Finning International Signals Resilient Growth Amid Headwinds
Finning International ((TSE:FTT)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Finning International’s latest earnings call struck a cautiously upbeat tone, with management highlighting solid growth across revenue, backlog, product support and returns, alongside stronger free cash flow and lower leverage. At the same time, executives acknowledged margin pressure, one-off charges and regional soft spots, but framed these as manageable bumps rather than structural setbacks.
Revenue Growth and Record Backlog
Finning reported full-year 2025 revenue up 7% to $10.6 billion, with fourth quarter sales rising 6% to $2.7 billion. The equipment backlog ended the year at a record $3.1 billion, up 20% from a year earlier and 9% since September, giving investors strong visibility on future demand.
Product Support Expansion and Technician Hiring
Product support revenue climbed 8% in 2025 to nearly $6 billion, with mining-related service work up about 10% in Canada and 5% in South America. To sustain that momentum, Finning added 225 technicians across its regions, expanding service capacity in what management sees as a high-margin, recurring revenue engine.
Earnings Growth and Return on Capital
Adjusted EPS increased 14% for 2025, with Q4 adjusted EPS at $1.00, up 3% year over year despite various headwinds. Finning’s invested capital turns improved to roughly 2.34 times, pushing consolidated adjusted ROIC to 19.2% in the fourth quarter, about 130 basis points higher than a year ago.
Robust Cash Flow and Lower Leverage
The company highlighted strong cash generation, producing nearly $550 million of free cash flow for the year and an outsized $642 million in Q4 alone. This allowed Finning to reduce net debt to adjusted EBITDA to 1.2 times from 1.7 times at the end of 2024, strengthening its balance sheet and funding flexibility.
Power & Energy and Used Equipment Momentum
Power & Energy has emerged as a growth engine, with revenue up 41% since mid-2023 and backlog up more than 70% over the same period to about $1 billion, 25% above December 2024. Used equipment revenue is up roughly 31% since Investor Day, underscoring management’s focus on lifecycle value even as quarterly comparisons remain volatile.
Regional Equipment Demand and Order Intake
New equipment sales grew 9% in Q4, driving record new equipment revenue for the year, and Canadian order intake surged nearly 50% versus the prior-year quarter. Over the last two years, Finning has delivered 95 new mining trucks in Canada and 132 in Chile, with more than 50 additional trucks in backlog and a pipeline of further opportunities.
Margin Pressure and EBIT Volatility
Despite top-line strength, gross profit margin slipped about 70 basis points in Q4, mainly on lower product support margins and mix. Excluding a write-off, adjusted EBIT fell around 2% year over year, while SG&A margin rose to roughly 15.4% as incentive-based compensation climbed.
One-Off Technology Write-Off and LTIP Costs
Finning booked a $22 million write-off tied to decommissioning certain technology assets in the fourth quarter, weighing on reported earnings. Long-term incentive plan expense also jumped to $21 million, versus a $3 million recovery a year earlier, shaving about $0.12 per share from quarterly results and inflating SG&A.
Weak Q4 Used Equipment Sales
Used equipment sales fell 23% year over year in Q4, with Canada down 42% as the prior year benefited from large, non-recurring conversions. Management noted this created a negative mix effect, pressuring both revenue growth and margins, though broader used activity remains higher versus earlier strategic baselines.
Chile Moderation and South American Returns
In South America, management signaled a near-term moderation in Chile as mines reorganize fleets and retire older machines, tempering activity levels. The region’s adjusted ROIC declined about 140 basis points year over year, and tight supply of skilled labor continues to pose execution challenges for further growth.
U.K. Construction Softness and Profitability
In the U.K. and Ireland, adjusted EBIT margin slipped roughly 120 basis points to 4.6%, with a higher mix of new equipment sales during softer construction utilization eroding profitability. Product support was essentially flat as slower demand in certain segments was offset by other areas of activity, leaving that business more in a holding pattern.
Higher Capital Needs and Execution Risk
Looking ahead to 2026, Finning plans more than $350 million in net capital and rental fleet expenditures to expand rental and service capacity. Management acknowledged that scaling fleets and workforce to capture construction and power rental recovery brings execution risk, but sees these investments as necessary to unlock the next leg of growth.
Forward-Looking Strategy and Financial Targets
Management reaffirmed its 2023 Investor Day roadmap, emphasizing continued growth in product support and Power & Energy after 2025’s gains in revenue, EPS and backlog. The company aims to keep invested capital turns in the 2.3 to 2.5 times range, sustain adjusted ROIC between 18% and 25%, maintain SG&A comfortably below 17%, generate positive free cash flow and preserve low leverage while funding selective growth and ongoing technician hiring.
Finning’s earnings call painted a picture of a business with healthy demand, rising services scale and improving capital efficiency, even as cyclical pockets and one-off items dent near-term margins. For investors, the story hinges on whether management can convert record backlog and heavy investment into durable earnings growth while keeping returns and balance sheet strength on their current upward track.
