"We enter 2013 uniquely positioned to deliver improved profitability. With the benefit of a full year with Bucyrus and continued product support growth from the expanding and aging machine population, we expect flat to ten percent revenue growth in 2013 over 2012. Having delivered sequential improvement in our operating performance, we expect continued progress in 2013 to drive higher EBIT margin, solid earnings growth and continued strong return on invested capital," continued Mr. Waites. "I am confident that by leveraging our 80-year heritage of superior customer service with our focus on advancing operational excellence we will drive additional value to our shareholders."
Q4 2012 FINANCIAL SUMMARY---------------------------------------------------------------------------C$ millions, except per share amounts Three months ended Dec 31(unaudited) 2012 2011 % change---------------------------------------------------------------------------Revenue 1,779 1,811 (2)Earnings before finance costs and income taxes (EBIT) 150 107 40Net income 105 71 49Basic EPS 0.61 0.41 49Earnings before finance costs, income taxes, depreciationand amortization (EBITDA)(1) 205 156 32Free cash flow(1)(2) 245 281 (13)----------------------------------------------------------------------------- Revenues declined by 2% from Q4 2011 to $1.8 billion, with record revenues in South America partly offsetting lower revenues in Canada and the UK & Ireland. New equipment sales were down by 14% primarily due to lower new equipment sales in Canada compared to record sales in Q4 2011. Product support revenues increased by 11% driven by strong growth in South America. Used equipment sales and rental revenues both rose by 4%.-- Gross profit was 10% higher compared to Q4 2011, reflecting a favourable shift in revenue mix to higher margin product support, as well as higher gross profit margins in most lines of business. Consolidated gross profit margin increased to 29.3% from 26.2% in Q4 2011.-- Selling, general and administrative (SG&A) expenses as a percentage of revenue were 21.5% compared to 20.3% in Q4 2011 due to higher costs associated with product support growth. However, this was the lowest quarterly SG&A as a percentage of revenue reported in 2012.-- EBIT increased by 40% to a record $150 million, driven by the best-ever EBIT achieved in South America and significantly improved EBIT results in Canada compared to Q4 2011. The fourth quarter results included a $9.7 million gain on the sale of property in Canada. Consolidated EBIT margin rose to 8.4% compared to 5.9% in Q4 2011 and 7.8% in Q3 2012. The sequential EBIT margin expansion over the last five quarters was mostly the result of significantly improved EBIT performance in Canada.-- Net income of $105 million and basic EPS of $0.61 were both at record levels. The newly acquired Bucyrus distribution business contributed approximately $0.04 per share of incremental profit to Q4 2012. Fourth quarter results also included approximately $0.06 per share gain from the property sale in Canada.-- EBITDA reached an all-time quarterly high of $205 million. Quarterly free cash flow was $245 million compared to $281 million in Q4 2011. The Company continues to focus on prudently managing working capital and reducing uncommitted inventory levels.-- The Company's net debt to total capital ratio(5) declined to 50.0% at the year end from 52.3% at the end of September. The net debt to total capital ratio is temporarily above the 35-45% target range due to higher debt levels to fund the purchase of the former Bucyrus distribution business as well as working capital requirements. The Company expects net debt to total capital ratio to return within the target range by the end of 2013 as a result of strong free cash flow, lower capital expenditures and improved working capital metrics.-- Order backlog declined to $1.2 billion at the end of December from $1.4 billion at the end of September. Compared to Q3 2012, deliveries were higher and more than offset a 42% increase in the order intake during Q4. The Company reported no unusual order cancellations in any of its operations in the fourth quarter. The current backlog is approximately $300 million below December 2011 levels as customers are more cautious and taking longer to make purchasing decisions in light of improved equipment availability and uncertain economic conditions.Q4 2012 HIGHLIGHTS BY OPERATIONCanada-- Revenues were 20% lower compared to the record levels in Q4 2011, mainly due to a 36% decline in new equipment sales from the exceptionally strong fourth quarter of 2011. While customers are taking a more cautious view on capital projects and expansions, market conditions in Western Canada were favourable in the fourth quarter. Product support revenues were comparable to Q4 2011 supported by stable activity in mining and heavy construction.-- Canada's reported EBIT of $74 million was 70% higher than in Q4 2011 and included a $9.7 million gain on the sale of property. EBIT margin improved over the past five consecutive quarters and was 9.4% compared to 4.4% in Q4 2011, largely due to the reduction in ERP related costs.-- Looking forward, Canada remains focused on driving operational excellence initiatives to improve working capital performance and increase service productivity. The Canadian operations expect to continue delivering improved EBIT margin performance in 2013.South America-- Revenues rose by 31% from Q4 2011, driven by record revenues in most lines of business. In functional currency (USD), revenues grew by 35% reflecting strong mining and construction activity in Chile, as well as the contribution from the newly integrated Bucyrus distribution business. In functional currency, new equipment sales and product support revenues set new records, climbing by 23% and 33% respectively.-- EBIT increased by 34% to a record $76 million. EBIT margin improved to 9.8% from 9.5% in Q4 2011, reflecting leverage to record revenues through SG&A cost control and higher margins in most lines of business.-- South America added approximately 1,000 employees to its workforce in 2012, a 15% increase from 2011, as the Company welcomed the former Bucyrus employees and added headcount to support the 28% annual growth in product support business over last year.-- Going forward, South American operations remain focused on managing cost pressures of the competitive labour market and driving operational excellence initiatives.United Kingdom and Ireland-- Fourth quarter revenues declined by 4% from Q4 2011 (3% decline in functional currency), reflecting softer market activity in most sectors. In functional currency (GBP), new equipment sales decreased by 4% due to weaker economic conditions. Product support revenues were down by 5% over Q4 2011, primarily as a result of slower demand for parts.-- EBIT declined by 30% to $10 million, and EBIT margin was 4.8% compared to 6.5% in Q4 2011, reflecting lower revenue levels and a pension curtailment gain of $6.4 million that was recorded in the fourth quarter of 2011.-- Looking into 2013, the UK and Ireland operations are focused on driving value from completed strategic acquisitions, executing on operational excellence initiatives and sustaining financial performance through a period of soft demand.