Revenues increased by two percent for 2014 for Finning, the world’slargest Caterpillar dealer, with CDN $6.9 billion (about U.S. $5.5 billion) for the year. Product support revenue reached a new record, driven by parts sales in Canada. For the fourth quarter, revenues were essentially flat, at $1.803 billion compared to $1.796 billion a year ago. Higher revenues in Canada and the U.K. and Ireland offset lower revenues in South America.
EBIT margin of 7.9 percent in the fourth quarter reflected strong profitability in South America. Free cash flow of $385 million was driven by strong cash generation in Canada.
For the full year, Canada’s EBIT increased by eight percent, driven by higher volumes and cost savings from supply chain and service initiatives. South America maintained profitability year over year despite a significant reduction in revenues. Free cash flow was $483 million, reducing the net debt to invested capital ratio to 31 percent. Canada’s ROIC increased to 17.1 percent from 15.9 percent as a result of capital efficiencies and higher EBIT.
Finning will reduce its workforce by about 500 employees, roughly 9 percent of its Canadian workforce. “While this is a difficult decision, it is a necessary step to adjust to expected business levels,” he said.
Rental revenues for Finning were 12 percent lower than in 2013, mostly because of increased competition in rental markets, as well as very strong demand in the fourth quarter of 2013.