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 |
