VANCOUVER — Finning International Inc. (TSX:FTT) shares sank Wednesday after the heavy equipment dealer said revenues and earnings fell more than analysts expected as the recession hit all of its businesses.
The company, whose operations include a plant in Red Deer where new equipment is prepared for delivery and existing equipment is rebuilt, also announced a strategic review of its Hewden business.
Finning, the world’s largest Caterpillar equipment dealer, said sales fell 24 per cent to $1.17 billion in the April-June period compared with $1.53 billion last year as construction, mining and other sectors were hit by the global economic downturn.
Net income fell 29 per cent to $48 million compared with $67 million for the same quarter last year. Earnings per share came in at 28 cents compared with 39 cents last year, weaker than expected.
Analysts surveyed by Thomson Reuters were looking for average earnings of 29 cents per share and revenues of $1.38 billion.
Finning stock closed down $2.10 or 11.09 per cent to $16.84 on the Toronto Stock Exchange on Wednesday.
Finning — which does most of its business in Western Canada, South America and the United Kingdom — has been hit hard by the recession as mining, oil and gas and other companies that use its equipment either put projects on hold, or cut costs.
Finning said revenue fell in all segments in the second quarter, but was the steepest in new equipment sales, which fell 40 per cent compared to a year ago. Equipment rental sales fell 29 per cent, while used equipment sales fell just one per cent.
Sales in its product support division, which handles equipment repairs, fell two per cent year-over-year.
The company said it has improved the amount of cash on its books to $140 million, which is $178 million more than its negative position for the same time last year.
Finning has been cutting costs since late last year to cope with the drop in business, including cutting about 700 of its more than 12,000 employees. About 100 of the layoffs have occurred in Red Deer.
The company said it cut expenses by $50 million or 15 per cent from the second quarter of last year. It has a goal to save $150 million this year.
“We are very focused on driving out of this recession in a very strong way, and that will happen,” Waites said.
In its outlook, the company said continued economic uncertainty has hurt revenues. As a result, it can’t predict how it will perform for the rest of the year.
“Previous expectations for 2009 revenue levels, established late in 2008 as part of the company’s budgeting process will likely not be achieved,” Finning stated.
“As a result, the company is withdrawing the revenue guidance previously provided. Given the current market uncertainty, Finning will not be providing revised guidance on expected revenue levels for 2009.”
Late last year, Finning had said it expected revenues to drop between three and eight per cent in 2009. Its 2008 annual revenue was just under $6 billion.