Finning International Inc.

Thank you for standing by. This is the conference operator. Welcome to the Finning International Inc. 4th Quarter 2021 Investor Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Analysts who wish to join the question queue may press star then 1 on their telephone keypad. Should you need assistance during the conference call, You may signal an operator by pressing star and zero. I would now like to turn the conference over to Greg Palaszczuk, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Finning's fourth quarter earnings call. Joining me today is Scott Thompson, President and CEO. Following our remarks today, we'll open the line to questions. This call is being webcast on finning.com. We've also provided a set of slides that we'll reference during our prepared remarks. The slides are posted on the investor relations section of our website. You can also view the slides on our webcast page. An audio file of this call and the accompanying presentation will be archived on our website. Before I turn it over to Scott, I want to remind everyone that some of the statements provided during this call are forward-looking. Please refer to slides 10 and 11 for important disclosures about forward-looking information, as well as currency and specified financial measures, including non-GAAP financial measures. Please note that forward-looking information is subject to risks, uncertainties, and other factors as discussed in our annual information form under key business risks and in our MD&A under risk factors and management and forward-looking information disclaimer. Please treat this information with caution as our actual results could differ materially from current expectations. Scott, over to you.

Thank you, Greg, and good morning, everyone. On today's call, I will speak about the key drivers of our 2021 performance and share our views on 2022. Greg will then review our financial performance in the fourth quarter and provide more details on our outlook by region and our objectives for the year. Please turn to slide two. We achieved strong results in 2021 driven by successful execution to deliver on our strategic plan and improve our earnings capacity. Market activity has recovered as the year progressed. Across the business, we saw tremendous momentum in capturing product support opportunities and winning major equipment deals. Our 2021 product support revenue was on par with the pre-pandemic levels of 2019, driven by our strategic focus on growing construction rebuilds and customer value agreements, and increased spending on parts and maintenance by mining customers, particularly towards the end of the year. Over the course of 2021, we were awarded multiple deals for mining equipment and product support in Chile, We won a significant share of the HS2 equipment opportunity in the UK, and we received an order for 20 797 ultra-class trucks in the oil sands as customers have increased capital budgets and started making tangible commitments. These deals have been driving growth in our equipment backlog, which is at near record levels as we enter 2022. On the supply side, we expect challenges from a constrained global supply environment to persist in 2022, resulting in longer lead times for equipment and parts in all of our regions and driving strong demand for used equipment, rentals and rebuilds. We have been leveraging our improved forecasting and supply chain capabilities to build a healthy inventory position, increasing our inventory by about $200 million from December 2020. We are also driving rebuilds and resale of used equipment to meet customer needs as supply of new equipment remains tight. We posted annual adjusted earnings per share of $2.18 and adjusted return on invested capital of 16.4%, exceeding our mid-cycle earnings per share and return on capital targets two quarters ahead of schedule, all while our revenue remained below pre-pandemic levels for the year. Our improved inventory management data-driven pricing decisions, and service and supply chain efficiencies enabled us to generate solid gross profit margins in a highly competitive and constrained supply environment. Importantly, we are seeing strong operating leverage from our reduced cost base and ongoing initiatives to increase productivity of our facilities and our people so we can serve our customers in the most efficient way possible. All of our regions delivered outstanding results in 2021, Canada and South America both exited the year with 10.1% EBIT as a percentage of net revenue. Return on capital in South America exceeded 20%. And UK and Ireland posted very strong revenue and EBIT performance throughout the year. Our employees should be proud of these accomplishments. It is their dedication and exceptional execution in serving our customers that have delivered such strong results for our shareholders in a very dynamic environment. Our strong balance sheet provides us with growing capacity for reinvestment and return of capital to shareholders. In 2021, we raised our dividend by 10% and repurchased 5 million shares. We also expanded our forward fuel capabilities to a wider range of renewable and low-carbon fuels. This investment will further build on the success of our forward fuel business, which continues to deliver excellent returns and customer outcomes. Looking ahead, we expect increasing interest from our customers in low and zero carbon technology, including electric drive, electric battery, natural gas and hydrogen blending, and hydrogen fuel cells. In partnership with Caterpillar, we will continue to offer our customers innovative and low carbon solutions to help them reduce emissions and increase productivity. The recent announcement from TEC on partnering with Caterpillar to advance zero emissions mining haul trucks at its BC operations is exciting news for us. Importantly, we are advancing our own sustainability journey, including a transition to energy efficient facilities and low carbon fuel for our vehicle fleets to further reduce our own emissions. In 2021, we were able to build on significant improvements we've made in 2020, despite higher activity levels, and reduce our absolute GHG emissions by approximately 7%. This puts us substantially ahead of schedule on our 2027 carbon reduction commitments. Recognizing the critical importance of these improvements, we are currently reviewing additional initiatives to continue reducing our carbon footprint, and we'll provide an update later this year. We believe that our 2021 performance sets a great foundation for us to capture upcycle opportunities and compound our earnings going forward. We saw the transition from mid-cycle to upcycle market conditions earlier than we had projected. From the start of 2022, we expect to be operating in an upcycle demand environment. We expect ongoing economic growth in our territories and strengthening commodity prices to support a positive market backdrop for our business. We are encouraged by increasing capital budgets, higher commodity production forecasts, and continued public and private investments in infrastructure in our regions. In summary, our team delivered excellent results in 2021, and we are optimistic about the year ahead. I am confident that we have rebuilt our business to deliver significantly improved operating leverage and expand our return on invested capital. We continue to target mid-teens and above earnings per share growth during the sustained up cycle. I will now hand it over to Greg.