From the 1998 Annual Report
Dear Shareholders, Customers, and Employees:
In 1998, after four years of continuous record revenues and profits, Finning
International Inc. received a resounding message.
The slowdown in Asia and decline in commodity prices was having a significant
impact on most of our markets, especially in the United Kingdom and British
Columbia. While the Company’s geographic diversification allowed us to achieve
increased revenue, our unsatisfactory profitability showed that we needed to
redefine the way we do business.
We needed to examine how we allocated capital within the Company in areas such
as inventory, rentals, real estate and technology. We had to harness advances
in information technology, transportation and communications to build on our
competitive advantage in each of the markets we serve.
By combining our "best solutions" practices with this new way of thinking, we
had an opportunity to rebuild our Company from the ground up – based on
flexibility and speed – to compete in the next millennium.
So we have embarked on a process of rebuilding the Company. Decisions are now
being made that are changing the shape of our operations. From a reduced cost
base, our dealer network is now focusing not only on the traditional business
segment but is also pursuing new emerging segments of the industry.
To better serve our traditional customers who own and operate their equipment,
we have committed to raising our customer support service levels. We will
achieve this through improved logistics and the application of information
technology. By taking advantage of our global connections and our Dealer
Business System (DBS) that links us from the factory floor to the branch shop,
Finning will improve service and delivery with a high-tech, high-touch
approach.
In addition, we will enhance our "best solutions" approach for customers who
currently own and operate equipment, but whose core competency lies elsewhere.
This will allow Finning to ensure optimal performance of Caterpillar equipment
for these customers by applying our Company’s knowledge of equipment operation
and maintenance. The depth of human talent at Finning boasts an expertise in
equipment solutions that has few peers. We are focused on intimately
understanding our customers’ businesses and on providing the best solutions to
lower unit operating costs – be it the production or transportation of ore,
timber, grain, oil, gravel or goods.
Our Company is undergoing a renewal that combines the vitality of "start-up"
thinking with the culture of proven profitability performance. We will combine
the best people, the best equipment and the best technologies to sustain our
competitive advantage in the marketplace.
Underpinning this "start-up" approach is a population of thousands of
Caterpillar machines throughout our territories that will require parts and
service support for years to come. The growth opportunities that will be
afforded by Caterpillar’s imaginative product expansion will open new markets
in the future. Augmenting this growing market opportunity is the strong capital
base we have as a publicly traded company, and a record of growth and
uninterrupted profitability.
In 1998, our Company achieved substantial successes despite difficult market
conditions in our territories. In Western Canada, we generated a significant
increase in market share based on the growing line-up of quality equipment from
Caterpillar. In Chile, we completed an organizational restructuring that has
brought new, high-calibre talent into the operation. And in the U.K., we
completed the merger of H. Leverton Limited into Finning (UK) Ltd., forming a
national Caterpillar dealership in Britain. In addition, we installed the most
recent version of DBS, a dealer-designed information system that is Year 2000
compliant, throughout all our operations.
As we move forward, there will be exciting opportunities for employees to grasp
new ideas and implement them for the benefit of our customers. At Finning, we
want our employees to grow through self-renewal and to be part of a learning
organization that allows them to realize their potential.
I am pleased to welcome Doug Whitehead to the Company. Mr. Whitehead brings a
proven record of senior management achieved through an outstanding career in
retail marketing and forestry. His appointment as President and Chief Operating
Officer adds more depth to the strong management team of Finning International
Inc.
Additionally, the Board appointed Andrew Simon of London, England as a Director,
effective January 1999, and Ricardo Bacarreza of Santiago, Chile as a Director,
effective February 1999. These Board appointments are a reflection of the
substantial growth of our operations outside Canada. The Board thanks Rolf
Hougen of Whitehorse, Yukon for his excellent service as a Director of the
Company for the past 19 years.
I would like to thank Bill Merrell and Dave Edwards, both of whom retired after
making unique and outstanding contributions to Finning over the course of their
careers.
On behalf of the Board of Directors, I wish to thank our employees for their
committed effort in what has been a very challenging year.
Looking to the future, I see our Company taking advantage of the unrealized
opportunities that will come with the next millennium. With vision, courage and
commitment, Finning will continue to deliver profitability and growth for its
shareholders.
Sincerely,
(signed)
James F. Shepard
Chairman and Chief Executive Officer
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