Finning International Q1 Earnings Call Highlights

Finning International (TSE:FTT) reported what management described as its strongest first-quarter adjusted earnings per share, as product support growth and a record backlog helped offset lower mining equipment deliveries in South America.

On the company’s Q1 2026 investor call, President and CEO Kevin Parkes said Finning is “executing,” pointing to adjusted EPS of CAD 1.02 and an eighth consecutive quarter of year-over-year product support growth. Revenue totaled CAD 2.5 billion, up 2% from Q1 2025, driven primarily by higher product support revenue in Canada and partially offset by lower mining equipment deliveries in South America.

“Most importantly, we continue to build the installed base and backlog in our operating regions, driving long-term product support opportunities and value,” Parkes said.

Product Support and Backlog Drive Results

Executive Vice President and CFO Dave Primrose said global product support revenue increased 6% year over year, led by a 13% gain in Canada. The Canadian increase was primarily driven by strong mining customer demand and higher rebuild activity.

Finning’s equipment backlog reached a record CAD 3.8 billion at the end of March, up 32% from March 2025 and up 20% from December 2025. Primrose said order intake outpaced deliveries across all market sectors, particularly mining and construction.

In mining, order intake rose approximately 70% from Q1 2025, led by Argentina and the Canadian oil sands. The company said it has more than 140 ultra-class and large mining trucks in backlog, with deliveries extending into 2027 and 2028. In construction, order intake increased about 30% year over year, with growth across all regions.

Finning’s power and energy backlog approached CAD 1.2 billion, supported mainly by data center orders in the U.K. and Ireland and gas compression equipment orders in Canada. Parkes said power and energy is becoming a more important opportunity across the company’s regions, including prime power and standby applications.

Canada Leads Growth, South America Moderates

Canada was the strongest regional growth driver in the quarter. New equipment sales in Canada rose 23% from Q1 2025, led by construction and strength across market sectors. Power and energy sales in Canada nearly doubled year over year, while rental revenue increased 20% on improving construction and power and energy activity.

Canadian EBIT margin was 8.1%, down 30 basis points from the prior year, primarily due to lower product support margins on strong volume growth, partially offset by improved SG margin. Adjusted return on invested capital from continuing operations improved 230 basis points to 18.2%.

In South America, adjusted EBIT margin was 11.1%, up 50 basis points from Q1 2025, reflecting a higher mix of product support revenue, partly offset by higher SG margin. However, revenue was affected by lower mining deliveries and the absence of a large construction equipment package delivered in the prior-year quarter.

Management said mining activity in Chile moderated as expected as some large customers recalibrated mine plans and equipment needs. Primrose said the longer-term outlook for Chile remains positive, supported by copper demand, strong copper prices, brownfield expansions and customer interest in greenfield projects. At the same time, he said the company expects some moderation in product support activity as customers adjust buying plans and existing fleets.

Parkes highlighted Argentina as an improving opportunity, particularly in mining and oil and gas. He said a recent order for more than 20 mining trucks is now in backlog, with deliveries expected to begin later this year and continue through 2028. Primrose also cited a recent win with Glencore’s Alumbrera copper mine.

U.K. and Ireland Outlook Remains Mixed

In the U.K. and Ireland, new equipment sales declined 6% in functional currency due to a timing shift of backlog delivery into Q2. Product support revenue was broadly comparable, while power and energy product support rose 5%. EBIT margin improved 40 basis points to 5.1%, driven by higher new equipment margins and a greater share of product support revenue.

Primrose said demand for new construction equipment in the U.K. and Ireland is expected to remain soft, consistent with low projected GDP growth. However, the company expects a growing contribution from power and energy, particularly from data center demand, while product support is expected to remain stable.

Cost Discipline, Dividend Growth and Capital Allocation

Finning adjusted its Q1 earnings for CAD 16 million of severance costs in South America tied to headcount reductions and organizational changes aimed at simplification, consolidation and service resiliency. Excluding those costs, adjusted EBIT was comparable with Q1 2025, Primrose said.

The company also recorded CAD 15 million of long-term incentive plan expense in the quarter, or CAD 0.09 per share, driven by share price appreciation. Primrose said SG reflected higher people costs to support business growth and the higher incentive expense, though Parkes noted that trailing 12-month SG margin declined 60 basis points despite targeted investments.

Finning’s net debt to adjusted EBITDA ratio was 1.6 times at the end of March. Invested capital turns were 2.3 times, and adjusted return on invested capital was 18.7%, both within target ranges. The company increased its dividend by 7.4%, marking its 25th consecutive year of dividend growth.

Asked about share buybacks, Primrose said returning capital to shareholders remains important, but buyback activity is evaluated dynamically based on cash flow, capital spending, growth opportunities and inventory needs. “We don’t give guidance on buybacks, but we do believe consistency is important,” he said.

Data Centers and Infrastructure in Focus

During the question-and-answer session, Parkes said Finning is encouraged by discussions around Canadian “nation-building” infrastructure projects, though he cautioned that there are not yet many shovel-ready projects. He said pipeline-related activity appears closer to affecting the business this year, including pipeline maintenance and expansion.

Parkes also said data center opportunities in Western Canada are becoming more active, with current activity weighted more toward backup power as customers use available grid capacity. He said the larger opportunity for Finning would be prime gas power, especially in Alberta, though delivery schedules for such projects are generally in the 2028 to 2029 period.

Management emphasized that growing equipment population remains central to Finning’s strategy. Parkes said mining truck population growth in Western Canada and South America is a key driver of future product support revenue, and he cited an upcoming trial with Codelco in Chile for Caterpillar’s Dynamic Energy Transfer system, expected to start in Q2 2026.

“We are building population, helping our customers increase utilization and lowering costs, and penetrating the aftermarket more than ever while remaining disciplined on cost and capital,” Parkes said.

About Finning International (TSE:FTT)

Finning International Inc is a dealer and distributor of heavy-duty machinery and parts of the Caterpillar brand. The company sells and rents Caterpillar machinery to the mining, construction, petroleum, forestry, and power system application industries. Finning International further provides parts and services for equipment and engines to its customers via its owned distribution network and buys and sells used equipment domestically and internationally after reconditioning or rebuilding the machinery.

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