Suppliers News (February 26, 2007)

No stopping Finning

Continued strong demand for heavy equipment and its maintenance propelled Finning International (FTT-T, FINGF-O), the world’s largest Caterpillar (CAT-N) dealer, to another stellar quarter.

Finning earned $52.7 million for the three months ended Dec. 31. That compares with a profit of $36.2 million for the last three months of 2005. Revenue improved to $1.41 billion from $1.12 billion in the same quarter a year earlier.

Finning’s Canadian division nearly doubled its earnings before interest and taxes to $55.6 million from $28.7 million, while Finning’s South American business earned $29.4 million, up 27%.

“In 2006, our Canadian and South American operations continued their dramatic growth and our U.K. dealership operations more than doubled their contribution to earnings from continuing operations,” says Doug Whitehead, president and CEO of Finning International.

“Our order book is at an all-time high of $1.5 billion, and contains a number of large orders for mining trucks with deliveries ranging from 2007 to 2010,” Whitehead added. “We are increasingly optimistic about the outlook for Finning over the next few years.”

This is the fifth straight quarter of record-breaking backlog for Finning. In other words, the company can’t keep up with demand.

In the fourth quarter, Finning entered the following contracts:

* North American Energy Partners (NOA-T, NOA-N) ordered $51 million in equipment, including nine 793D, nine 777F and four 785C haul trucks, all of which are expected to be delivered in 2007.

* In December, Suncor Energy (SU-T, SU-N), exercised an option, granted in a deal completed in June, to purchase six additional Caterpillar 797B haul trucks and with them, a 10-year product service agreement. One of the new trucks was delivered in December and the rest should be hauling by June. The transaction was worth roughly $75 million.

In June, Finning trumpeted the signing of a $115-million maintenance contract with Suncor in a purchase that also included nine 797B-series trucks, and the now-exercised option for six more. The nine trucks were delivered between April and July and are the first B-series trucks in Suncor’s fleet.

* Minera Escondida, part of BHP Billiton (BHP-N, BLT-L), says it will buy 45 Caterpillar 797B mining trucks from Finning’s South American mining division. Delivery of the trucks is expected to begin in early 2009. The transaction will be governed by the long-term strategic alliance between BHP and Caterpillar.

* And Silver Standard Resources (SSO-T, SSRI-Q) bought a package of mining equipment for the Pirquitas silver mine, in northwestern Argentina, from Finning’s South American mining division. The package includes one O&K RH90 hydraulic shovel as well as a fleet of seven Caterpillar 777 haul trucks and 10 pieces of support equipment, which will all arrive by year-end. Finning is negotiating a multi-year maintenance and repair contract to support the heavy equipment at Pirquitas. The value of the agreement could reach $70 million.

Orica buys BST

Watkins, Colorado-based Orica (OCLDF-O, ORI-A) now owns BST Manufacturing, a maker of cast booster products used in the quarry and mining markets.

Located in Minden, La., BST has supplied Orica for years with various boosters, including its patented Pentex products. Cast boosters come in various sizes and contain both explosives and detonation devices.

Orica says the deal was about securing a steady supply of boosters.

While BST will keep its name and operate as a subsidiary, Orica plans to expand BST’s capacity to supply all of the booster products Orica sells to North American clients.

BST employs about 70 people, who will now join Orica.

Orica is part of Orica Mining Services, one of the world’s largest suppliers of commercial explosives and blasting equipment for the mining, quarries and construction markets.

French firm lands Canadian driller

Foraco International, a global drilling services company based in France, has bought the Canadian operations of Connors Drilling, a private company based in Kamloops, B.C., with branch offices in Yellowknife, N.W.T.

The deal brings the number of rigs owned and operated by Foraco in Canada to 34 from nine. Connors Drilling posted revenue of roughly $15 million last year.

Connors employs 140 people and is well known throughout Canada’s western mining community. Connors Drilling also operates subsidiaries in Chile and Argentina and has offered both surface and underground diamond drilling services for more than 50 years.

Foraco says it plans to keep all of the Connors employees.

“The acquisition of Connors Drilling adds significant depth to our existing operations in North America,” says Tim Bremner, Foraco’s Canadian senior vice-president. “We are in a better position to service our Canadian customers and have established a broader base of operations.”

Based in Marseille, France, Foraco made its first foray into Canada in 2006, establishing Foraco Canada, based in Ontario.