Finning International Inc. (TSX:FTT) warned Thursday that the mining sector in South America, a key market for the heavy equipment dealer, faces a number of headwinds.
Finning chief operating officer Juan Carlos Villegas said copper producers in South America are worried about rising costs.
“As a result, our outlook is cautious,” he told a conference call with analysts after the Vancouver-based company reported improved third quarter earnings and profits.
“Mining customers are investing less aggressively from before. Greenfield projects are not proceeding as quickly as the past and brownfield project expansions are reviewed more carefully.”
Villegas said Finning’s growth in the region will be slower than in the past. However, he noted the company did score a US$190 million deal this week with Codelco, Chile’s state owned copper mining company.
“We view this news as positive given the very weak mining backdrop,” RBC Capital Markets analyst Sara O’Brien said of the Codelco deal.
Finning reported Thursday a third-quarter profit of $86.2 million or 50 cents per share, compared with a profit of $81.2 million or 47 cents per share a year earlier.
The average analyst estimate had been for a profit of 51 cents per share, according to Thomson Reuters.
The world’s largest Caterpillar dealer said the improvement came as revenue for the three months ended Sept. 30 was $1.78 billion, up from $1.59 billion in the same quarter last year, helped by new equipment sales in Canada.
Revenue from Canada was up 25 per cent compared with a year ago, while South America dipped by less than one per cent and revenue from Finning’s U.K.-Ireland segment was flat year-over-year.
The company’s order backlog at Sept. 30 stood at $1 billion, down from $1.1 billion at the end of June.
Finning president and chief executive Scott Thomson said the results were in line with management expectations, but noted that there was some uncertainty in the economic environment.
“The mining sector, particularly in South America, is under pressure and we are actively managing our cost structure so that it remains in line with expected business levels,” he said.
Finning also announced Thursday that Villegas would add the role of president of Finning Canada to his responsibilities as chief operating officer.
Andy Fraser, currently president of Finning Canada, was named executive vice-president of customer and external relations for Finning International.
Fraser will focus on the company’s relationships with its largest customers as well as community and government relations.