors (D11 – D9)<br />
341<br />
609<br />
56%<br />
99<br />
Motor Graders (24 - 16)<br />
168<br />
273<br />
62%<br />
80<br />
Underground<br />
148<br />
480<br />
31%<br />
120<br />
Total<br />
2,089<br />
3,860<br />
54%<br />
997<br />
6
Construction and Power Systems<br />
• Growing demand from mining contractors in Chile<br />
• Substantial private and government investment in infrastructure in<br />
Chile<br />
• Significant opportunity to grow product support in construction and<br />
power systems as population of equipment and engines increasing<br />
• Construction product support market share ~60%<br />
• Market segmentation strategy offers unique customer value<br />
proposition<br />
• Growing market share in various sub-segments (e.g. Compacto)<br />
• Service culture of innovation and technology<br />
• Remote condition monitoring services<br />
• Low-cost solutions for easy to repair failures<br />
• Slow but stable business activity in Argentina<br />
• Meeting customer demand to greatest extent possible<br />
• Adjusted our business to align with decreased activity levels<br />
7
Opportunities<br />
• Mining growth supported by healthy copper prices<br />
• Mining equipment population expected to increase significantly over next 5 years<br />
• Continued strong demand for product support<br />
• Bucyrus<br />
• Unique opportunity to offer complete mining solution<br />
• Significant product support opportunity<br />
• New products and businesses<br />
• 795 electric drive truck<br />
• Fabrication of truck bodies<br />
• METSO mobile crushers<br />
• Technology products and services<br />
• Solid demand from construction and<br />
power systems customers in Chile<br />
8
2013 Priorities – Consistent Execution<br />
• Drive operational excellence<br />
• Supply chain end-to-end<br />
integration<br />
• Grow Bucyrus business<br />
• Balance product support<br />
growth with efficiencies<br />
• Manage the business with<br />
caution in light of macroeconomic<br />
uncertainty<br />
9
Market Outlook<br />
• Positive long-term fundamentals as copper prices<br />
remain high by historical standards<br />
• Expect Chilean mining to continue to be very active<br />
• Solid activity in existing operations<br />
• Continued strong demand for product support<br />
• Caution on new projects and expansions<br />
• Positive outlook for construction and power systems in<br />
Chile, Bolivia and Uruguay<br />
• 2013 – election year in Chile<br />
• Economic environment in Argentina expected to remain<br />
largely unchanged<br />
10
Summary<br />
• Strong outlook for Chile<br />
• Mining investment presents big opportunities<br />
• Solid order intake and strong demand for product support<br />
• Infrastructure spend to support construction and power systems<br />
business<br />
• Capturing growth opportunities with<br />
Bucyrus and 795 electric drive truck<br />
• Driving operational excellence<br />
• Focus on supply chain<br />
• Leveraging product support capabilities<br />
• Improving EBIT margin performance<br />
11
Investor Day<br />
Neil Dickinson, Managing Director, <strong>Finning</strong> UK & Ireland<br />
December 13, 2012
<strong>Finning</strong> UK & Ireland<br />
• Revenue:<br />
• 2011: $831 million<br />
• YTD Sep 2012: $684 million<br />
<strong>Finning</strong> Cat<br />
Cat Compact<br />
Dealers<br />
Ag Dealers<br />
• EBIT:<br />
• 2011: $52 million<br />
• YTD Sep 2012: $40 million<br />
• Segmented approach<br />
• Equipment Solutions<br />
• Power Systems<br />
• Employees: ~1,800<br />
2
<strong>Finning</strong> UK & Ireland Revenue Profile<br />
Revenue<br />
by Line of Business<br />
Product Support<br />
Revenue by Industry<br />
New Equipment<br />
Sales by Industry<br />
Used<br />
Equipment<br />
7%<br />
Rental<br />
3%<br />
Mining<br />
7%<br />
Waste,<br />
Industrial,<br />
Demolition<br />
7%<br />
Quarrying<br />
3%<br />
Power<br />
Systems<br />
Industrial<br />
11%<br />
Product<br />
Support<br />
29%<br />
New<br />
Equipment<br />
61%<br />
Power<br />
Systems<br />
38%<br />
Construction<br />
55%<br />
Mining<br />
19%<br />
Construction<br />
31%<br />
Power &<br />
Energy<br />
19%<br />
Marine<br />
7%<br />
Oil &<br />
Gas<br />
3%<br />
YTD ending September 30, 2012<br />
3
Clear Strategic Roadmap<br />
Trusted by Experts<br />
Expand Into<br />
Growing Markets<br />
Solutions<br />
Provider<br />
Operational<br />
Excellence +<br />
Profitable<br />
Growth<br />
Solidify<br />
Foundation<br />
C<br />
A<br />
T<br />
S<br />
T<br />
R<br />
A<br />
T<br />
E<br />
G<br />
I<br />
C<br />
Dominate Mining,<br />
Power & Core<br />
Grow & Develop<br />
Power Systems<br />
Scope<br />
Product Support +<br />
Reman Growth<br />
Rollo Acquired<br />
Leadership<br />
Programme<br />
Implemented<br />
Specialised<br />
Engineering &<br />
Technology<br />
All Makes Managed<br />
Services<br />
Bucyrus<br />
MWM<br />
Safety Simplified<br />
New <strong>Finning</strong> UK<br />
‘Trusted’ Strategy<br />
Product Support<br />
Growth Beyond Core<br />
Panorama &<br />
Operational<br />
Excellence<br />
Sitech + <strong>Finning</strong><br />
Technologies<br />
Supply Chain +<br />
Procurement<br />
UK Business Model<br />
EBIT% Improvement<br />
BCP & Core<br />
Agreements<br />
#1 for Service &<br />
Loyalty<br />
CPS* & OPERATIONAL EXCELLENCE<br />
* Caterpillar Production System<br />
4
Execution on Strategy in 2012<br />
• Acquired Damar - specialised engineering<br />
business; completed £7m anaerobic<br />
digestion plant<br />
• Acquired Bucyrus – 6 shovels sold in year 1<br />
• Acquired distribution rights to Komptech<br />
products – total solution for recycling sector<br />
• Established “Managed Services “ capability<br />
• Caterpillar Gas (MWM) products added and<br />
<strong>Finning</strong> recognised as Perkins Gas Centre<br />
of Excellence for Western Europe and<br />
Scandinavia<br />
• Finsight launched<br />
• Recognised as leader in safety<br />
• Continue to focus on higher margin / added<br />
value opportunities<br />
5
Operational Excellence<br />
Strategic Focus<br />
• Driving supply chain initiatives<br />
• Outsourced national distribution centre<br />
• Revised ordering processes - Lane 1<br />
• Focused on EBIT margin improvement<br />
• Focus on SG&A<br />
• Review procurement contracts<br />
• Defined benefit pension plan closed<br />
• Headcount rationalisation<br />
• Utility costs<br />
• Caterpillar Production System (CPS) –<br />
eliminating waste<br />
6
Operational Excellence<br />
Strategic Focus<br />
• People and high-performance culture<br />
• Safety – national award winners<br />
• Employee engagement - 82% in 2012<br />
• Training<br />
• “Developing Great Leaders” course<br />
• <strong>Finning</strong> Academy in top 100 UK schemes<br />
• Market segmentation<br />
• Customer loyalty / service productivity<br />
• Top 2 for Customer Loyalty in Caterpillar<br />
• Awarded Gold Service Excellence from<br />
Caterpillar<br />
• Finsight / Managed Services<br />
7
Market Outlook 2013<br />
• Equipment Solutions – market size<br />
down 10%<br />
• Mining impacted by weak coal prices<br />
• Limited investment in quarry and<br />
aggregates<br />
• Government investment – rail and<br />
energy, possibly housing<br />
• Industrials slowing<br />
• Small machines – niche markets<br />
• Power Systems – mixed growth<br />
• Oil & Gas<br />
• <strong>Inc</strong>reased product range<br />
in Gas Electric Power<br />
• Marine<br />
• Renewables / clean power<br />
8
UK & Ireland Opportunities<br />
Equipment Solutions<br />
• Mining and energy<br />
• Underground via Bucyrus<br />
• Legacy products<br />
• Tungsten mine<br />
• Quarrying and industrial<br />
• Managed Services<br />
• Market share gains<br />
• Machine age increasing<br />
• Waste and recycling<br />
• Komptech complementary products<br />
• Growth in Materials Recovery Facilities<br />
• Plant hire and agriculture<br />
• Developing dealer network<br />
• Market share gains – 20,000 unit market<br />
9
UK & Ireland Opportunities<br />
Power Systems<br />
• Power and energy<br />
• Mission critical diesel – hospitals, data centres<br />
• Water treatment industry<br />
• Expanded capability and products<br />
• Oil & Gas<br />
• North Sea resurgence<br />
• Flameproof technology<br />
• Managed services contracts - BP<br />
• Marine<br />
• <strong>International</strong> opportunity<br />
• Offshore wind farms<br />
• Pleasure craft<br />
• Industrial and Perkins<br />
• Center of Excellence for Perkins Gas<br />
• 60% market share rock crushers – 1,500 engines<br />
10
Global Power Systems<br />
• 2012 ~ $1 billion revenue<br />
• Global megatrends offer growth opportunities<br />
• Population growth and urbanisation<br />
• Electronic revolution / connectivity<br />
• Climate change<br />
• Renewables<br />
• Energy from waste<br />
• Fracking<br />
• Caterpillar growth and focus<br />
• Expanded product line<br />
• <strong>Finning</strong> skills and expertise<br />
• Leverage skills across the territories<br />
• Engineering, Procurement and Construction<br />
capability<br />
• Packaging / added value capability<br />
11
2013 Priorities – Consistent Execution<br />
• Drive operational excellence<br />
• Focus on working capital improvements<br />
• Drive efficiencies through Caterpillar<br />
Production System (CPS)<br />
• High-performance culture and people<br />
• Maintain outstanding customer loyalty<br />
• Manage through periods of weak demand<br />
• Drive revenue opportunities<br />
• Tightly control SG&A costs<br />
• Reduce discretionary expenses<br />
(e.g. travel, overtime)<br />
• Sustain financial performance<br />
12
Summary<br />
• Drive maximum value from the strategic<br />
acquisitions<br />
• Total focus on operational excellence<br />
• Deliver financial performance<br />
• Build talent and high performance culture<br />
• Stick to the strategy - Trusted by Experts<br />
• Focus on added value growth<br />
• Power Systems and product support growth<br />
• Diversified business<br />
13
Investor Day<br />
Summary<br />
Mike Waites, President and CEO<br />
December 13, 2012
Business Conditions<br />
• Market conditions and customer confidence vary by region<br />
• Canada – stable activity levels; uncertain outlook<br />
• South America – positive long-term fundamentals; solid outlook<br />
• UK & Ireland – challenging economic landscape; some pockets of<br />
strength<br />
• Operating with caution<br />
• Monitoring business activity closely<br />
• Taking prudent steps to manage business with more conservatism<br />
• Reducing uncommitted inventory<br />
• Carefully managing new orders<br />
• Controlling SG&A expenses<br />
2
2013 Priorities – Consistent Execution<br />
• Drive revenue in slow growth environment<br />
• Focus on operational excellence<br />
• Supply chain management<br />
• Service productivity<br />
• SG&A improvements<br />
• Improve operating profitability and return on invested capital<br />
• EBIT margin - sequential expansion<br />
• Leverage latest investments<br />
• Lower capex and disciplined net rental additions<br />
• Strengthen balance sheet<br />
3
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