Finning to lay off 1,100 people amid commodity price slump

Finning International, the world's largest Caterpillar heavyequipment dealer, announced Thursday it will lay off 1,100 people inCanada and abroad in a sign that the Vancouver-based company isfeeling the repercussions of the decline in commodity prices.

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The job cuts, representing eight per cent of its total workforce,will include 440 people in Western Canada, 550 in South America anda smaller number in Europe where Finning has operations in theUnited Kingdom and Ireland.

Combined with previous downsizing efforts, Finning is on track tocut its global staff by 1,900 in 2015, including 1,100 in Canada.

Finning also said Thursday that 11 locations in Western Canadawill close, on top of 16 shutdowns that were previously announced asthe company restructures how it operates.

"Our customer's needs are changing, our business model ischanging. The bricks and mortar footprint that we have was built for20 years ago is in my personal view less relevant going forward,"company chief executive Scott Thomson said in a conference call withanalysts.

"If there's ways to get parts to customers without bricks andmortar, without that fixed investment, we should be doing it."

Thomson said the change in business strategy will help thecompany better position itself for when demand strengthens.

"I would view this less as a cost-cutting effort and more as atransformation," said Thomson. "It was accelerated by theenvironment we're in, but I think it's the right approach movingforward."

Finning sells heavy equipment used in the mining and energysectors, which have been hit hard by a sustained drop in commodityprices.

Oil prices are down by more than half compared with last year,while copper prices, a major driver of South American miningoperations, have also dropped by half since 2011.

Thomson said one of the 11 facilities that will close will be inSparwood, B.C., near Teck Resources' Elk Valley coal mine. Thecompany did not disclose where the other shutdowns will take place.

In its latest results released Thursday, Finning saidnew-equipment sales dropped by 27 per cent between its secondquarter and third quarter ended Sept. 30.

The third-quarter financial report also showed that revenue wasdown 10 per cent from a year earlier to $1.5 billion from $1.67billion. Net income fell 42 per cent to $33 million from $57million. But free cash flow, which is what's left after providingfor servicing debt, increased 28 per cent to $140 million from $109million.

Thomson said there is little sign of a turnaround, but governmentspending on infrastructure federally and in Alberta could providesome relief.

"But I'm not sure we should be counting on any of that toincrease revenue in '16 versus '15," he said.

In addition to Saskatchewan and British Columbia, Finning's Alberta operations includeLloydminster, Medicine Hat, Mildred Lake, Fort McKay, Lethbridge, Red Deer, Rocky Mountain House, Edmonton, Calgary and Fort McMurray.