Finning starts 'strategic review' of Hewden

Finning International has announced a strategic review of Hewden, its UK rental business, following further deterioration of its results in the second quarter of 2009 and little prospect of improved business conditions "well into 2010".

Finning said Hewden's performance in the second quarter had been disappointing, with rental revenues down 33.1% in UK currency and continued pressure on rental prices and utilization.

Mike Waites, Finning's president and chief executive officer, speaking at the company's investors' conference call, said Finning had made changes at Hewden, with significant reductions in capital expenditure, and improved product mix and a focus on national and major accounts, but "the economic situation in the UK is not getting better, and that has put pressure of prices and utilisation.

"We have a strategic review under way at Hewden...all options are on the table, but the message...is that we will be solving the problem."

Mr Waites said that Caterpillar was aware of the situation and that Finning had "good degrees of freedom" to make a decision about Hewden. He said there could be ways for Caterpillar to drive sales and market share in the UK other than having a large rental business.

He said that he hoped that a decision would be reached before the end of the year. "It's not a long protracted process...time is of the essence", he told analysts.

Finning UK reported sales down 29.2%, in UK currency, with rental operations down 33.1%. Hewden's revenues were C$58.2 million for the quarter, compared to C$95.8 million for the same period in 2008, while Finning UK's new equipment sales were almost half down at C$76.5 from C$146.7 million.

Overall, Finning group revenues declined 24% to C$1.16 billion for the quarter "due to significantly lower new equipment sales and rental revenues in all operations, reflecting weak economic conditions." The only bright spot in the results was Finning's performance in its South American territories (Argentina, Bolivia, Chile and Uruguay), where revenues (in local currency) fell by only 8%.