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FINNING | CANADA<br />
to LEAD<br />
FINNING MECHANIC ON AN 844 WHEEL DOZER IN ASSEMBLY SHOP- MILDRED LAKE BRANCH, ALBERTA<br />
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A corporate crown jewel, this territory alone generates<br />
annual revenues exceeding $2 billion.<br />
2005 Performance<br />
<strong>Finning</strong> (<strong>Canada</strong>) had a very successful year, capitalizing on<br />
increased demand from customers across all sectors. Continued<br />
strength in commodity prices and healthy economies in B.C. and<br />
Alberta supported very robust activity in mining, construction, oil<br />
and gas and forestry.<br />
Another year of strong equipment sales added to the large and<br />
growing population of Cat equipment in western <strong>Canada</strong>, providing<br />
significant growth opportunities for product support services<br />
in future years. While managing increased volumes of business in<br />
all operations, <strong>Finning</strong> (<strong>Canada</strong>) set a new safety record in 2005<br />
to remain a recognized leader in industry safety.<br />
Tackling Challenges<br />
<strong>Inc</strong>reased worldwide demand for Cat equipment and parts led<br />
to supply shortages in some product categories. To mitigate new<br />
equipment availability issues, <strong>Finning</strong> (<strong>Canada</strong>) devised innovative<br />
strategies to meet customer needs including selling a portion of<br />
its rental fleet as well as sourcing and selling record amounts of<br />
quality used equipment.<br />
<strong>Inc</strong>reased need for skilled service personnel also presented a<br />
challenge, calling for renewed focus on recruiting initiatives. Our<br />
new “People Strategy” is aimed at attracting, developing and<br />
engaging quality people to grow the business and service our<br />
customers.<br />
Future Momentum<br />
The western Canadian economy is forecast to remain strong<br />
and commodity prices are expected to stay at attractive levels<br />
throughout 2006. As a result, <strong>Finning</strong> (<strong>Canada</strong>) is anticipating<br />
another very good year for new equipment sales and increased<br />
parts and service business from the growing population of machines<br />
in its territories.<br />
Expansion of the Alberta oil sands industry and B.C.’s mining<br />
sector, together with growing housing starts and construction<br />
projects related to the 2010 Olympics, as well as numerous<br />
infrastructure initiatives, all point to favourable market conditions<br />
and opportunities for 2006 and years to come.<br />
Mining<br />
This sector saw very strong growth in 2005 due to rising<br />
commodity prices, driven by growing global demand and limited<br />
supply. All indicators point to continued strength in mining, and<br />
we expect to benefit from rising demand for parts and service on<br />
equipment already operating in the field.<br />
Construction<br />
Record expenditures for housing and commercial construction<br />
and major infrastructure projects in western <strong>Canada</strong> led to a very<br />
successful year for all lines of Cat construction equipment.<br />
Proposed construction expenditures for 2006 will see <strong>Finning</strong> gain<br />
further ground with excellent opportunities to build on this year’s<br />
wins.<br />
Conventional Oil & Gas<br />
Approximately 22,000 wells were drilled in western <strong>Canada</strong><br />
in 2005, and a higher number is expected for 2006. We anticipate<br />
strong demand for gas compression engines and mobile equipment<br />
through 2006 and beyond.<br />
Forestry<br />
The B.C. interior softwood lumber industry had a strong year in<br />
2005 due to higher prices for lumber and accelerated harvesting<br />
to counter the widespread impact of the pine beetle infestation.<br />
These factors are expected to continue to positively influence<br />
demand for equipment in B.C.’s interior forestry sector.<br />
Cat Rental Stores<br />
With 27 stores in B.C. and Alberta, we are now a major player in<br />
the small equipment rental industry. 2005 was a very successful<br />
year, with revenues up 56% and profitability exceeding<br />
expectations. <strong>Finning</strong> plans to open two new Cat Rental Stores in<br />
2006 and will continue to focus on cost efficiencies and increased<br />
asset utilization.<br />
Pipelines<br />
As a partner with a 25% interest in PipeLine Machinery<br />
<strong>International</strong> (PLM), the global Cat pipeline equipment dealership,<br />
<strong>Finning</strong> has the opportunity to become involved as a supplier to<br />
pipeline construction projects worldwide. Several major pipeline<br />
projects have been proposed for western <strong>Canada</strong> and are<br />
expected to proceed in the 2007 to 2011 time period.<br />
FINNING INTERNATIONAL INC.<br />
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