Review of Operations - Finning (Canada) - Finning International Inc.

finning [canada]Finning began as the Caterpillar dealer in British Columbia in 1933and has since acquired Canadian dealerships in Yukon Territory, Alberta,the Northwest Territories and a portion of the Territory of Nunavut.The Company services its Canadian dealership territory through itsdivision, Finning (Canada). Finning (Canada) has 41 branches and 2,717employees with its head office located in Edmonton, Alberta.Ian M. ReidPresident, Finning (Canada)“Our many opportunities comefrom having a track recordof providing customers withsolutions that make theirbusinesses better, whetheron a huge scale in the oil sandsor a smaller scale through ourCAT rental stores.”financial performanceTotal revenue was $1,456.3million, compared with $1,269.3million in 2002, contributing40.5% of Finning International’s$3,593.3 million total revenue.highlightsMaintained our strong 70% sharein the Canadian oil sands miningequipment market with a $30million sale of six 797B trucks,the largest of their kind in theworld, to Syncrude Canada Ltd.Constructed a landfill methanegas cogeneration powerhouse inDelta, B.C. that will be operatedand maintained by the Companyunder a multi-year agreement.Completed the sale of a 20-machine $10-million packageof Caterpillar equipmentto one of British Columbia’sleading private loggingcontractors. The transactionwas the largest single forestryequipment sale to anindependent logging contractorin Finning’s 70 years of operation.Oil Sands Mine Proposals Company Cost Timeline($ billion)1. Syncrude Stage III Syncrude Canada Ltd. $5.7 Complete 20052. Syncrude Stage IV Syncrude Canada Ltd. NA 2005 – 20103. Horizon Canadian Natural $8.5 Over a decadeResources Ltd. starting ~ 20034. Northern Lights Synenco Energy Inc. $4.5 2008 – 20105. Jackpine Shell Canada, $2 NAChevron Canada,Western Oil Sands6. Virgin BA Energy Inc. $1 20067. Kearl Lake Imperial Oil $5 – 8 2012finning international inc. annual report 2003Photo: CAT Rental Storein Fort McMurray, Alberta.[26]

finning international inc. annual report 2003[27]

finning [canada]finning international inc. annual report 2003opportunitiesOil Sands miningAt the Athabasca Oil SandsProject (AOSP), a mining,extraction and upgradingdevelopment that produces155,000 barrels of bitumen perday, the Company has establishedwhat it considers its model forfuture opportunities in this largeand growing market. In late 2002,the Company concluded a $133million sale with Albian SandsEnergy Inc., operator of AOSP’soil sands mine at Muskeg River,for all mining machines, trucksand support equipment. TheCompany also signed a $150million five-year customer servicecontract. In 2003, Finningestablished a 60-person branchoperation on site to repair andmaintain all mine site equipmentand to warehouse parts.Oil and gasDrilling activity in westernCanada, a major indicator ofindustry growth, is forecast to beonly marginally lower in 2004than the record pace achievedin 2003. Longer term, thecompanies proposing a $4 billionnatural gas pipeline from Canada’sMackenzie River Delta havereported they are on track forcompletion and begin delivery ofgas to Canadian and U.S. marketsbefore the end of the decade.Finning’s opportunity isrepresented by mobile earthmovingequipment used in explorationand preparation of drill sites andpipeline routes; excavators andpipe-layers used in gathering andtransmission systems; diesel andnatural gas engines used inoperation of drill rigs, pumps andcompressors; and electrical setsfor camp power generation.Solving problemsin the forest industryThe Company has a relationshipwith Canfor Corporation, thelargest producer of softwood[28]

lumber and one of the largestmarket pulp producers in Canada,that demonstrates how solving acustomer’s problems can bringopportunities in the westernCanadian forest products industry.In 1997, Canfor had an agedequipment fleet, high repair andmaintenance costs, and machinebreakdowns resulting in lostproductivity. Finning’s solutionwas called “Power by the Hour”and provided Canfor with anequipment replacement, and arepair and maintenance strategy.Finning leases equipment toCanfor, provides preventivemaintenance and replaces agingparts before they fail. Finningalso provides extra machineswhen needed in emergenciesor at peak operating periods,eliminating the need for Canforto have surplus machinessitting idle to cover downtimeor peak contingencies.Today the relationship isevolving to better align withcurrent business realities,more flexible lease paymentschedules and application ofused machines instead of newmachines where appropriate.Today, 148 machines are in placeat eighteen Canfor locations inBritish Columbia.RentalAfter several years of leading theheavy construction equipmentrental market, the Company isexpanding “The CAT RentalStore” network to become theleader in small equipment rentalto contractors, industrial plantsand commercial operations.During 2003, thirteen new CATRental Stores were opened. AtDecember 31, 2003, there were25 CAT Rental Stores in BritishColumbia and Alberta, and theCompany’s objective is to achievemarket leadership in this segment.Photo: CAT 797 trucks,Albian Oil Sands, Alberta.finning international inc. annual report 2003[29]