National News

Finning International reports lower Q1 profit

By The Canadian Press

VANCOUVER - Finning International Inc. (TSX:FTT) announced Tuesday that it was increasing its dividend even as the world's largest Caterpillar equipment dealer reported lower first-quarter profits despite a seven per cent increase in revenue.

Finning said the 2.5 cent increase will raise the quarterly dividend to 17.75 per share from 15.25 cents, and will be payable June 12 to shareholders of record on May 29.

The Vancouver-based company reported after markets closed that net income in the three months ended March 31 fell to $68 million or 39 cents per share from $73 million or 43 cents in the same 2013 period.

Revenue was $1.68 billion, up from $1.56 billion as higher sales in Canada and the United Kingdom and Ireland offset a decline in South America.

Earnings before finance costs and income taxes of $111 million were five per cent below the same quarter last year, reflecting what Finning said were lower sales volumes in South America and lower gross profit margins in Canada.

The company's order backlog of $1.3 billion at the end of the most recent quarter was up some 45 per cent from the end of December, driven primarily by record order intake in Canada, including an equipment order for $260 million from an existing oilsands producer for a fleet expansion.

Commenting on the results, president and CEO Scott Thomson said conditions in the South American market were "looking more challenging than we first thought and we expect that to continue through 2014."

"However, I am pleased that our team in South America is focused on what they can control, namely costs and invested capital. Costs were reduced significantly and profitability was maintained. For the remainder of the year, the team will be focused on reducing invested capital and costs to match current demand."

Thomson said he was also pleased with revenue growth in Canada but that profitability was impacted by higher new equipment sales in the revenue mix and a higher proportion of sales that were lower margin mining machines.

Finning operates in Western Canada, Chile, Argentina, Bolivia, Uruguay, as well as in the United Kingdom and Ireland.

On the Toronto Stock Exchange, its shares closed up 21.5 cents at $30.21 on Tuesday.

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