Finning International Q2 2026 Earnings Report

Finning International EPS Results

• Actual EPS: C$1.22
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Finning International Revenue Results

• Actual Revenue: $3.13 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Finning International Announcement Details

• Quarter: Q2 2026
• Date: 8/5/2026
• Time: After Market Closes
• Conference Call Date: Thursday, August 6, 2026
• Conference Call Time: 10:00AM ET

Finning is the world's largest Caterpillar dealer. Headquartered in Surrey, British Columbia, we sell and rent Caterpillar equipment and provide parts, service and performance solutions in Western Canada, Chile, Argentina, Bolivia, the United Kingdom, and Ireland. Since 1933, we have delivered unrivalled customer service and are committed to solving our customers' toughest challenges.

Finning International Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Finning reported record Q2 results, with revenue surpassing CAD 3 billion for the first time, EPS up 21% year over year to CAD 1.22, and EBIT up 16%.
• Positive Sentiment: Product support revenue increased 11% for the ninth consecutive quarter, while new equipment deliveries rose 34%; backlog remained at a record CAD 3.8 billion, up 26% year over year.
• Positive Sentiment: Management highlighted strong growth opportunities in Western Canada, including mining, oil and gas, rentals, and power generation for data centers. Finning plans to expand its packaging capabilities and is increasing its Canadian technician base to support future demand.
• Negative Sentiment: Gross profit and EBIT margins declined as product support margins compressed, reflecting customer mix, technician productivity ramp-up, increased competition in less-proprietary products, tariffs on mining-related steel, and a higher proportion of new equipment sales.
• Neutral Sentiment: South America’s longer-term outlook remains favorable, but management expects near-term product support activity in Chile to moderate through 2028, while U.K. and Ireland demand remains constrained by low projected GDP growth.

Presentation

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Finning International Inc.'s second quarter 2026 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.

[Operator]

Analysts who wish to join the question queue may press star then one on their telephone keypad. Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to David Primrose, Executive Vice President and Chief Financial Officer. Please go ahead.

[David Primrose, EVP and CFO at Finning International Inc]

Thank you, operator. Good morning, everyone, and welcome to Finning's second quarter earnings call. Joining me on today's call is Kevin Parkes, our President and CEO. Following our remarks, we will open the line to questions. This call is being webcast on the investor relations section of finning.com. We have also provided a set of slides on our website that we will reference, and an audio file of this call and the accompanying slides will be archived.

[David Primrose, EVP and CFO at Finning International Inc]

Before I turn it over to Kevin, I want to remind everyone that some of the statements provided during this call are forward-looking. Please refer to slides nine and 10 for important disclosures about forward-looking information, as well as currency and specified financial measures, including non-GAAP financial measures.

[David Primrose, EVP and CFO at Finning International Inc]

Please note that forward-looking information is subject to risks, uncertainties, and other factors as discussed in our..please treat this information with caution, as our actual results could differ materially from current expectations. In addition, unless otherwise noted, this presentation reflects the results of continuing operations only. Kevin, over to you.

[Kevin Parkes, President and CEO at Finning International Inc]

Thank you, Dave. Good morning, everyone. Thank you for joining us, thank you to our teams, our customers, and Caterpillar for your hard work, trust, and partnership. Strong strategic execution delivered record quarterly EPS of CAD 1.22, up 21% year-over-year. Revenues exceeded CAD 3 billion for the first time, product support grew year-on-year for the ninth consecutive quarter, growing 11%.

[Kevin Parkes, President and CEO at Finning International Inc]

Even with record new equipment deliveries, which were up 34%, backlog remains strong at CAD 3.8 billion, driven by strategically significant mining orders in Chile and gas compression orders in Canada. Quoting activity and fleet enhancement discussions are increasing in Chile and Argentina. Oil sands production, pipeline activity, and infrastructure build in Canada are gaining momentum. Market share gains across all regions give us confidence in future backlog growth. Most importantly, the machine and engine population continues to grow across our territories.

[Kevin Parkes, President and CEO at Finning International Inc]

That installed base is the engine for future product support growth and the clearest line of sight to long-term value creation. As in prior quarters, my prepared remarks will focus on the long-term earning potential we are building. Dave will then cover off quarterly results in more detail. Please turn to slide two. Our performance across our three strategic pillars of our strategy is fundamentally increasing our EPS potential.

[Kevin Parkes, President and CEO at Finning International Inc]

Product support revenue reached CAD 6.2 billion on a last 12-month basis. In the quarter, product support was up 11% year-over-year, led by 19% growth in Canada. Canadian product support is growing across every sector, supported by larger mining population, rebuild activity, and increased contracted labor penetration. Indeed, customer value agreements with labor grew by 70% in the quarter, enabled by a deliberate strategic investment in capacity, including a 20% increase in technicians year-over-year.

[Kevin Parkes, President and CEO at Finning International Inc]

Our rental businesses are also gaining momentum in each region, with revenue up 19% led by Canada. Strategic fleet investments are allowing us to capture improving end market demand while growing with new customers and growing our population. At the same time, our cost and capital discipline continue to anchor our resilient operating model.

[Kevin Parkes, President and CEO at Finning International Inc]

We are investing in building capacity and capability to create long-term growth while maintaining strong operational leverage. SG&A as a percentage of revenue was 14.5% on a last 12-month basis, down by 120 basis points from 12 months of Q2 2025. Invested capital turns increased to 2.35x. These are not just efficiency metrics. They are proof points that our operating model is more resilient, more scalable, and more capable of compounding earnings.

[Kevin Parkes, President and CEO at Finning International Inc]

Before I hand back to Dave, I want to talk about a long-term opportunity for power for data centers in Western Canada, and specifically Alberta. We are working with operators, power producers, and government on primary bridging and backup solutions.

[Kevin Parkes, President and CEO at Finning International Inc]

This is a generational power opportunity for Canada, Alberta, and Finning, and it fits directly with our core strategy of building an installed base in our operating territories and supporting it over its lifecycle by converting that population into long-term product support growth. I also want to say that this is not new territory for us. Our U.K. and Ireland dealership has been supporting the build, maintenance, and operation of data centers for more than a decade, developing a trusted capability and deep application experience. That capability is showing up in the numbers.

[Kevin Parkes, President and CEO at Finning International Inc]

Power and energy new equipment sales in our U.K. and Ireland business are up 38% year-to-date, supported by a healthy product backlog. Turning to Canada, while we are encouraged about the generational opportunity for data center builds in Western Canada, our incumbent power and energy business is also building momentum ahead of any data center contribution. Sales are up 63% year-to-date, and our backlog is up more than 100% compared to Q2 2025.

[Kevin Parkes, President and CEO at Finning International Inc]

This is primarily driven by gas compression as the oil and gas outlook improves following significant business development announcements in the quarter. It is clear power is becoming a larger strategic platform for Finning, and it strengthens the same installed base and product support flywheel that underpins our long-term earnings potential and growth. To close, quarter two demonstrates the power of the strategy.

[Kevin Parkes, President and CEO at Finning International Inc]

We are growing the installed base, we are converting that growth into product support, and we are maintaining disciplined cost and capital execution. We are building a more resilient operating model, the combination is the foundations of our earnings growth potential and the reason why we remain highly optimistic about Finning's long-term future. With that, I'll hand the call back to Dave.

[David Primrose, EVP and CFO at Finning International Inc]

Thank you, Kevin. I'll now turn to slide three. Our Q2 revenue of CAD 3.1 billion was up 20% compared to Q2 2025, primarily driven by strong new equipment deliveries across all regions and continued product support growth, particularly in Canada. Exceeding CAD 3 billion in quarterly revenue for the first time in our history helped to drive record EPS and reflects continued execution momentum. We are pleased with our growth across our diversified end markets.

[David Primrose, EVP and CFO at Finning International Inc]

New equipment deliveries accelerated in all regions, increasing our installed population and creating a base for future product support opportunities. Product support revenue also continued to grow, supported by robust mining activity and an improving construction sector. EBIT was CAD 249 million, up 16% compared to Q2 2025 adjusted EBIT. EPS of CAD 1.22 was up 21% compared to Q2 2025 adjusted EPS of CAD 1.01.

[David Primrose, EVP and CFO at Finning International Inc]

Long-term incentive plan expense was CAD 21 million this quarter, or approximately CAD 0.13 per share of EPS impact, driven by continued strong share price appreciation. This compares to LTIP expense of CAD 25 million, or approximately CAD 0.13 per share of EPS impact in Q2 2025. Our balance sheet and capital efficiency remain strong.

[David Primrose, EVP and CFO at Finning International Inc]

Free cash flow was a positive CAD 15 million, with increased collections from higher revenues largely offsetting investments in working capital to support growth. Net debt to adjusted EBITDA was 1.6x at the end of June. Invested capital turns were 2.35x, and adjusted return on invested capital from continuing operations was 19%, all within our target ranges. On slide four, we show changes in our revenue by line of business compared to Q2 2025 and the composition of our equipment backlog by market sector.

[David Primrose, EVP and CFO at Finning International Inc]

New equipment sales were up 34%, driven by increased mining deliveries in Canada and South America, as well as construction deliveries in all regions. Used equipment sales were up 18%, primarily driven by increased activity in the Canadian construction business. Rental revenue was up 19%, reflecting improving construction and power and energy activity across all regions.

[David Primrose, EVP and CFO at Finning International Inc]

Product support revenue was up 11%, primarily driven by strong activity in Canada, where product support was up 19%, led by mining. Despite the record level of new equipment sales in the quarter, equipment backlog remained at record levels of CAD 3.8 billion at June 30th 2026, in line with March 31st 2026, and up 26% from June last year, and up 22% from December 2025. Order intake continued to outpace deliveries in the quarter.

[David Primrose, EVP and CFO at Finning International Inc]

Power and energy benefited from oil and gas activity in Canada, while mining was supported by strong activity in South America. Backlog remains well diversified by market sector, with approximately half in mining, about one-third in power and energy, and the remainder in construction. Backlog strength continues to provide confidence in future product support opportunities.

[David Primrose, EVP and CFO at Finning International Inc]

Turning to our EBIT performance on slide five. Gross profit margin was 21.3%, down 240 basis points compared to Q2 2025, reflecting lower product support margins on strong volume growth and a higher proportion of new equipment revenue in the sales mix. SG&A margin was 13.3%, down 220 basis points from Q2 2025. This demonstrates continued cost discipline through the growth cycle and also reflects a higher mix of new equipment sales.

[David Primrose, EVP and CFO at Finning International Inc]

EBIT margin was 8%, down 30 basis points from Q2 2025 adjusted EBIT margin, reflecting lower product support margins and higher new equipment revenue mix. Importantly, EBIT dollars increased 16% year-over-year. Q2 EBIT margin was 9.7% in South America, 8.3% in Canada, and 6.2% in the U.K. and Ireland. Looking ahead, we will continue to seek opportunities to reduce costs, improve efficiency, enhance operating leverage, and strengthen resilience to drive higher earnings capacity.

[David Primrose, EVP and CFO at Finning International Inc]

Moving to our South America results and outlook, which are summarized on slide six. In functional currency, new equipment sales were up 35% from Q2 2025 due to higher construction and mining deliveries in Chile. Product support revenue was up 3%, driven by higher mining activity in Chile and also increased revenue in all sectors in Argentina.

[David Primrose, EVP and CFO at Finning International Inc]

EBIT margin of 9.7% was down 40 basis points from Q2 2025 adjusted EBIT margin, primarily driven by the higher proportion of equipment revenue in the mix and also lower product support margin, partially offset by lower SG&A margin. Adjusted return on invested capital of 23.5% was down 240 basis points, impacted by working capital investments supporting growth and the resulting increase in average invested capital.

[David Primrose, EVP and CFO at Finning International Inc]

In Chile, our longer-term outlook remains positive, underpinned by growing global demand for copper, strong copper prices, capital deployment into large-scale brownfield expansions under supportive government priorities, and customer confidence to invest in greenfield projects. We are continuing to see a broad-based level of quoting, tender, and award activity for mining equipment, product support, and technology solutions. Some of these awards hit our order backlog in Q2, while others are expected to be finalized in Q3 and beyond.

[David Primrose, EVP and CFO at Finning International Inc]

In the near term, we continue to expect some moderation in product support activity levels and a more stabilized labor environment through 2028. In the Chilean construction sector, we continue to see a healthy demand from large contractors supporting mining operations, and we expect infrastructure construction activity to remain steady. In power and energy, activity remains strong in the industrial and the data center markets.

[David Primrose, EVP and CFO at Finning International Inc]

In Argentina, the outlook is increasingly positive and quoting activity remains high. We are diligently monitoring what is a dynamic operating environment to ensure we are best positioned to capture opportunities, particularly in oil and gas and mining, as they arise. Turning to Canada on slide seven. New equipment sales were up 33% from Q2 2025, with strong sales across all market sectors led by mining and continued market share gains in construction.

[David Primrose, EVP and CFO at Finning International Inc]

Used equipment sales were up 25%, reflecting increased activity in the construction sector in line with overall market activity. Rental revenue was up 22%, driven by improving construction and power and energy activity. Product support revenue was up 19%, reflecting strong demand across all sectors and particularly in mining. EBIT margin of 8.3% was down 110 basis points, driven by lower product support margin and increased equipment sales mix, partially offset by improved SG&A margin.

[David Primrose, EVP and CFO at Finning International Inc]

Return on invested capital from continuing operations was 18%, up 170 basis points, driven by higher profitability and improved capital efficiency over the last 12 months. Our outlook for Western Canada remains positive. Mining activity continues to strengthen, with customers actively looking to increase production and fleet capacity through both performance and investment. In power and energy, oil and gas activity remains strong and backlog is increasing.

[David Primrose, EVP and CFO at Finning International Inc]

Data center sentiment continues to grow, supported by recent announcements, although the timing remains uncertain pending project approvals. Construction sector activity continues to improve, with customer demand increasing ahead of anticipated major project confirmations. We expect this to have a positive impact on new, used, and rental revenue while remaining cautious with respect to the exact timing and magnitude of future projects.

[David Primrose, EVP and CFO at Finning International Inc]

Our focus remains on building resilience by managing costs and invested capital levels while driving productivity improvements through the growth cycle. Q2 2025, driven by delivery of delayed sales from Q1, as mentioned last quarter. Product support revenue was down 2% due to lower activity in both construction and power. We expect the product support business to remain stable in the short and mid-term. EBIT margin of 6.2% was up 100 basis points, driven by robust SG&A control on higher revenues.

[David Primrose, EVP and CFO at Finning International Inc]

Adjusted return on invested capital of 21.6% was up 320 basis points year-over-year, reflecting the higher profitability achieved during. We continue to expect demand to remain soft in line with low projected GDP growth. We continue to expect a growing contribution from power and energy as we execute our strategy. Quoting activity remains strong, driven by healthy demand for both primary and backup power generation solutions. I'll now turn it back to Kevin for some closing remarks.

[Kevin Parkes, President and CEO at Finning International Inc]

Thank you, Dave. Before I close, I wanted to talk about the leadership transition in South America and recognize my colleague, Juan Pablo Amar, who will be retiring later this year. For more than 30 years, Juan Pablo has made an enormous contribution to our business. His loyalty, flexibility and commitment to our company, customers and employees has been inspiring.

[Kevin Parkes, President and CEO at Finning International Inc]

Under his leadership, our South American business has more than doubled by many metrics, and importantly, he has positioned our business for the next phase of growth. He has led critical investments in our team, facilities, and capabilities to ensure our business is ready to support our customers as they embark on their growth plans. I feel lucky to have had his support for the past four years and wish him well in his retirement.

[Kevin Parkes, President and CEO at Finning International Inc]

He will continue to support me and the new team led by Sebastian Reisch to ensure we have an effective and energized transition. To close, we are pleased with the continued execution of our strategy and the results we are generating. We are committed to growing our product support business by growing population and building new capacity and capabilities. We are excited about the more transformative opportunities we have in Argentina, power generation and rental. With that, we'll open for questions.

[Operator]

Thank you. We will now begin the question and answer session. Analysts who wish to join the question queue may press star then one on the telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question comes from Cherilyn Radbourne with TD Cowen. Please go ahead.

[Cherilyn Radbourne, Analyst at TD Cowen]

Thanks very much and good morning. I do want to quickly wish Juan Pablo our very best on his retirement.

[Kevin Parkes, President and CEO at Finning International Inc]

Thank you.

[Cherilyn Radbourne, Analyst at TD Cowen]

Kevin, I was hoping you could spend a bit more time addressing that opportunity set for Finning and also sort of the timing and scale of a corresponding production response?

[Kevin Parkes, President and CEO at Finning International Inc]

Yeah. Undoubtedly, it's been a good summer for positive sentiment and collaborative announcements between the federal and provincial government in Alberta. That's really encouraging, and I think that built on an already improving sentiment and outlook from the major producers in Alberta. I think that there is a long way to go.

[Kevin Parkes, President and CEO at Finning International Inc]

There's a lot more discussions to happen, some critical hurdles or agreements to overcome, and some infrastructure to build out as well before we see any kind of real meaningful growth in production in the region. It's a tailwind, and I expect miners, the oil sands producers and energy producers to be organizing themselves around that positive outlook for more production in Western Canada. We are seeing some of that just in general confidence and sentiment today.

[Kevin Parkes, President and CEO at Finning International Inc]

I point to our gas compression business being a good example of that. Also we delivered a truck a week in Canada in the quarter, and we expect that to continue from our very healthy backlog. We are seeing some of that immediately, I guess, Cherilyn, in our backlog and how we deliver that, like Dave mentioned about strong gas compression sales in the quarter. It's more an incremental and positive improvement right now rather than a step change in production and impact on our company.

[Cherilyn Radbourne, Analyst at TD Cowen]

Related to that, as we think about the labor that will be needed to support nation building infrastructure, do you think the government needs to be doing more on that front in addition to expediting the approval process?

[Kevin Parkes, President and CEO at Finning International Inc]

A 100%, I've had some of those conversations with the major projects office. There's a lot of positive momentum, but it's companies like Finning that supply the equipment and the labor and the talent to really make the projects happen. We have been recruiting, as we've said, a technician a day. That's still going very well.

[Kevin Parkes, President and CEO at Finning International Inc]

Our technician base, not including OEM, is up 20% in Canada year-to-date. We are encouraged by our ability to attract talent in the marketplace, and we are kind of preempting the projects. Any confidence that the government could provide and the market can provide in terms of what they think that demand will actually look like, will help us to organize ourselves even more effectively.

[Kevin Parkes, President and CEO at Finning International Inc]

I think the most important thing to say about that, Cherilyn, is that we are doing it anyway because of our opportunity and our ambition to dramatically increase the percentage of labor that we have working on and around our machines anyway. We have a market share opportunity ahead of us anyway, which we are getting after. That gives us momentum in the recruitment, the training that's required that we can lever up and down as the demand materializes.

[David Primrose, EVP and CFO at Finning International Inc]

What I would add there, Cherilyn, is we're certainly supportive to any government initiatives there. In the meantime, like Kevin said, we've had very good success in Western Canada. We have a very strong brand in the employment market, and we've doubled down even further this year with the various trade schools all across Western Canada. The team's had very good success to date.

[Cherilyn Radbourne, Analyst at TD Cowen]

Thank you for the time.

[Kevin Parkes, President and CEO at Finning International Inc]

Thanks, Cherilyn.

[Operator]

The next question comes from Devin Dodge with BMO Capital Markets. Please go ahead.

[Devin Dodge, Analyst at BMO Capital Markets]

All right. Thanks. Good morning, guys.

[Kevin Parkes, President and CEO at Finning International Inc]

Good morning.

[Devin Dodge, Analyst at BMO Capital Markets]

For data center related projects in Western Canada, would Finning consider internalizing the packaging of that power system? I know Finning has done some of that work in the past, but I'm not sure if the capacity is available to do that work at the scale required for the opportunities in front of you, and just wondering if that approach would differ between prime and backup power.

[Kevin Parkes, President and CEO at Finning International Inc]

Yeah. The answer to your question is absolutely yes. We are totally committed to packaging the data center requirement in our territory. We have a fantastic facility that requires minimal investment to move that forward. You've been following us for a long time, Devin, and you probably remember our investment in Calgary and the facilities we have in the Red Deer region.

[Kevin Parkes, President and CEO at Finning International Inc]

We feel well-positioned that we can build that capability and capacity relatively quickly and without a kind of major investment. We think it's critical to participate in all aspects of the data center opportunity, including controlling the quality and the velocity of packaging, particularly as it relates to cold weather in Alberta.

[Kevin Parkes, President and CEO at Finning International Inc]

Being associated and working with that package as it goes through build and deliver and commissioning, ultimately to participate and to partner with the product support opportunity, which is really the big opportunity for us as we look forward. From a packaging perspective, there's no real difference, material difference between prime and backup from a packaging perspective. Obviously, there's a demonstrable difference as it relates to lifecycle product support in a prime application. I think that was the second part of your question, but forgive me if I got it wrong.

[Devin Dodge, Analyst at BMO Capital Markets]

Yeah. No, that was great. Thanks for that. Second question. Product support margins, they compressed in both Canada and South America. Just wondering if you could provide a framework for how much of the margin pressure was related to mix versus maybe some cost inefficiencies to accommodate the growth that may be more transient.

[Kevin Parkes, President and CEO at Finning International Inc]

I'd put it down to three aspects actually, Devin, and you've hit on two. Certainly mix within mix. We've seen about a 3% product support shift in Canada specifically to our larger customers. When you normalize that 3% product support at a more normalized product support rate, you account for about half of the difference.

[Kevin Parkes, President and CEO at Finning International Inc]

There's also the second point that you raised is very valid and fair. As you grow a technician a day, there are some training and productivity ramp-ups that you need to work on. There is a little bit of a drag there. Something that might take you 100 hours might take you 110, for example. There's one other one which is an aggressive approach to product support growth in commodities that are less proprietary and to that end, more competitive.

[Kevin Parkes, President and CEO at Finning International Inc]

They offer us great opportunity to grow our business at what is still a healthy margin. It will have an overall impact on the overall product support margins. The last one really, which is more transient than the others, is just the impact of tariffs on heavy steel products, which impacts us due to the proportion of our business, which is mining. We're managing through that with our customers because we do see it as transient.

[Kevin Parkes, President and CEO at Finning International Inc]

The others we'll work through, but we see that continuing for a while as we improve productivity. We're not going to stop aggressively going after market share. We do see improvement in product support in construction and power. It's just not growing as fast as mining, which is a nice problem to have. They're all growing, but one's growing really substantially, which is just having an impact on the margin in the near term.

[David Primrose, EVP and CFO at Finning International Inc]

What I would add to that, Devin, is in Canada, they had a remarkable 19% product support growth. All three segments, mining, construction, and power were double digit, but mining led the way, their growth was even higher. Again, that mix plays into that.

[Devin Dodge, Analyst at BMO Capital Markets]

Yeah, for sure. Thanks for that. I'll turn it over.

[Kevin Parkes, President and CEO at Finning International Inc]

Thanks, Devin.

[Operator]

The next question comes from Steve Hansen with Raymond James. Please go ahead.

[Steve Hansen, Analyst at Raymond James]

Yeah. Good morning, guys. Thanks for the time. Congrats on the product support growth. It's great to see. It's hard to think back in 2024 was not long ago when it was a little more difficult. I just want to dig in a little bit more. I think you've referenced your desire to grow your labor share on the machines a couple of times now in recent calls. I just wanted to get maybe a sense or some sort of framework to think about that. Do you have an ability to grow that share by 5%, by 20%? Do you have a sense for just sort of putting some bookends around what the growth opportunity could be over the next period of time?

[Kevin Parkes, President and CEO at Finning International Inc]

I think, it's different in the different regions, but specifically, targeting Canada, we would have a lower market share of labor on the supporting Caterpillar equipment. I would say that there's line of sight to doubling that in Canada. We're on the way to that, and that effort is being well-received.

[Kevin Parkes, President and CEO at Finning International Inc]

As I mentioned to Cherilyn, we've totally re-engineered our apprenticeship program because we grew out of the last one with the partner we were using. We've re-engineered that to We were very focused on one college. We're now working with multiple colleges to help us expedite and expand our apprenticeship programs. I would say, it's a doubling, and then we'll continue the effort and then we'll recalibrate at that point in time.

[Kevin Parkes, President and CEO at Finning International Inc]

In South America, we have a relatively high market share, given the contracts in mining and the proportion of our business in South America, which is mining. The opportunity there is just the increased population. You'll notice we've added to backlog in the quarter. We talked about a moderating growth environment for a few quarters here in South America, and I'm encouraged by the backlog add in Q1 with Alhambra Resources Ltd and then the significant win in Q2.

[Kevin Parkes, President and CEO at Finning International Inc]

Again, it put the backlog up 40% quarter-over-quarter here in South America. A lot of the proportion of that population is under some kind of contract with Finning. There's an opportunity to maintain our market share in labor in South America, but just the volume of trucks that are under contract is going to increase in Chile and in Argentina.

[Kevin Parkes, President and CEO at Finning International Inc]

In the U.K., the growth there, we have relatively high market share as major customers have outsourced product support over a decade. Where we're seeing the big growth opportunity in the U.K. is in our servicing contracts. We're seeing that in Canada too, but the number of machines that are under a service contract with Finning labor is increasing dramatically in Canada.

[Steve Hansen, Analyst at Raymond James]

A smaller line of your business in rental, but it has demonstrated some solid growth here of late. I think back to the 2023 Investor Day, down south, I think you had started to prioritize some growth there. That was subsequently pulled back from an expectation standpoint, but it does feel like now your commitment to growing that business, I guess, in partnership with Caterpillar, has come back to the fore here. Maybe just give us a sense for where you're viewing that business today and where it stands and where you want to take it here in the next year or two. Thanks.

[Kevin Parkes, President and CEO at Finning International Inc]

Good question, Steve. Just to be clear, we never pulled back from it under my leadership. I am committed to rental. I think it's a great business. It's a different business, and it needs to be effectively run. The pullback which you're alluding to, which is fair, was more market conditions in 2023 and 2024 that didn't support aggressive growth.

[Kevin Parkes, President and CEO at Finning International Inc]

Back again to Cherilyn's question around what are the impacts you're seeing on the more positive sentiment, particularly in Western Canada, it's across the board, right? It's in gas compression, it's in new trucks in the oil sands, it's in rental projects for enablement and things like that. Actually, the vast majority of our rental business is in construction in Canada today. That's where the big proportion of our business is. That business actually was up 60% in the quarter, 50% year to date.

[Kevin Parkes, President and CEO at Finning International Inc]

That's heavy rents and rental services. That, we're really encouraged by that. Similar to your question around service, let's double it and we'll have a calibration and see what the next steps is. Doubling would be the ambition from the outset. I would say that in Canada, and U.K. specifically, we're super encouraged by the opportunity in power rentals.

[Kevin Parkes, President and CEO at Finning International Inc]

It complements our business well. It supports the need for reliable power generation. It supports the opportunity to bridge to more permanent power generation for mines, for communities, for data centers. We're seeing really healthy growth in terms of our power rental business. That business is up 25% year to date in the U.K., 20-ish% in Canada year to date.

[Kevin Parkes, President and CEO at Finning International Inc]

Not seeing the kind of the really great growth levels that we're seeing in construction right now, but moving along really nicely. The rental figure that Dave mentioned as well previously, that includes some pretty big declines in mining rentals, because that's lumpy, right? We rent for nine months or a year or 18 months. They typically get bought.

[Kevin Parkes, President and CEO at Finning International Inc]

The customer purchases the rental units. No, I think our rental performance is extremely encouraging right now. We're really committed to it, and we believe it can make a meaningful contribution to our EPS. I would suggest that in Q2, the EPS contribution, I'm not going to share it, but the EPS contribution from rental to the Canadian business was very helpful.

[Steve Hansen, Analyst at Raymond James]

That's really good color. Appreciate the time.

[Kevin Parkes, President and CEO at Finning International Inc]

Pleasure, Steve.

[Operator]

Once again, if any analysts have a question, please press star then one on your telephone keypad. The next question comes from Krista Friesen with CIBC. Please go ahead.

[Krista Friesen, Analyst at CIBC]

Hi. Thanks for taking my question. I was just wondering on the power side in Alberta, when it comes to data centers, we've seen a little bit of movement with the AESO coming out with updated guidelines back in June, there's a comment in there about bridging capabilities. I'm just wondering how you're thinking about the prime power opportunity with some of the changes and announcements coming out of the AESO in the past month or two.

[Kevin Parkes, President and CEO at Finning International Inc]

I would describe the situation as evolving right now, as you mentioned. It's kind of quick, slow, quick. We're trying to stay across all of that opportunity, make sure that we're ready to support the opportunities for prime bridging or backup power. Clearly, prime power has a higher value creation for Finning. We're super focused in that area and working with customers behind the meter.

[Kevin Parkes, President and CEO at Finning International Inc]

I think that the first opportunity probably is gonna be backup, as there is some capacity in the grids. I think as it moves forward, the opportunity will probably shift to bridging power whilst permanent capacity is constructed and built. As it relates to the permanent power, that's the kind of crown jewels. That's where we're really focused on participating in that prime power generation.

[Kevin Parkes, President and CEO at Finning International Inc]

As you know, there are multiple ways you can produce that power. There's already been some announcements that support the build of new gas-fired power generation. We think the opportunity in and around that to bridge and to participate in the resiliency of that behind the fence power generation is super exciting. Right now, it doesn't feature in our financials and our more than 100% growth that we're seeing in our power generation business today is in prime power, is in gas, and it's in gas compression.

[Krista Friesen, Analyst at CIBC]

Okay. Thank you for the color there. Maybe just to follow on, as we think of the backup opportunity and we see some of these data center projects be announced, like Project Greenlight, would that be a one-for-one backup to prime power solution, or would you not necessarily need that level of replication? Thank you.

[Kevin Parkes, President and CEO at Finning International Inc]

Yeah. We tried to give some examples of how it might play out, in terms of the one-for-one to help shape and model it, as I mentioned previously, it's evolving and dynamic. There certainly isn't a one-for-one relationship between prime and backup if you're providing prime power generation. When you're building prime generation, you're building in a level of redundancy.

[Kevin Parkes, President and CEO at Finning International Inc]

It's not like the grid goes off and you have to back it up. If you've got 10 gas engines, the likelihood that all 10 go down at once is very low. You've always got some redundancy in the system. No, it's not one for one. There will be backup generation opportunities, and there'll be some bridging opportunities while that prime power is being constructed and built. You know that you've got diesel backing up grids.

[Kevin Parkes, President and CEO at Finning International Inc]

When you've got behind the meter bring your own power, there's an element of redundancy built into those projects which doesn't reduce it to zero, but it reduces the need for the proportion of backup generation you need. There's also the fact different types of data centers that have different latency and productivity requirements, right? There's different data center use cases that are less critical and so require less backup generation.

[Krista Friesen, Analyst at CIBC]

Thank you. Appreciate the comments on that.

[Operator]

This concludes the question and answer session. I would like to turn the conference back over to Mr. Primrose for any closing remarks. Please go ahead.

[David Primrose, EVP and CFO at Finning International Inc]

Thank you, operator. Yeah, thanks everyone for joining. Kevin and I are in Santiago, Chile today, and we appreciate you joining us, and we look forward to joining you in November when Kevin and I will be in Dublin with the U.K. and Ireland team for that call. Thank you again, and have a safe day.

[Operator]

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Participants

Executives

• David Primrose, EVP and CFO
• Kevin Parkes, President and CEO

Analysts

• Cherilyn Radbourne, Analyst at TD Cowen
• Devin Dodge, Analyst at BMO Capital Markets
• Steve Hansen, Analyst at Raymond James
• Krista Friesen, Analyst at CIBC