Finning International Inc: Finning reports Q1 2024 results, 10% dividend increase, and significant copper deals awarded in Q2 2024

VANCOUVER, British Columbia, May 06, 2024 (GLOBE NEWSWIRE) -- Finning International Inc. (TSX: FTT) ("Finning", the "Company", "we", "our" or "us") reported first quarter 2024 results today. All monetary amounts are in Canadian dollars unless otherwise stated.

"I would like to thank our team for their dedication to serving our customers and diligently building execution momentum through our strategic plan. We are pleased with our new equipment deliveries in the quarter. Combined with the strong execution of our used equipment strategy, we continue to build equipment population, while also demonstrating resilience and helping offset the impact of lower product support revenue in the quarter.

We are pleased with our recent strategically important wins in each region, including contracts with multiple copper mines in Chile, the oil sands in Canada, and data centers in the UK and Ireland. These wins represent over $700 million of new equipment orders received in April, which bolster our backlog and demonstrate increasing customer confidence in their markets and our partnership," said Kevin Parkes, president and CEO.

HIGHLIGHTS
All comparisons are to Q1 2023 results unless indicated otherwise.

• Q1 2024 revenue of $2.6 billion and net revenue ⁽²⁾ of $2.3 billion were up 9%, driven by 25% higher new equipment sales and 48% higher used equipment sales. Product support revenue was 1% below Q1 2023.
• Equipment backlog ⁽²⁾ of $2.0 billion at March 31, 2024 was maintained at December 31, 2023 levels. Order intake in South America and the UK & Ireland outpaced deliveries in Q1 2024 and was driven by mining and power systems.
• Q1 2024 EBIT ⁽¹⁾ of $202 million was down 7% from Adjusted EBIT ⁽³⁾⁽⁴⁾ in Q1 2023 primarily driven by the shift in revenue mix to new and used equipment sales. SG&A ⁽¹⁾ as a percentage of net revenue ⁽²⁾ was 17.7%, down 130 basis points from Q1 2023 supported by strong cost control.
• Q1 2024 EBIT as a percentage of net revenue ⁽²⁾ was 11.0% in South America, 8.9% in Canada, and 4.5% in the UK & Ireland.
• Q1 2024 EPS ⁽¹⁾ was $0.84 compared to $0.89 in Q1 2023.
• Q1 2024 free cash flow ⁽³⁾ was a use of cash of $210 million compared to a use of cash of $245 million in Q1 2023, reflecting normal seasonality. Net debt to Adjusted EBITDA ^(1)(2)(4) was 1.9 times at March 31, 2024, compared to 1.7 times at December 31, 2023.

"Our board approved an increase in our quarterly dividend by 10% to $0.275 per share, marking our 23^rd consecutive year of growth. This increase is well-supported by our improved earnings capacity and demonstrates our strong commitment to returning capital to shareholders.

We remain squarely focused on growing our business in a moderating growth environment through driving product support, building full-cycle resilience by unlocking invested capital, and delivering sustainable growth in used, rental, and power systems. We anticipate the execution of our strategy will have an increasing impact through this year, with improving product support growth rates and substantial free cash flow generation," concluded Mr. Parkes.

Q1 2024 FINANCIAL SUMMARY

		3 months ended
		March 31
					% change
						fav (1)
	($ millions, except per share amounts)	2024		2023	(unfav) (1)
	New equipment	779		624		25%
	Used equipment	136		92		48%
	Equipment rental	74		75		(2)%
	Product support	1,297		1,308		(1)%
	Net fuel and other	46		45		4%
	Net revenue	2,332		2,144		9%
	Gross profit	615		622		(1)%
	Gross profit as a percentage of net revenue (2)	26.4%		29.0%
	SG&A	(413)		(407)		(2)%
	SG&A as a percentage of net revenue	(17.7)%		(19.0)%
	Equity earnings of joint ventures	-		1
	Other income	-		41
	Other expenses	-		(18)
	EBIT	202		239		(16)%
	EBIT as a percentage of net revenue	8.7%		11.2%
	Adjusted EBIT	202		216		(7)%
	Adjusted EBIT as a percentage of net revenue (2)(4)	8.7%		10.1%
	Net income attributable to shareholders of Finning	121		134		(10)%
	EPS	0.84		0.89		(5)%
	Adjusted EPS (2)(4)	0.84		0.89		(5)%
	Free cash flow	(210)		(245)		14%

	Q1 2024 EBIT by Operation			South		UK &				Finning
	($ millions, except per share amounts)	Canada		America		Ireland		Other		Total		EPS
	EBIT / EPS	112		84		14		(8)		202		0.84
	EBIT as a percentage of net revenue	8.9%		11.0%		4.5%		n/m (1)		8.7%

	Q1 2023 EBIT by Operation			South		UK &				Finning
	($ millions, except per share amounts)	Canada		America		Ireland		Other		Total		EPS
	EBIT / EPS	126		74		15		24		239		0.89
	Gain on wind up of foreign subsidiaries	-		-		-		(41)		(41)		(0.21)
	Severance costs	4		7		2		5		18		0.09
	Withholding tax on repatriation of profits	-		-		-		-		-		0.12
	Adjusted EBIT / Adjusted EPS	130		81		17		(12)		216		0.89
	Adjusted EBIT as a percentage of net revenue	11.3%		11.5%		5.7%		n/m		10.1%

QUARTERLY KEY PERFORMANCE MEASURES

			2024		2023					2022
			Q1		Q4	Q3	Q2	Q1		Q4	Q3	Q2	Q1
	EBIT ($ millions)		202		177	252	242	239		214	224	190	140
	Adjusted EBIT ($ millions)		202		232	252	242	216		214	224	190	140
	EBIT as a % of net revenue
		Consolidated	8.7%		7.4%	10.3%	9.4%	11.2%		9.0%	10.7%	9.4%	8.1%
		Canada	8.9%		9.3%	10.8%	9.9%	11.0%		11.0%	11.7%	10.0%	9.1%
		South America	11.0%		6.7%	12.3%	12.1%	10.5%		11.4%	12.3%	10.1%	11.4%
		UK & Ireland	4.5%		1.8%	5.9%	5.5%	5.1%		4.4%	6.2%	6.4%	5.0%
	Adjusted EBIT as a % of net revenue
		Consolidated	8.7%		9.6%	10.3%	9.4%	10.1%		9.0%	10.7%	9.4%	8.1%
		Canada	8.9%		9.7%	10.8%	9.9%	11.3%		11.0%	11.7%	10.0%	9.1%
		South America	11.0%		12.6%	12.3%	12.1%	11.5%		11.4%	12.3%	10.1%	11.4%
		UK & Ireland	4.5%		2.7%	5.9%	5.5%	5.7%		4.4%	6.2%	6.4%	5.0%
	EPS		0.84		0.59	1.07	1.00	0.89		0.89	0.97	0.80	0.59
	Adjusted EPS		0.84		0.96	1.07	1.00	0.89		0.89	0.97	0.80	0.59
	Invested capital (2) ($ millions)		5,128		4,765	4,897	4,630	4,545		4,170	4,358	4,076	3,777
	ROIC (1)(2) (%)
		Consolidated	18.0%		19.3%	20.7%	20.8%	20.2%		18.7%	18.3%	17.5%	17.0%
		Canada	17.4%		18.6%	19.8%	20.1%	19.4%		18.7%	18.2%	17.4%	17.4%
		South America	24.2%		23.8%	27.1%	25.9%	24.0%		24.5%	22.7%	22.3%	21.7%
		UK & Ireland	10.9%		11.3%	13.7%	15.5%	17.0%		17.0%	16.6%	16.2%	15.7%
	Adjusted ROIC (2)(4)
		Consolidated	19.1%		20.0%	20.2%	20.2%	19.7%		18.7%	18.3%	17.5%	17.0%
		Canada	17.6%		19.0%	19.9%	20.2%	19.6%		18.7%	18.2%	17.4%	17.4%
		South America	27.4%		27.6%	27.6%	26.4%	24.6%		24.5%	22.7%	22.3%	21.7%
		UK & Ireland	11.5%		12.3%	14.1%	15.9%	17.4%		17.0%	16.6%	16.2%	15.7%
	Invested capital turnover (2) (times)		2.00		2.03	2.08	2.07	2.01		2.01	1.96	2.00	2.03
	Inventory ($ millions)		3,073		2,844	2,919	2,764	2,710		2,461	2,526	2,228	2,101
	Inventory turns (dealership) (2) (times)		2.34		2.45	2.58	2.49	2.51		2.61	2.52	2.50	2.66
	Working capital to net revenue (a)(2)		29.0%		28.4%	27.3%	27.3%	27.8%		27.4%	27.1%	25.1%	23.8%
	Free cash flow ($ millions)		(210)		280	-	31	(245)		332	(57)	(142)	(303)
	Net debt to Adjusted EBITDA ratio (times)		1.9		1.7	1.8	1.8	1.7		1.6	1.8	1.8	1.6

(a)	Comparative results for 2023 have been restated for our adoption of the amendments to IAS 1, Presentation of Financial Statements effective for the financial year beginning January 1, 2024.

Q1 2024 HIGHLIGHTS BY OPERATION
All comparisons are to Q1 2023 results unless indicated otherwise. All numbers, except ROIC, are in functional currency: Canada - Canadian dollar; South America - US dollar (USD); UK & Ireland - UK pound sterling (GBP). These variances and ratios for South America and UK & Ireland exclude the foreign currency translation impact from the CAD relative to the USD and GBP, respectively, and are therefore considered to be specified financial measures. We believe the variances and ratios in functional currency provide meaningful information about operational performance of the reporting segment.

Canada Operations

• Net revenue was up 9%, driven by higher new and used equipment sales. New equipment sales were up 39%, with strong volumes across all sectors. Used equipment sales were up 37%, driven by conversions of rental equipment with purchase options to sales, and stronger volumes across retail and wholesale channels from our increased participation in used equipment markets.
• Product support revenue was down 4%. The completion of major projects impacted construction customer activity levels, and challenging operating conditions also reduced equipment utilization hours in most sectors.
• EBIT was down 14% from Adjusted EBIT in Q1 2023 and EBIT as a percentage of net revenue of 8.9% was down from 11.3% Adjusted EBIT as a percentage of net revenue in Q1 2023, primarily due to a higher proportion of new equipment sales in the revenue mix.
• In April, we received an order from an oil sands operator to supply 20 Caterpillar ultra-class trucks for delivery beginning in Q3 2024.

South America Operations

• Net revenue increased by 9%, led by new equipment sales, which were up 20%, driven by deliveries to Chilean mining customers.
• Product support revenue was up 4%, up in all market sectors with increased activity in mining and power systems as well as demand for rebuilds in construction. Parts sales were up 7% and were partly offset by lower service revenue due to a weaker Chilean peso relative to the US dollar compared to Q1 2023.

• EBIT was up 3% from Adjusted EBIT in Q1 2023. EBIT as a percentage of net revenue of 11.0% was down 50 basis points from Adjusted EBIT as a percentage of net revenue in Q1 2023, due to a higher proportion of low margin mining equipment sales in revenue mix.
• In Argentina, we reduced our risk levels and were able to return to profitability in the quarter, which was earlier than anticipated.

• In April, we received significant equipment orders from our mining customers totaling $550 million. This includes a large truck order from an existing global customer framework agreement and a package of ultra-class trucks and ancillary equipment for Codelco at multiple mines, with deliveries beginning in Q3 2024. The new Codelco equipment order is valued at $380 million, and the fleet will be supported under a 10-year maintenance and repair contract.
  

UK & Ireland Operations

• Net revenue increased by 3%, driven by used equipment sales which nearly doubled from Q1 2023 as we work to increase our participation in the used equipment market.
• New equipment sales were similar to Q1 2023, with higher power systems project deliveries offset by lower volumes in the construction sector due to soft market activity.
• Product support revenue was down 7%, impacted by lower customer activity levels and reduced machine utilization hours.
• EBIT as a percentage of net revenue was 4.5%, down from Adjusted EBIT as a percentage of net revenue of 5.7% in Q1 2023 mostly due to a lower proportion of product support in the revenue mix and continued inflationary cost pressures.

Corporate and Other Items

• Corporate EBIT loss was $8 million in Q1 2024 compared to Adjusted EBIT of $12 million in Q1 2023, mainly due to lower people-related costs and professional fees.
• The Board of Directors has approved a 10% increase in the quarterly dividend to $0.275 per share from $0.25 per share, payable on June 6, 2024, to shareholders of record on May 22, 2024. This dividend will be considered an eligible dividend for Canadian income tax purposes.
• We repurchased 1.6 million shares in Q1 2024 at an average cost of $36.33, representing 1.1% of our public float.
  

Renewal of Share Repurchase Program

We have received approval from the Toronto Stock Exchange ("TSX") to renew our normal course issuer bid ("NCIB") to purchase for cancellation up to 14,000,000 of our common shares, representing 9.87% of the public float of 141,873,049 common shares as at April 30, 2024. As at April 30, 2024, Finning had a total of 142,174,863 common shares issued and outstanding.

The NCIB, which will begin on May 13, 2024 and end no later than May 12, 2025, will be conducted through the facilities of the TSX or other Canadian alternative trading systems, if eligible, and will conform to their rules and regulations.

Our Board of Directors believes that, from time to time, the purchase by Finning of its common shares represents a desirable use of its available cash to increase shareholder value.

The average daily trading volume of our common shares over the six-month period ending April 30, 2024, as calculated in accordance with TSX rules, was 346,060 common shares. Consequently, under TSX rules, we will be allowed to purchase daily, through the facilities of the TSX, a maximum of 86,515 common shares representing 25% of such average daily trading volume, subject to certain exceptions for block purchases. All shares purchased pursuant to the normal course issuer bid will be cancelled.

Purchases under the normal course issuer bid will be made by means of open market transactions or such other means as the TSX may permit. The price to be paid by us for any common share will be the market price at the time of acquisition, plus brokerage fees.

In connection with the NCIB, we will enter into an automatic share purchase plan ("ASPP") with a designated broker. The ASPP will allow for the purchase of shares under the NCIB at times when we would ordinarily not be permitted to purchase shares due to regulatory restrictions and customary self-imposed blackout restrictions.

The ASPP will provide a set of standard instructions to the designated broker to make purchases under the NCIB in accordance with the limits and other terms set out in the ASPP. The designated broker will determine the timing of these purchases in its sole discretion based on purchasing parameters set by us and subject to the rules of the TSX, applicable securities laws, and the terms of the ASPP. The ASPP has been pre-cleared by the TSX and will be implemented as of May 13, 2024. All purchases made under the ASPP will be included in computing the number of shares purchased and cancelled by us under the NCIB. Outside of pre-determined blackout periods, shares may be purchased under the NCIB based on management's discretion, in compliance with TSX rules, and applicable securities laws.

Under the current NCIB, which expires on May 12, 2024, we obtained approval to purchase up to 14,900,895 common shares. As of April 30, 2024, we purchased and cancelled 7,155,163 common shares under the current NCIB on the open market through the facilities of the TSX and other alternative Canadian trading systems at a volume weighted average price paid of $38.46 per common share (excluding commissions).

MARKET UPDATE AND BUSINESS OUTLOOK
The discussion of our expectations relating to the market and business outlook in this section is forward-looking information that is based upon the assumptions and subject to the material risks discussed under the heading "Forward-Looking Information Caution" at the end of this news release. Actual outcomes and results may vary significantly.

Canada Operations

Our outlook for Western Canada is positive. While the completion of major pipelines has slowed some construction activities in the near-term, it creates additional capacity to move heavy oil and liquefied natural gas to end markets, and we expect to see increased activity in the energy sector and production growth going forward. Our mining and energy customers are expected to increase spending levels, including investment to renew, maintain, and rebuild aging fleets. In April, we received an order from an oil sands operator for ultra-class trucks for delivery beginning in Q3 2024. Based on customer commitments and discussions, we anticipate strong demand for product support, including component remanufacturing and rebuilds in the oil sands.

We expect ongoing commitments from federal and provincial governments for infrastructure development to support activity in the construction sector. In addition, growing demand for reliable, efficient, and sustainable electric power solutions across communities in Western Canada creates opportunities for our power systems business.

South America Operations

In Chile, our strong outlook is underpinned by growing global demand for copper, strengthening copper prices, the approvals of large-scale brownfield expansions, and increasing customer confidence to invest in brownfield and greenfield projects. We are seeing a broad-based increase in quoting, tender, and award activity for mining equipment, product support, and technology solutions. In April, we received significant equipment orders from our mining customers totaling $550 million, including a large truck order from an existing global customer framework agreement and a large order from Codelco for ultra-class trucks and ancillary equipment to be delivered to multiple mines and supported under a 10-year maintenance and repair contract. The new Codelco equipment order is valued at $380 million. We expect to start delivering these orders in Q3 2024.

In the Chilean construction sector, we continue to see healthy demand from large contractors supporting mining operations, and we expect infrastructure construction to remain stable. In the power systems sector, activity remains strong in the industrial and data centre markets, driving growing demand for electric power solutions.

Weaker Chilean peso relative to the US dollar is expected to continue impacting service revenue growth rates in 2024, while also supporting lower SG&A.

In Argentina, steps are being taken by the new government to address the fiscal imbalances in the country with the goal of ultimately stabilizing inflation and opening the economy for free import and export of goods in the long-term. However, devaluing the currency, containing public spending, reducing subsidies, and lowering spending on public works are driving continued challenging market and operating conditions. We are actively monitoring the new rules and policies to ensure access to hedging is maintained. While we see pockets of strong activity, especially in the oil & gas sector, we are taking a low-risk approach in Argentina in 2024.

UK & Ireland Operations

With low GDP growth projected in the UK in 2024, we expect demand in the construction sector to remain soft. We expect a growing contribution from used equipment and power systems as we continue to execute on our strategy. In power systems, quoting activity remains strong, driven by healthy demand for primary and backup power generation, particularly in the data centre market. We expect our product support business in the UK & Ireland to remain resilient, driven by growth in rebuilds and Customer Value Agreements.

Execution Focus

We remain committed to growing our business in 2024 while building more resilience into our operating model and progressing towards our Investor Day targets. We anticipate the execution of our strategy will have an increasing impact through this year, with improving product support growth rates and substantial free cash flow generation.

To access Finning's complete Q1 2024 results, please visit our website at https://www.finning.com/en_CA/company/investors.html

Q1 2024 INVESTOR CALL
We will hold an investor call on May 7, 2024 at 10:00 am Eastern Time. Dial-in numbers: 1-844-763-8274 (Canada and US toll free), 1-647-484-8814 (international toll), 44-20-3795-9972 (UK toll). The investor call will be webcast live and archived for three months. The webcast and accompanying presentation can be accessed at https://www.finning.com/en_CA/company/investors.html

ABOUT FINNING
Finning is the world's largest Caterpillar dealer, delivering unrivalled service to customers for over 90 years. Headquartered in Surrey, British Columbia, we provide Caterpillar equipment, parts, services, and performance solutions in Western Canada, Chile, Argentina, Bolivia, the United Kingdom, and Ireland.

CONTACT INFORMATION
Ilona Rojkova
Director, Investor Relations
Phone: [phone]
Email: [e-mail]
https://www.finning.com

Description of Specified Financial Measures and Reconciliations

Specified Financial Measures

We believe that certain specified financial measures, including non-GAAP ⁽¹⁾ financial measures, provide users of our Earnings Release with important information regarding the operational performance and related trends of our business. The specified financial measures we use do not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other issuers. Accordingly, specified financial measures should not be considered as a substitute or alternative for financial measures determined in accordance with GAAP (GAAP financial measures). By considering these specified financial measures in combination with the comparable GAAP financial measures (where available) we believe that users are provided a better overall understanding of our business and financial performance during the relevant period than if they simply considered the GAAP financial measures alone.

We use KPIs to consistently measure performance against our priorities across the organization. Some of our KPIs are specified financial measures.

There may be significant items that we do not consider indicative of our operational and financial trends, either by nature or amount. We exclude these items when evaluating our operating financial performance. These items may not be non-recurring, but we believe that excluding these significant items from GAAP financial measures provides a better understanding of our financial performance when considered in conjunction with the GAAP financial measures. Financial measures that have been adjusted to take these significant items into account are referred to as "Adjusted" measures. Adjusted measures are specified financial measures and are intended to provide additional information to readers of the Earnings Release.

Descriptions and components of the specified financial measures we use in this Earnings Release are set out below. Where applicable, quantitative reconciliations from certain specified financial measures to their most directly comparable GAAP financial measures (specified, defined, or determined under GAAP and used in our consolidated financial statements) are also set out below.

Adjusted EPS

Adjusted EPS excludes the after-tax per share impact of significant items that we do not consider to be indicative of operational and financial trends either by nature or amount to provide a better overall understanding of our underlying business performance. The tax impact of each significant item is calculated by applying the relevant applicable tax rate for the jurisdiction in which the significant item occurred. The after-tax per share impact of significant items is calculated by dividing the after-tax amount of significant items by the weighted average number of common shares outstanding during the period.

A reconciliation between EPS (the most directly comparable GAAP financial measure) and Adjusted EPS can be found on page 9 of this Earnings Release.

Adjusted EBIT and Adjusted EBITDA

Adjusted EBIT and Adjusted EBITDA exclude items that we do not consider to be indicative of operational and financial trends, either by nature or amount, to provide a better overall understanding of our underlying business performance.

Adjusted EBITDA is calculated by adding depreciation and amortization to Adjusted EBIT.

The most directly comparable GAAP financial measure to Adjusted EBITDA and Adjusted EBIT is EBIT.

Significant items identified by management that affected our results were as follows:

• On December 13, 2023, the newly-elected Argentine government devalued the ARS official exchange rate by 118% from 366.5 ARS to 800 ARS for USD
  1. As a result of prolonged government currency restrictions, including no material access to USD starting in late August 2023, our ARS exposure increased and during this period economic hedges were not available. As a result of the growth in our ARS exposure and the significant devaluation of the ARS in the fourth quarter, our South American operations incurred a foreign exchange loss of $56 million which exceeds the typical foreign exchange impact in the region.
• We began to implement our invested capital improvement plan as outlined at our 2023 Investor Day, which targets selling and optimizing real estate and exiting low-ROIC activities. In Q4 2023:
  • Our South American operations sold a property in Chile and recorded a gain of $13 million on the sale; and,
  • Following an evaluation of the business needs of our operations and related intangible assets, several software and technology assets have been or will be decommissioned, and as a result, we derecognized previously capitalized costs of $12 million.

• In Q1 2023, we executed various transactions to simplify and adjust our organizational structure. We wound up two wholly owned subsidiaries, recapitalized and repatriated $170 million of profits from our South American operations, and incurred severance costs in each region as we reduced corporate overhead costs and simplified our operating model. As a result of these activities, our Q1 2023 financial results were impacted by significant items that we do not consider indicative of operational and financial trends:
  • Net foreign currency translation gain and income tax expense were reclassified to net income on the wind up of foreign subsidiaries;
  • Withholding tax payable related to the repatriation of profits; and,
  • Severance costs incurred in all of our operations.

A reconciliation from EBIT to Adjusted EBIT and Adjusted EBITDA for our consolidated operations is as follows:

	3 months ended			2024		2023					2022					2021
	($ millions)			Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30
	EBIT			202		177	252	242	239		214	224	190	140		157	150	137
	Significant items:
			Foreign exchange and tax impact of devaluation of ARS	-		56	-	-	-		-	-	-	-		-	-	-
		Gain on sale of property, plant, and equipment		-		(13)	-	-	-		-	-	-	-		-	-	-
		Write-off of intangible assets		-		12	-	-	-		-	-	-	-		-	-	-
		Gain on wind up of foreign subsidiaries		-		-	-	-	(41)		-	-	-	-		-	-	-
		Severance costs		-		-	-	-	18		-	-	-	-		-	-	-
	Adjusted EBIT			202		232	252	242	216		214	224	190	140		157	150	137
	Depreciation and amortization			99		99	94	94	92		87	84	81	81		84	80	78
	Adjusted EBITDA (3)(4)			301		331	346	336	308		301	308	271	221		241	230	215

The income tax impact of the significant items was as follows:

	3 months ended			2024		2023					2022
	($ millions)			Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31
	Significant items:
		Foreign exchange and tax impact of devaluation of ARS		-		(3)	-	-	-		-	-	-	-
		Gain on sale of property, plant, and equipment		-		4	-	-	-		-	-	-	-
		Write-off of intangible assets		-		(3)	-	-	-		-	-	-	-
		Gain on wind up of foreign subsidiaries		-		-	-	-	9		-	-	-	-
		Severance costs		-		-	-	-	(5)		-	-	-	-
		Withholding tax on repatriation of profits		-		-	-	-	19		-	-	-	-
	(Recovery of) provision for income taxes on the significant items			-		(2)	-	-	23		-	-	-	-

A reconciliation from EPS to Adjusted EPS for our consolidated operations is as follows:

	3 months ended			2024		2023					2022
	($)			Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31
	EPS (a)			0.84		0.59	1.07	1.00	0.89		0.89	0.97	0.80	0.59
	Significant items:
		Foreign exchange and tax impact of devaluation of ARS		-		0.37	-	-	-		-	-	-	-
		Gain on sale of property, plant, and equipment		-		(0.06)	-	-	-		-	-	-	-
		Write-off of intangible assets		-		0.06	-	-	-		-	-	-	-
		Gain on wind up of foreign subsidiaries		-		-	-	-	(0.21)		-	-	-	-
		Severance costs		-		-	-	-	0.09		-	-	-	-
		Withholding tax on repatriation of profits		-		-	-	-	0.12		-	-	-	-
	Adjusted EPS (a)			0.84		0.96	1.07	1.00	0.89		0.89	0.97	0.80	0.59

(a)	The per share impact for each quarter has been calculated using the weighted average number of common shares outstanding during the respective quarters; therefore, quarterly amounts may not add to the annual or year-to-date total.

A reconciliation from EBIT to Adjusted EBIT for our Canadian operations is as follows:

	3 months ended		2024		2023					2022					2021
	($ millions)		Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30
	EBIT		112		117	137	136	126		128	125	102	80		92	84	82
	Significant items:
		Write-off of intangible assets	-		5	-	-	-		-	-	-	-		-	-	-
		Severance costs	-		-	-	-	4		-	-	-	-		-	-	-
	Adjusted EBIT		112		122	137	136	130		128	125	102	80		92	84	82

A reconciliation from EBIT to Adjusted EBIT for our South American operations is as follows:

	3 months ended		2024		2023					2022					2021
	($ millions)		Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30
	EBIT		84		55	104	104	74		96	85	64	65		59	58	51
	Significant items:
		Foreign exchange and tax impact of devaluation of ARS	-		56	-	-	-		-	-	-	-		-	-	-
		Gain on sale of property, plant, and equipment	-		(13)	-	-	-		-	-	-	-		-	-	-
		Write-off of intangible assets	-		4	-	-	-		-	-	-	-		-	-	-
		Severance costs	-		-	-	-	7		-	-	-	-		-	-	-
	Adjusted EBIT		84		102	104	104	81		96	85	64	65		59	58	51

A reconciliation from EBIT to Adjusted EBIT for our UK & Ireland operations is as follows:

	3 months ended			2024		2023					2022					2021
	($ millions)			Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30
	EBIT			14		6	19	18	15		16	21	23	14		12	17	17
	Significant items:
		Write-off of intangible assets		-		3	-	-	-		-	-	-	-		-	-	-
		Severance costs		-		-	-	-	2		-	-	-	-		-	-	-
	Adjusted EBIT			14		9	19	18	17		16	21	23	14		12	17	17

A reconciliation from EBIT to Adjusted EBIT for our Other operations is as follows:

	3 months ended		2024		2023					2022					2021
	($ millions)		Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30
	EBIT		(8)		(1)	(8)	(16)	24		(26)	(7)	1	(19)		(6)	(9)	(13)
	Significant items:
		Gain on wind up of foreign subsidiaries	-		-	-	-	(41)		-	-	-	-		-	-	-
		Severance costs	-		-	-	-	5		-	-	-	-		-	-	-
	Adjusted EBIT		(8)		(1)	(8)	(16)	(12)		(26)	(7)	1	(19)		(6)	(9)	(13)

Equipment Backlog

Equipment backlog is defined as the retail value of new equipment units ordered by customers for future deliveries. We use equipment backlog as a measure of projecting future new equipment deliveries. There is no directly comparable GAAP financial measure for equipment backlog.

Free Cash Flow

Free cash flow is defined as cash flow provided by or used in operating activities less net additions to property, plant, and equipment and intangible assets, as disclosed in our financial statements. We use free cash flow to assess cash operating performance, including working capital efficiency. Consistent positive free cash flow generation enables us to re-invest capital to grow our business and return capital to shareholders. A reconciliation from cash flow used in or provided by operating activities to free cash flow is as follows:

	3 months ended	2024		2023					2022
	($ millions)	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31
	Cash flow (used in) provided by operating activities	(177)		291	37	66	(166)		410	(24)	(112)	(273)
	Additions to property, plant, and equipment and intangible assets	(37)		(51)	(50)	(40)	(79)		(78)	(33)	(30)	(30)
	Proceeds on disposal of property, plant, and equipment	4		40	13	5	-		-	-	-	-
	Free cash flow	(210)		280	-	31	(245)		332	(57)	(142)	(303)

Inventory Turns (Dealership)

Inventory turns (dealership) is the number of times our dealership inventory is sold and replaced over a period. We use inventory turns (dealership) to measure asset utilization. Inventory turns (dealership) is calculated as annualized cost of sales (excluding cost of sales related to the mobile refuelling operations) for the last six months divided by average inventory (excluding inventory related to the mobile refuelling operations), based on an average of the last two quarters. Cost of sales related to the dealership and inventory related to the dealership are calculated as follows:

	3 months ended	2024		2023					2022					2021
	($ millions)	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31
	Cost of sales	1,969		2,024	2,044	2,125	1,758		2,025	1,807	1,761	1,463		1,465
	Cost of sales related to the mobile refuelling operations	(269)		(278)	(283)	(237)	(253)		(302)	(293)	(300)	(231)		(190)
	Cost of sales related to the dealership (3)	1,700		1,746	1,761	1,888	1,505		1,723	1,514	1,461	1,232		1,275
		2024		2023					2022					2021
	($ millions)	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31
	Inventory	3,073		2,844	2,919	2,764	2,710		2,461	2,526	2,228	2,101		1,687
	Inventory related to the mobile refuelling operations	(9)		(12)	(17)	(14)	(12)		(12)	(12)	(13)	(11)		(9)
	Inventory related to the dealership (3)	3,064		2,832	2,902	2,750	2,698		2,449	2,514	2,215	2,090		1,678

Invested Capital

Invested capital is calculated as net debt plus total equity. Invested capital is also calculated as total assets less total liabilities, excluding net debt. Net debt is calculated as short-term and long-term debt, net of cash and cash equivalents. We use invested capital as a measure of the total cash investment made in Finning and each reportable segment. Invested capital is used in a number of different measurements (ROIC, Adjusted ROIC, invested capital turnover) to assess financial performance against other companies and between reportable segments. Invested capital is calculated as follows:

		2024		2023					2022					2021
	($ millions)	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30
	Cash and cash equivalents	(215)		(152)	(168)	(74)	(129)		(288)	(120)	(170)	(295)		(502)	(518)	(378)
	Short-term debt	1,322		1,239	1,372	1,142	1,266		1,068	1,087	992	804		374	419	114
	Long-term debt
	Current	68		199	203	199	253		114	106	110	63		190	191	386
	Non-current	1,379		949	955	949	675		815	836	807	909		921	923	903
	Net debt (3)	2,554		2,235	2,362	2,216	2,065		1,709	1,909	1,739	1,481		983	1,015	1,025
	Total equity	2,574		2,530	2,535	2,414	2,480		2,461	2,449	2,337	2,296		2,343	2,320	2,252
	Invested capital	5,128		4,765	4,897	4,630	4,545		4,170	4,358	4,076	3,777		3,326	3,335	3,277

Invested Capital Turnover

We use invested capital turnover to measure capital efficiency. Invested capital turnover is calculated as net revenue for the last twelve months divided by average invested capital of the last four quarters.

Net Debt to Adjusted EBITDA Ratio

This ratio is calculated as net debt at the reporting date divided by Adjusted EBITDA for the last twelve months. We use this ratio to assess operating leverage and ability to repay debt. This ratio approximates the length of time, in years, that it would take us to repay debt, with net debt and Adjusted EBITDA held constant.

Net Revenue, Gross Profit as a % of Net Revenue, SG&A as a % of Net Revenue, and EBIT as a % of Net Revenue

Net revenue is defined as total revenue less the cost of fuel related to the mobile refuelling operations in our Canadian operations. As these fuel costs are pass-through in nature for this business, we view net revenue as more representative than revenue in assessing the performance of the business because the rack price for the cost of fuel is fully passed through to the customer and is not in our control. For our South American and UK & Ireland operations, net revenue is the same as total revenue.

We use these specified financial measures to assess and evaluate the financial performance or profitability of our reportable segments. We may also calculate EBIT as a % of net revenue using Adjusted EBIT to exclude significant items we do not consider to be indicative of operational and financial trends either by nature or amount to provide a better overall understanding of our underlying business performance.

The ratios are calculated, respectively, as gross profit divided by net revenue, SG&A divided by net revenue, and EBIT divided by net revenue. The most directly comparable GAAP financial measure to net revenue is total revenue. Net revenue is calculated as follows:

	3 months ended	2024		2023					2022					2021
	($ millions)	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30
	Total revenue	2,584		2,664	2,704	2,779	2,380		2,653	2,384	2,289	1,953		1,949	1,904	1,845
	Cost of fuel	(252)		(261)	(267)	(220)	(236)		(285)	(277)	(285)	(217)		(175)	(156)	(140)
	Net revenue	2,332		2,403	2,437	2,559	2,144		2,368	2,107	2,004	1,736		1,774	1,748	1,705

ROIC and Adjusted ROIC

ROIC is defined as EBIT for the last twelve months divided by average invested capital of the last four quarters, expressed as a percentage.

We view ROIC as a useful measure for capital allocation decisions that drive profitable growth and attractive returns to shareholders. We also calculate Adjusted ROIC using Adjusted EBIT to exclude significant items that we do not consider to be indicative of operational and financial trends either by nature or amount to provide a better overall understanding of our underlying business performance.

Working Capital & Working Capital to Net Revenue Ratio

Working capital is defined as total current assets (excluding cash and cash equivalents) less total current liabilities (excluding short-term debt and current portion of long-term debt). We view working capital as a measure for assessing overall liquidity.

The working capital to net revenue ratio is calculated as average working capital of the last four quarters, divided by net revenue for the last twelve months. We use this KPI to assess the efficiency in our use of working capital to generate net revenue. Working capital is calculated as follows:

		2024		2023					2022					2021
	($ millions)	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30	Mar 31		Dec 31	Sep 30	Jun 30
	Total current assets	5,432		4,930	5,217	4,985	4,974		4,781	4,652	4,098	4,030		3,619	3,620	3,416
	Cash and cash equivalents	(215)		(152)	(168)	(74)	(129)		(288)	(120)	(170)	(295)		(502)	(518)	(378)
	Total current assets in working capital	5,217		4,778	5,049	4,911	4,845		4,493	4,532	3,928	3,735		3,117	3,102	3,038
	Total current liabilities (a)	3,561		3,516	3,722	3,600	3,788		3,401	3,196	2,789	2,647		2,155	2,156	1,942
	Short-term debt	(1,322)		(1,239)	(1,372)	(1,142)	(1,266)		(1,068)	(1,087)	(992)	(804)		(374)	(419)	(114)
	Current portion of long-term debt	(68)		(199)	(203)	(199)	(253)		(114)	(106)	(110)	(63)		(190)	(191)	(386)
	Total current liabilities in working capital (a)	2,171		2,078	2,147	2,259	2,269		2,219	2,003	1,687	1,780		1,591	1,546	1,442
	Working capital (a)(3)	3,046		2,700	2,902	2,652	2,576		2,274	2,529	2,241	1,955		1,526	1,556	1,596

(a)	Comparative results for 2023 have been restated for our adoption of the amendments to IAS 1, Presentation of Financial Statements effective for the financial year beginning January 1, 2024.

FOOTNOTES

(1)	Earnings Before Finance Costs and Income Taxes (EBIT); Basic Earnings per Share (EPS); Earnings Before Finance Costs, Income Taxes, Depreciation and Amortization (EBITDA); Selling, General & Administrative Expenses (SG&A); Return on Invested Capital (ROIC); favourable (fav); unfavourable (unfav); not meaningful (n/m); generally accepted accounting principles (GAAP).
(2)	See "Description of Specified Financial Measures and Reconciliations" on page 7 of this Earnings Release.
(3)	These are non-GAAP financial measures. See "Description of Specified Financial Measures and Reconciliations" on page 7 of this Earnings Release.
(4)	Certain financial measures were impacted by significant items management does not consider indicative of operational and financial trends either by nature or amount; these significant items are described starting on page 8 of this Earnings Release. The financial measures that have been adjusted to take these items into account are referred to as "Adjusted" measures.

Forward-Looking Information Disclaimer

This news release contains information that is forward-looking. Information is forward-looking when we use what we know and expect today to give information about the future. All forward-looking information in this news release is subject to this disclaimer including the assumptions and material risk factors referred to below. Forward-looking information in this news release includes, but is not limited to, the following: all information in the section entitled "Market Update and Business Outlook", including for our Canada operations: our outlook for Western Canada being positive; our expectation for increased activity in the energy sector and production growth going forward (based on assumptions of additional capacity created by the completion of major pipelines); our expectations for mining and energy customers increasing their spending levels including investment to renew, maintain, and rebuild aging fleets; our expectation for strong demand for product support, including component remanufacturing and rebuilds in the oil sands (based on customer commitments and discussions); our expectations for the supply of 20 Caterpillar ultra-class trucks to an oil sands operator beginning in Q3 2024; our expectation regarding ongoing commitments from federal and provincial governments for infrastructure development to support activity in the construction sector; our expectations of strong demand for electric power solutions across communities in Western Canada, and that strong demand creates opportunities for our power systems business; for our South America operations: in Chile, our strong outlook based on growing global demand for copper, strengthening copper price, approvals of large-scale brownfield expansions and increasing customer confidence to invest in brownfield and greenfield projects; our expectations related to significant equipment orders received from mining customers in April, including, with respect to Codelco, the expectation for deliveries to begin in Q3 2024, and the related 10-year maintenance and repair contract; our expectation for a weaker Chilean peso relative to the USD to continue impacting service growth rates in 2024, while also supporting lower SG&A; our expectation that infrastructure construction in Chile will remain stable (based on assumptions of continued healthy demand from large contractors supporting mining operations); in the power systems sector, our expectation regarding growing demand for electric power solutions from strong activity in the industrial and data centre markets; in Argentina, our expected low-risk approach in Argentina in 2024; our expectation that steps are being taken by the new government to address the fiscal imbalances in the country with the goal of ultimately stabilizing inflation and opening the economy for free import and export of goods in the long-term; our expectation that devaluing the currency, containing public spending, reducing subsidies, and lowering spending on public works are driving continued challenging market and operating conditions; continued monitoring of new rules and policies to ensure hedging is maintained; our expectation that there will be pockets of strong activity, especially in the oil & gas sector; for our UK & Ireland operations: our expectation for demand in the construction sector to remain soft; our expectation of a growing contribution from used equipment and power systems as we continue to execute on our strategy; in power systems, our expectation of continued strong quoting activity (based on assumptions of healthy demand for primary and backup power generation, particularly in the data centre market); our expectation of our product support business to remain resilient, driven by growth in rebuilds and Customer Value Agreements; and overall: our expectation of growing our business in 2024 while building more resilience into our operating model and progressing towards our Investor Day targets; our expectation that the execution of our strategy will result in increasing impact through this year, with improving product support growth rates and substantial free cash flow generation; the expected renewal of our NCIB and the implementation of the automatic share purchase plan in connection with the NCIB; and the Canadian income tax treatment of the quarterly dividend. All such forward-looking information is provided pursuant to the 'safe harbour' provisions of applicable Canadian securities laws.

Unless we indicate otherwise, forward-looking information in this news release reflects our expectations at the date of this news release. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking information, whether as a result of new information, future events, or otherwise.

Forward-looking information, by its very nature, is subject to numerous risks and uncertainties and is based on a number of assumptions. This gives rise to the possibility that actual results could differ materially from the expectations expressed in or implied by such forward-looking information and that our business outlook, objectives, plans, strategic priorities and other information that is not historical fact may not be achieved. As a result, we cannot guarantee that any forward-looking information will materialize.

Factors that could cause actual results or events to differ materially from those expressed in or implied by this forward-looking information include: the specific factors stated above; the impact and duration of, and our ability to respond to and manage, high inflation, increasing interest rates, and supply chain challenges; general economic and market conditions, including increasing inflationary cost pressure, and economic and market conditions in the regions where we operate; perspectives of renewed investments in the oil and gas and mining projects in Argentina; government approvals of large-scale brownfield expansions; support and commitment by Canadian federal and provincial governments in infrastructure development; foreign exchange rates; commodity prices; interest rates; the level of customer confidence and spending, and the demand for, and prices of, our products and services; our ability to maintain our relationship with Caterpillar; our dependence on the continued market acceptance of our products, and the timely supply of parts and equipment; our ability to continue to improve productivity and operational efficiencies while continuing to maintain customer service; our ability to manage cost pressures as growth in revenue occurs; our ability to effectively integrate and realize expected synergies from businesses that we acquire; our ability to deliver our equipment backlog; our ability to negotiate satisfactory purchase or investment terms and prices, obtain necessary regulatory or other approvals, and secure financing on attractive terms or at all; our ability to manage our growth strategy effectively; our ability to effectively price and manage long-term product support contracts with our customers; our ability to drive continuous cost efficiency; our ability to attract sufficient skilled labour resources as market conditions, business strategy or technologies change; our ability to negotiate and renew collective bargaining agreements with satisfactory terms for our employees and us; the intensity of competitive activity; our ability to maintain a safe and healthy work environment across all regions; our ability to raise the capital needed to implement our business plan; business disruption resulting from business process change, systems change and organizational change; regulatory initiatives or proceedings, litigation and changes in laws, regulations or policies, including with respect to environmental protection and/or energy transition; stock market volatility; changes in political and economic environments in the regions where we carry on business; our ability to respond to climate change-related risks; the availability of carbon neutral technology or renewable power; the cost of climate change initiatives; the occurrence of one or more natural disasters, pandemic outbreaks, geo-political events, acts of terrorism, social unrest or similar disruptions; the availability of insurance at commercially reasonable rates and whether the amount of insurance coverage will be adequate to cover all liability or loss that we incur; the potential of warranty claims being greater than we anticipate; and the integrity, reliability and availability of, and benefits from, information technology and the data processed by that technology; and our ability to protect our business from cybersecurity threats or incidents. Forward-looking information is provided in this news release to give information about our current expectations and plans and allow investors and others to get a better understanding of our operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking information for any other purpose.

Forward-looking information provided in this news release is based on a number of assumptions that we believed were reasonable on the day the information was given, including but not limited to: the specific assumptions stated above; that we will be able to successfully manage our business through volatile commodity prices, high inflation, increasing interest rates, and supply chain challenges, and successfully execute our strategies to win customers, achieve full cycle resilience (based on assumptions that steps to reduce corporate overhead, drive productivity and optimize working capital while supporting strong business growth will be successful and sustainable) and continue business momentum (based on assumptions that we will be able to continue to source and hire technicians, build capabilities and capacity and successfully and sustainably improve workshop efficiencies); that commodity prices will remain at constructive levels; that our customers will not curtail their activities; that general economic and market conditions will continue to be strong; that the level of customer confidence and spending, and the demand for, and prices of, our products and services will be maintained; that support and demand for renewable energy will continue to grow; that present supply chain and inflationary challenges will not materially impact large project deliveries in our equipment backlog; our ability to successfully execute our plans and intentions, including our strategic priorities as outlined at our 2023 Investor Day; that we will successfully execute initiatives to reduce our GHG emissions and support our customers on their individual GHG reduction pathways; our ability to attract and retain skilled staff; market competition will remain at similar levels; the products and technology offered by our competitors will be as expected; identified opportunities for growth will result in revenue; that we have sufficient liquidity to meet operational needs; that we will have the funds for share repurchases under the NCIB; consistent and stable legislation in the various countries in which we operate; no disruptive changes in the technology environment; our current good relationships with our customers and suppliers, service providers and other third parties will be maintained and that Caterpillar and such other suppliers will deliver quality, competitive products with supply chain continuity; sustainment of strengthened oil prices; completion of major pipelines and the resulting increased activity in the energy sector; that demand for sustainable electric power solutions in Western Canada will continue to grow; quoting activity for requests for proposals for equipment and product support is reflective of opportunities; and strong recoveries in the regions that we operate. Some of the assumptions, risks, and other factors, which could cause results to differ materially from those expressed in the forward-looking information contained in this news release, are discussed in our current AIF and in our annual and most recent quarterly MD&A for the financial risks. We caution readers that the risks described in the annual and most recent quarterly MD&A and in the AIF are not the only ones that could impact us. Additional risks and uncertainties not currently known to us or that are currently deemed to be immaterial may also have a material adverse effect on our business, financial condition, or results of operation.

Except as otherwise indicated, forward-looking information does not reflect the potential impact of any non-recurring or other unusual items or of any dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date of this news release. The financial impact of these transactions and non-recurring and other unusual items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business.