Finning International Inc.

Mauk Breukels - Director, Investor Relations L. Scott Thomson - President and Chief Executive Officer Juan Carlos Villegas - Executive Vice President and Chief Operating Officer Anna Marks - Senior Vice President and Corporate Controller

Yuri Lynk - Canaccord Genuity Sara O’Brien - RBC Capital Markets Cherilyn Radbourne - TD Securities Ben Cherniavsky – Raymond James Bert Powell - BMO Capital Markets Tom Varesh - M Partners Benoit Poirier - Desjardins Capital Management

Thank you, operator, and thanks to everyone for joining us. As usual, there is a set of slides which accompany today’s remarks and they are available on our website finning.com.

The slides and an audio file of this conference call will be archived at finning.com as well. Before I turn over the call to Scott, I want to remind everyone that some of the statements provided during the call and the information in the slides that accompany the call and in the press release is forward-looking.

This forward-looking information is subject to risks and uncertainties, as discussed in the company’s Annual Information Form, under Key Business Risks. Please treat this information with caution, as Finning’s actual results could differ materially from current expectations.

Our forward-looking disclaimer statement is on slide two and is part of our quarterly releases and filings. Finning does not accept any obligation to update this information.

Scott, over to you.

Thank you, Mauk, and good morning everyone. It is a pleasure to have the opportunity to speak with you at my first quarterly earnings call.

Juan Carlos is here with me as well. Unfortunately, Dave Smith just had surgery on his back and is not able to attend today.

Anna Marks, Finning’s Controller will take his place. Dave will be back on his feet soon and will join me and Juan Carlos during our Investor Meeting in September.

After my opening comments, Anna will provide an overview of the financials and Juan Carlos will conclude with one or two tangible examples of our progress on the operational excellence agenda, and an outlook on our end markets given some of the things we are seeing with our customers. Since I joined Finning on June 17th, my immediate priority has been hearing from our company’s stakeholders.

I traveled to each of our regions with Juan Carlos to meet with employees and customers. While it has only been eight weeks since I joined the company, it has been ample time to see Finning’s great potential.

We have talented and highly committed employees and the culture fits with the values I hold. The company’s success is built upon a strong foundation of trust and integrity.

Finning has an enviable business model. The company has great after markets business with customers for a wide range of quality products sold in a variety of industries and geographies.

The strong partnership with Caterpillar is compelling. Caterpillar is a very successful partner which builds the best heavy equipment in the world and values its dealership network.

Today, I wanted to share my initial observations on our three regions starting with the UK. I am impressed by the employee engagement and level of customer loyalty in the region and after a number of years of difficulties it appears as if the business is now better positioned.

I do believe there are market share opportunities, particularly in the construction segment and if we can continue to grow the power systems business we will see margin improvement over time. Given the nature of the competition in the UK and the large influence of the rental market, I do not think this business will ever be as profitable as our South American or Canadian operations, but there is profitability upside going forward.

The near-term challenge relates to the persisting softness in the coal mining sector and some of the financial difficulties we have seen with our customers. Our product support revenue has been impacted because mining customers haven’t been fully utilized in their fleets of equipment, but overall Neil and the team are doing a good job managing the business, particularly in light of the macroeconomic challenges and the uncertainty around product support revenues.

Turning to South America, I am extremely impressed with how the team has grown that business over the last few years. Under Juan Carlos and now Marcello’s leadership, FINSA has done a good job deploying technology to enhance customer loyalty and improve profitability.

They have done a good job utilizing sophisticated revenue management methods and they have also competed effectively in the mining segment despite strong competition for large mining trucks. Our opportunity in FINSA revolves around increased market share in the mining and general construction line.

We also have potential with the former Bucyrus business. In South America, the drills and shovels business has run into some operating challenges in the second quarter.

And as a result, this component of FINSA’s business has not met our projections for the first half of 2013. That being said, well we address our customers concerns around parts availability and one or two issues in product performance.

The drills and shovels business will provide significant growth for us in the future. Let me turn to Canada our largest business and largest opportunity.

We have a number of challenges in Canada that we are addressing and require further work. My visits to the various branches and my discussions with employees and customers have highlighted four key focus areas for me.

The first issue is customer loyalty. Our customer satisfaction levels require greater attention.

One top purchase criterion for our customers is the availability of parts and services. This speaks directly to our supply chain and the need to improve performance.

We are collaboratively addressing this issue with Caterpillar, however my observation is that we need to increase the resources dedicated to these process improvements, so that the benefits of these changes come more quickly. The second focus area is service profitability, a combination of low labor utilization, elevated levels of G&A and the lack of discipline around cost and revenue management is negatively impacting our profit from the services we provide to customers.

We know our inefficiency is also driving reduced customer loyalty and therefore if we improve service efficiency and profitability we will also improve customer loyalty. The third priority relates to market share.

We have a significant market share opportunity in the non-mining segments of our business. While we have been successful with high market shares in mining, we can focus in more intensely on the construction and power segments in order to grow these businesses.

An example is medium and large excavators where the market share opportunity is substantial. Lastly, I believe we need to improve our asset utilization.

Current market conditions causes to have excess capacity particularly in the oil sands. Better co-ordination among our various facilities and higher utilization will address some of our service profitability and SG&A issues.

In my mind these four areas combined with elevated SG&A costs have contributed the underperformance of the Canadian business. If you exclude the one-off impacts of land sale gains, Canadian profitability has plateaued between 7.5% to 8% EBITDA margin for the last four quarters.

The focus areas I identified have contributed to us not meeting our financial projections, they also speak to the tremendous upside inherit in the business. After only a few weeks with the Canadian team, I am convinced there is significant profitability potential.

I believe the operational excellent agenda that the team detailed in the December Investor Day must continue to be the number one priority. As we look forward we clearly want to grow the size of the business, but we need the operations strengthen to the point where we have the appropriate level of profit pull-through from our revenue base.

And the great news is that the Finning Canada team has recognized these issues and have started to address them. We have a strong team in place and have added some complementary expertise in key areas.

For example Gary Agnew is our new head of Customer Solutions. He has arrived from our UK Operations and has been in his role for three months.

In the last month we saw a meaningful increase in market share. Christian Showaz has joined Andy’s team for South America and is focused on fixing the supply chain issues.

We have already seen improvements in our parts performance in branches where Christian has spent time and reworked the processes. However, these issues will take time and one of my priorities will be ensuring that we the appropriate amount of resource focused on key issues facing Andy and his team.

Our Finning Canada organization consisted employees who are very engaged in the business and are passionate about serving our customers. However, it has been a tough period for our employees because of the system implementation issues and the fact that in some cases we haven’t been able to meet our customers’ expectations.

Our employees want to be part of the winning team at Finning and I am committed to ensuring we create that environment. We need to develop our people appropriately retain engaged individuals and attract additional talent.

Andy and his team have started this process, but we’ve recognized there is more work to do. That summarizes my initial assessment following my first day weeks and I will finish this morning by giving you a sense of what I believe the rest of 2013 may look like from a financial perspective.

From a top line perspective, I know we stated at zero to 10% revenue target at the beginning of the year, but the first two quarters have seen slightly reduced revenue relative to 2012. However, there is room for some optimism on the revenue side in the back half of the year given the equipment delivery schedule.

From a profitability perspective, I am not expecting improved margin performance in Canada in the second half of the year relative to the first given the pace of operational improvements and the impact of higher equipment sales anticipated in the balance of the year. That being said, my initial impression is that there are significant opportunities to improve performance, and I will be in a position to highlight the potential of Canada and the pace of improvement that is feasible at the end of the year once I have gone through the fall budgeting process.

I want to close by letting you our shareholders know that I am excited about the significant potential I see at Finning. The business model when executed properly is profitable through the cycle and will generate significant free cash flow.

I will bring a sense of urgency to the organization with the objective of strengthening the foundations that we can increase profitability, generate free flow through more efficient use of working capital, reduce leverage, and earn back our historic valuation multiple. Finning is a great company with a strong history of success, and many strengths on which to build.

I am looking forward to what lies ahead as we continue to build the promising future that will benefit our customers, employees, Caterpillar, and shareholders. And with that, I will turn it over to Anna to give you an overview of the financials for the second quarter.

Thanks, Scott, and good morning everyone. I will begin my remarks today by providing you with the quarterly highlights compared to the second quarter of 2012.

Slide 5 summarizes our second quarter results relative to last year. Compared to 2012, our results were affected by the slowdown in mining.

Revenues declined by 8% primarily due to lower new equipment sales, which decreased in all operations and were down 25% on a consolidated basis. I’d like to point out though that Q2 of last year is a tough comparison since it was our second best quarter ever for new equipment sales.

Canada saw the biggest decline this quarter due to lower volumes in the oil sands and coal mining. Product support proved to be more resilient, although a 12% increase was mostly driven by additional revenue from the expanded mining product line, the term we use for the former Bucyrus business.

We did achieve modest organic growth and product support year-over-year. Equipment utilization remains solid in both mining and construction.

However, mining customers are beginning to defer repairs and maintenance to reduce operating costs. Product support contributed almost 50% to total revenue this quarter, up from 40.7% a year ago.

As a result, we posted an increase in gross profit over last year due to higher product support volumes, which were partly offset by late delivery penalties and higher than expected startup costs on certain contracts. SG&A expenses were essentially flat on lower revenues.

We did see a reduction in SG&A cost in Canada in the second quarter. However, this was offset by additional costs for Fort McKay, and the expanded mining product line which we did not have last year.

In South America, higher SG&A expenses were due to unfavorable adjustments to certain projects as well as a full quarter of costs for the expanded mining product lines this year versus two months last year. SG&A cost control remains a key focus area in all our operations, particularly in light of continued economic uncertainty and a slower outlook for mining.

EBIT grew by 2% and was mostly driven by South America. And our EBIT margin improved to 7.6%, up from 6.8% due to higher EBIT margins in Canada.

Net income was up 5% from last year, but included a tax benefit of approximately $6 million, or $0.03 a share related to previously unrecognized tax losses partially offset by higher finance costs. Moving to free cash flow, free cash flow was $6 million in the quarter, an improvement from last year due to lower rental and capital expenditures, which were partly offset by higher working capital spend.

We remain focused on improving our working capital, particularly inventories. In the second quarter, both the UK and South America made good progress in reducing inventories.

In Canada, new equipment inventories were higher due to a significant amount of new equipment on hand at the end of the quarter, which were being prepared for deliveries in Q3. In addition, some deliveries were delayed in Canada due to flooding in Alberta.

Our uncommitted inventory levels on hand were lower in all operations. Looking ahead, we expect our inventory levels to decline as we have a particularly strong delivery schedule in Q3 in Canada.

Out net debt to total capital ratio was 50.6% at the end of June, similar to the end of March and in line with our expectations. We project improved free cash flow performance in the second half of the year, which will reduce our net debt to total capital ratio.

During the last few months, we successfully completed the refinancing ₤17 million Eurobond, and the $250 million medium term notes at attractive rates, which will reduce our finance costs going forward. Now shifting my remarks to our performance relative to the first quarter of 2013, we feel that by comparing that result sequentially to the prior quarter we will provide you with a better sense of how the year is unfolding and the progress we’re making in each of our operations.

Slide six shows how our consolidated quarterly results are trending sequentially. Revenues rose by 4%, with all operations achieving higher revenues.

New equipment sales improved slightly, mostly in the UK due to seasonality and it was also up in Canada. In South America, slower mining activity levels translated into lower volumes compared to the first quarter.

On the product support side equipment utilization levels remained steady in all our regions and we achieved 5% growth over the first quarter driven primarily by South America. In Canada, product support revenues were unchanged from Q1, despite softness in the mining sector.

Both gross profit and SG&A expenses increased by 3% over the first quarter but remained relatively unchanged as a percentage of revenue. EBIT rose by 5% and EBIT margin improved in all operations.

I’ll now turn to our operations and provide you with the key sequential highlights related to the EBIT margin performance in each of our regions compared to the first quarter of 2013. Slide seven, summarizes our Canadian results, quarterly EBIT margin improved to 7.9% from 7.5% on a similar revenue mix.

This was driven primarily by improved service margins at OEM where we successfully implemented operating efficiencies as well as by lower SG&A costs in our Canadian operations compared to the first quarter. As Scott mentioned earlier we expected achieving operational improvements in Canada will take some time although we are starting to see some progress.

Turning to South America, I’m on slide eight, EBIT margin was 9.5% compared to 9.3% in the first quarter, the 9.3% margin for Q1 reflects the new presentation of Argentina exports as other income as noted in our MD&A. The benefit of a revenue mix shift to higher margin product supports in the second quarter was partly offset by a lower EBIT contribution from the expanded mining product line due to lower revenues and higher than expected start up costs relating to contract.

In addition, SG&A costs were negatively affected by adjustments to certain projects in the quarter. Moving onto the results from UK and Ireland which are summarized on slide nine, quarterly EBIT margin was up slightly to 5.7% from 5.4%, a solid performance in a tough market.

The margin improvement was driven by SG&A cost control, while delivering higher revenues compared to a seasonally low Q1. On this note, I’ll turn it over to Juan Carlos to provide you with an update on market conditions in each of our regions.

Juan Carlos?

Thank you, Anna. Good morning everyone.

As Scott mentioned we have spent last number of weeks traveling and reviewing each of our operations in Canada, UK and FINSA. It is great to have Scott’s support for our operational excellence agenda and to see his commitment to the work we have underway.

We are continuing to lay the foundations for operational excellence across Finning in order to improve our operating performance. Our three priorities remain supply chain, service efficiency and cost management.

We’ve recognized there is a still lot of work ahead of us to get where we want to be. Progress is made every day in different areas of the business.

For instance, our branch in British Columbia we are improving our supply chain processes and are focusing and optimizing inventory levels. We have reduced the number of line items by 60% and reduced emergency orders by 50% while we increased our order fill rates and inventory turns.

Sparwood is our flagship. We plan to rollout to six additional branches we have already identified.

Many of you saw firsthand in the oil sands the supply chain and service process improvement which are – we are implementing. Some of the things we have done are improving forecast accuracy.

We rank now number three in North America among Cat dealers on forecast accuracy. Reduced amount of availability and increased customer availability thus improving our parts and service delivery.

We are implementing the service excellent project in four branches to improve our service efficiency and labor utilization. All these changes are significant to improve our efficiency and performance in Canada and they will take some time, excuse me, to fully realize our potential but the entire team is highly motivating and focused on translating our efforts into sustainable results.

Similar improvement initiatives are in place in FINSA and Europe. I’ll now it to review our market conditions.

In Western Canada, we’re seeing slightly high yield capital expenditure in heavy construction and forestry sector this year. The team is doing a good job building market share and working to gain customer loyalty back on the segments.

In the conventional oil and gas segment market conditions remain weak and business is slow to our power system division. In mining, which includes the oil sands, producers and contractors are under pressure to reduce costs.

We expect utilization rates of producer equipment to remain solid, but demand for new equipment and product support in the mining sector is expected to slow in the near future. The team is focused on aggressively pursuing all the sales and service opportunities we have.

With regards to the shovels and drills division, the team is highly focused on capturing the business, which has translated to results that are better than plan and better than the initial business case. We are very pleased with our progress.

Demand for rental equipment remained as strong in all sectors, in South America market conditions are softening. In mining producers are becoming more concerned about their operating costs.

They are maintaining production and equipment utilization levels, but are watchful on equipment purchasing decision, a trend to over-hold equipment is arising which could bring product support opportunities. The Sparwood business in South America has not been as smooth as Canada.

As we merged the business with our existing mining division, we lost a little bit of focus on fully capturing the part business opportunity. We have since go back on track and are forecasting increased participation on the current business opportunity.

Equipment sales are slow due to the projects being postponed. Service’s high demand, and has helped to compensate for lower business volume.

In Argentina, the political situation has remained same, business condition have not change we expect positive business year in spite of input restriction, FINSA is adjusting the business structure to current condition. And we will continue to deliver results as they have normally done.

In the UK and Ireland, the backlog has improved and outlook is improving as well. Overall the team is continuing to do good job capitalizing on our opportunities.

Before I wrap up, let me comment on our consolidated backlog. Our backlog was $1.1 billion at the end of June unchanged from the end of March.

We expect significant deliveries over the balance of the year. Our order intake was 15% in all operations in the second quarter over the first quarter.

And most of these new orders came from the non-mining sectors. I do want to point out that we are bidding on a number of mining projects.

In summary, as lower business environment for new equipment in mining, drills and shovels is very good in Canada and UK and making progress in FINSA. Product support is low in contractors in the oil sands and coal UK and growing in FINSA.

We are operating with the disciplined and caution that current business conditions required, we are driving our operational initiatives while we continue to monitor market activity closely. I will now turn it back to Mauk.

Operator that concludes our remarks, before we go to the Q&A we request everyone on the line that as a courtesy to your colleagues we ask no more than two questions when it is your turn. Please go to the end of the queue if you have more questions.

Operator, if you could open up the line for questions please.

Hi, good afternoon. Good morning, I should say.

So, the margin progression in Canada seems to be getting pushed out, what’s behind the issues that are causing the progression to be slower than originally thought, because you would think that with the market kind of taking a breather, it should be a little bit easier to implement some of these initiatives that are underway. So, I guess a little bit more color on what’s changed there?

And secondly, Scott I mean where do you think that the Canadian EBIT margin can get to, I mean, is 9% to 10% still achievable in your mind, and when might we see that happen?

Right, thanks, Yuri. So, I’ll answer part of that question and then I will hand it to Juan Carlos to talk about some of the operational improvement and pace of those changes.

In terms of the 9% to 10% target that had been out there, I do see significant opportunities and those opportunities revolve around some of those key focus areas I talk to. I think it’s too early to describe what the magnitude of those opportunities are or the pace of improvements that are possible.

I will come back to market, post the budgeting process and lay out a shareholder promise around performance in Canada, but I need to do the work and I need to go through that budgeting process to come to that conclusion. What I would tell you is based on the first eight weeks there are opportunities, there are significant opportunities, and they revolve around the supply chain.

They revolve around market shares. They revolve around asset utilization.

And they revolve around customer loyalty, I mean, those four issues that I highlighted in my opening comments. So, I do believe there is opportunities I will come back to you with the magnitude and pace, but I am not in a position do that now.

And Juan Carlos, maybe you can talk about some of the operational.

Yes. Some of you were in the (indiscernible) and we discussed much more details on what are we doing in operational excellence under the different initiatives.

And some of these initiatives will take time, because we need to do in branch by branch some of them and we need to – we don’t want to do a big bang and do a big transformation that could threaten the stability and sustainability of the business going forward. So, we believe that is much better, much consistent to go doing those changes as I said branch by branch, sector by sector, and we have continuous improvement rather that a big bang that could threat the sustainability of the company.

Some of that progress has been successful already and you’ve seen some progression in the margins. Now, when the businesses started slowing down, you get less revenue, we have made progress in our cost, and you will see sequentially year-after-year how the cost has improved, but with the business coming down, it’s much more difficult to get it done reflected in the bottom line.

As Scott said, we see tremendous opportunity going on in Canada and we will continue to deploy our strategy, and we are confident that in the medium term, we will see more of those results to the bottom line.

Okay. And then secondly, you did mention that you are currently bidding on some mining projects, can you provide a little more color as to where those are located if they are oil sands or in the traditional mining sector, and what delivery period would we be looking at if you are successful?

Well, as you would understand, we cannot be very granular in giving that explanation, it’s a competitive scenario out there, but we do our bidding in projects that are Brownfield, not so much Greenfield both in Canada and FINSA. And we expect some news about those and probably during this quarter at the latest in quarter four.

Thank you.

Thanks, Yuri.

Hi, good morning. Scott, in your comments you talked about the focus areas one being customer loyalty, just wondered, can you comment on how much of that issue is related to the ERP implementation problems from last year and are we talking about pricing pressure to try and win back these customers or how do you go about that?

Hi, Sara. So, I think so, the ERP Before I joined the firm I heard a lot about ERP so, that gone around various facilities that I’ve talked to people about ERP implementation.

And my view is the system isn’t operating at its maximum functionality, and there will be improvements that we can make – continuous improvement that we can make overtime. That being said, it feels like it’s delivering parts and to our branches and people interestingly who have been trained on the system seem to be having a lot more ease of use than people who were used to a different system.

So, that gives me some comfort that increased training will help us on the ERP. I don’t think ERP necessarily is that the major contributor to customer loyalty, I mean, if you look at our, the way we track customer loyalty in compared to pre-implementation, I’m not sure we were at the right level even before the loss in implementation.

Now, one big driver of customer loyalty is parts availability, and that does speak to some interaction with the ERP system, but I also think it’s deeper than that and it’s – it goes right back to the supply chain and increased collaboration with Caterpillar, less complexity in our supply chain, having the right inventories in the right places being able to deliver parts, not only over-the-counter in 85% type fill rates but also when we’re service jobs, I mean, I think that all played into customer loyalty and there is a big opportunity for us there and then if you can improve customer loyalty, I think that helps from a margin perspective frankly rather than hurts. As we look at competition, I think we are facing some competition and I think that you have seen that actually in some of the results although, we don’t disclose parts and service GP, it’s a competitive marketplace and so getting under this customer loyalty piece very, very quickly as extremely important because we want to protect the margin that comes with the world-class service and parts that we do provide.

So hopefully that gives you a little bit of color on the customer loyalty basis.

Yeah, I appreciate that and just maybe as a second part to the question, do you need to throw additional resources, whether it’s working capital for parts availability or additional personnel training or something. Is that sort of what’s slowing down the progress is it, that you have to throw more cost at it to get it right?

I mean, I think there is a resources piece to this. If you look at Juan Carlos and his introductory comments talked about Sparwood and you can actually go into that branch and see tangible progress on parts availability, I mean, it’s really clear, you just look at the numbers, the inventory turn, the amount of inventory on hand having the right inventory on hand and the question in my mind is how you increased that velocity of change.

How you move those Sparwood changes to across the whole network and do that in a relatively short period of time and I do think there are something to resources around that, I mean, I think we have to resource the supply chain improvements in a more aggressive fashion. Training, I mean, of course, I mean, I think we did – we have upped our training and we’ll continue to spend money on training.

Inventory in terms of the right levels of inventory, we saw inventory come down pretty significantly and in line with our plans in U.K. and FINSA this quarter, which was good news.

In Canada, we didn’t see inventory decreases to the extent, we would have liked and I think there was two things driving that, one is we do have some significant equipment deliveries in the third quarter. So, inventories were slightly higher than we otherwise would have been the case.

But also in terms of inventory turns, we have to be faster with that inventory in Canada and I think in the third and fourth quarter you will see a reduction in inventory in Canada and therefore you will see better free cash flow performance for the firm, which is a good thing, but I think there is still a lot of work to do around that whole supply chain in inventory management both to help customer loyalty, but also to help free cash flow performance.

Okay that’s helpful, thanks, I’ll turn it over.

Thanks very much, and good morning. You spoke about some branch improvement initiatives in Sparwood BC.

I wonder if you can talk about why start in Sparwood, and whether the other six branches that you are rolling out those initiatives to are high impact branches.

Sure. So, I will – it’s Sparwood, BC branch, but I’ll let Juan Carlos talk about improvements that we have made and may be the rationale for Sparwood and what’s next on the docket.

Yeah, Sparwood is the closest branch we have to Spokane and you just wait to get Caterpillar connected to the new processes that we are implementing and from there we can test a number of initiatives we are doing and start doing directly ship – direct shipment from Spokane rather than going to truck or to other centers of distribution. So with that we are testing a number of possibilities.

From there we were expanding to six other branches so really, the idea is that we’re going to go by phases. Below Edmonton, and we go growing up north in the initiative so, first step is the closest to Spokane, I think we grow up going north.

Okay, that’s helpful. And then in terms of your outlook commentary, you did indicate that you were encouraged that order intake was up sequentially in Q2 versus Q1 and I just wondered if that’s really encouraging given that Q1 is traditionally a seasonally weak period, maybe you can elaborate a bit there.

Yeah, it’s – we feel good about it mainly because it’s not any big orders – it’s not a big package of mining. It is very different number of orders mainly for the non-mining sector and is both in FINSA and in Canada where we have grown as a percentage to over the previous month and as we track month after month, for the intake and when we see little bit of a slowdown in the market, it’s just we feel quite good about having that order intake is split among different customers in the lower – in the smaller equipment on the smaller customer.

So, it feels good. It’s still a good indicator that activity continues.

Okay, thank you. That’s my two.

Good morning.

Good morning.

Could you maybe just shared a little more light on the comments you made about, if I heard them correctly, deferred maintenance work that, I mean, your parts business was up I think 12% you said in the quarter, was up in the first quarter as well. That is supposed to be the resilient part of our business.

So just trying to reconcile that with what I thought I heard you say maybe hedging your bets a little bit about the aftermarket activity with respect to perhaps some deferred maintenance expenses in the mining business?

Ben, I’ll – nice to meet you and I’ll let Juan Carlos to answer the question.

Yeah, Ben, you know the majority of our growth is the new product line, drills and shovels division. If we look at our traditional line to yellow line as we go, the growth was not that high in comparison so, on the biggest slowdown has been on the mining contractors that have parked their equipment especially in the oil sands so, we see the producers continue utilizing the equipment, we don’t see a reduction in the number of hours that they put in the equipment, but when we look at the contractors, those are the one that have had to park that equipment, and by parking the equipment of course, those no hours of utilization, no part consumption.

So, that’s the main impact.

Does it look any different? I assume this is different from ‘09, when people parked their iron as well, I mean, there is a different magnitude or I mean, just traditionally again, this is supposed to be a pretty resilient business, so how should we think about that, say for the next 12 to 24 months in terms of what expectations should be around the sustainability or the aftermarket business in mining.

Yeah, Ben as I said the growth in the yellow line is still existent so, we said resilient business, now question about it. The fact that during this time adjusting, the contractors or the producers have asked the contractors to slow down, and not having us award them new jobs, it’s not sustainable really in the medium to long-term.

The job needs to be done by somebody. Is it by more equipment with the producers, or the hours of the contractors, they still need to keep on producing.

We believe that it’s an adjusting period and the business – part business will come back under the drills and shovels is the one that created the growth as I said in the first quarter, but resiliency of the yellow line part business will remain and isn’t it also fair, I mean, in the second quarter the product support business associated with the drills and shovels didn’t perform up to our expectations and a lot of that was – I think self-inflicted. So going forward, I think we understand why we can fix that and you will see more growth from the drills and shovels business in FINSA in the back half of the year relative to the first half of the year.

Yeah, like I said Canada is doing really well, and FINSA had some issues in (inaudible) as we have discussed, but they have the plans to bring it back on track so, we will see the resilience coming back.

I am sorry if I’m confused it is still early out here. What is the – it’s the yellow line that’s been resilient, is that correct, you’re saying it’s the Bucyrus product more that was slower in South America.

Yeah to be more specific Ben, the yellow line grew 3%, year-over-year, right versus the overall growth on including Bucyrus. The Bucyrus line of course grew because it’s a new line, it grew really well on plan in Canada, below plan in FINSA for the first half of the year and our planning study goes back closed to plan in the second half of the year.

But 3% growth in the yellow line, the base business, that’s a relatively small number you would think at this stage, is that what you are saying, that could and should be that higher.

Yeah, that’s exactly my point, should be higher than 3%, I mean was not because we saw the stoppages of some of the contractors fleet that had high consumption of parts that were stopped because of this cost, with the producer making decision about the use of contractors.

I got it, okay, thanks for that clarification. And the second question to Scott, I realize it is early days and I don’t want to – don’t expect you to say too much about these sorts of things, but your early impressions of the infrastructure that Finning has, and the capital investments it has made.

There have been some very significant investments over the years, a lot of capital put to use, that by some metrics haven’t really generated sufficient returns. You mentioned sweating the assets harder over capacity and equipment I mean, do you think that the footprint that Finning has, your first impression, do you think that it’s right, or as you evaluate the business, you think there is – you open to looking at that as well, and saying there may be areas where we have invested too much capital in this business?

Yes, Ben. I’m open to looking at that obviously and I spent a little bit of time up in Fort McMurray, and when you look at that new facility, I mean, it’s a very impressive facility, it’s a world-class facility when you talked to Caterpillar about that facility, I mean, they are very pleased, I say it’s one of the best facilities in that whole network and I think there should be a way to provide high quality service at a high profitability for us so, that’s point one.

Point two, when you look at the capital it’s been invested, it has been significant and I’m not sure we’ve seen the types of returns we want to see from that capital investment and I think it’s a very lease, there is better coordination we can have between the facilities and so far example, my impression right now is decisions on where components go to be rebuild so, we do new prep for equipment, that’s not necessarily done in as coordinated fashion as I think it could be done and I think by more coordination will be able to increase the utilization – increased the quality and increased customer royalty so, I think it’s too early to come back and say here is what the changes that I think we could bake on the footprint, but it’s clear to me that we can utilize the assets in a more coordinated and ultimately a more profitable fashion.

Great, that’s helpful. Thanks, and look forward to hearing more from you in the future.

Yeah, thanks, Ben.

Thanks and welcome, Scott. Your comments with respect to margins in the second half of the year being relatively flat, and two kind of tensions at work here, one being the mix and higher expectation in equipment, and the other being a slower pace of operational improvement.

I’m just trying to look at back – those two statements in conjunction with your statement around appropriate resources and how you are thinking about the balance between those and the impact on margins.

So, if you look at the business over the last four quarters, in my mind as I look at the business over the last four quarters, I think the EBIT margin has essentially plateau in the 7.5% to 8% range and that’s when you back out some one-off gains so, that’s point one. Point two, when I look at the case of operational improvements, I think the team is working on the right issues.

That’s clear to me. The question I have is can we increased the velocity with which we make those improvements and that speaks to the resource issue.

And I guess I was preparing for this call I was thinking about the third and four quarter and I see phase of improvements because of resources, but also because of these are complicated issues to fix your supply chain for your whole 140,000 skews or something, someone said yesterday. These are not simple issues.

They are complicated issues and it will take some time and we have to get after them, because that’s the way we’re ultimately going to build the world-class distribution business. But when I look at the third and four quarter and the phase that we are right now making those improvements and I see new equipment particularly in the third quarter frankly, update chunk of new equipment in the third quarter, I don’t get confidence that we’re going to see margin improvement in the third and fourth quarter of the year.

That’s not to say that there is not significant profitability improvements in one of the problems with using EBIT margin as your tagline to show successes you have big equipment deliveries in the third quarter, your margin potentially goes down a little bit because new equipment is a lower margin than product support and everyone looks at it and says you aren’t doing a good job, and that’s not necessarily the case. So, I think what I want to do is I want to come back to the market in the fourth quarter with my shareholder promise and what I think we can deliver I can assure you there are improvements that we can make in Canada and that will ultimately drive that performance and better profitability, but I don’t that directly answer your question, but that’s how I was thinking about the guidance in the third and fourth quarter.

So, that gives a little more clarity. Is it possible to give us a sense of the magnitude of the change in terms of our magnitude of change, but just in terms of delivery expectations given we’ve a fair amount of volatility in new equipment sales these days.

In terms of the amount that is being delivered in the third quarter and do you have a – these are something you can share on that, is it something that you want talk about?

Yeah, I mean, that we do see some significant deliveries, I think as mentioned earlier the inventory levels in Canada are quite high in June due to these deliveries, they are up in South America as well, I’m not sure we really want to share the amount of equipment, but it is going to be.

I guess what I would say, Bert is revenues down 2%, I think, 2013 relative to 2012 and based on my conversations with the team, I feel comfortable that we will get into that 0% to 10% range, I think we’ll be albeit at a very low end of that range, but we will see revenue growth this year and that’s driven primarily by higher level of new equipment deliveries in the back half of the year and a good part of that in the third quarter or so.

Okay that’s helpful, Scott, thanks.

Thanks, Bert.

Good morning.

Good morning.

With the increased focus and talk on customer loyalty and the competitive marketplace, I was just wondering how much, sorry, are you seeing any Chinese equipment being brought into Canada with the increased Chinese presence in Western Canada and do you, is part of this renewed focus on loyalty and market share a fear of a potential disruptive marketplace in the future with the potential of Chinese equipment coming into Canada.

And so, I’ll answer the customer loyalty and the market share focus, and then Juan Carlos you can talk about Chinese influence. No, I mean, as I thought about priorities, I haven’t been focused on our particular competitor, what I’ve been focused on is, if we are going to be successful ultimately we have to be delivering valuable services to our customers and we have to be creating a barrier to entry for other people and if our customer loyalty scores are not where we want them to be and are not right now then that’s a problem now that the good news is that provides a lot of upside because I think there is a significant improvements we can make to improve that loyalty and then that will provide upside for the company.

On the market share side, I think we’ve done a very good job on the mining market share particularly in the oil sands, but when I look at the non-mining market share, there is opportunities for us and take excavators or medium and large excavators, I mean, we’ve lost significant share over the last three or four years relative to other North America Caterpillar dealers and that in my mind is that we have to change that and there is a big opportunity, the excavator segment is a significant now portion of the non-mining overall market, Caterpillar has got a great excavator and I think if we can increase the focus to that non-mining segment. There is a lot of growth opportunities for us.

Similarly on the power system side, we’ve recently put in a VP of Power Systems, I think there is a big engine opportunity in Western Canada particularly as you think about LNG development and Asian influence coming into Canada. There is a very big engine opportunity, I know Caterpillar focused on it and we need to be focus on and I think that provides a lot of upside as well.

As it relates to China influence in particular maybe Juan Carlos you may have a view.

Yeah, we just underwent an analysis of whether we had a Korean or Chinese start up coming into Canada and where they a threat as we speak, and the answer is not now. We’ve seen that strongly in South America and some you might recall that we do have an arm or dealership in Argentina and now we are opening one in Chile that sells the Chinese brand that Caterpillar owns (S&E) and we are selling Chinese product in South America and we are the dealer of that, but we are not seen of that activity moving to North America for now.

One of the restriction is the engines is that certifications – pollution certification of the engines that the Chinese yet do not have. So, we don’t see that threat at the moment.

Okay, great, thank you, that’s it for me.

Hey, good morning and welcome, Scott. Just my question when we look at your second half outlook and the fact that you will be delivering some big equipment in the third quarter, and also Q4.

Is it fair to assume that given the supply these days is better than it used to be? Is it fair to say that the back log should be softer than what you reported at the end of June?

Yeah, I mean, I think we’ve seen June backlog be pretty consistent with March backlog but we have significant equipment deliveries in the third and fourth quarter so, I think that’s a fair assumption, that backlog will come down. The good news is, as Juan Carlos said in his remarks, is order intake in the second quarter is up to the first quarter and similarly doesn’t take as long to get products from Caterpillar given the slowdown in the activity so, backlog will come down, but I’m not sure we should read too much into that in terms of the 2014 outlook.

Okay, perfect. And with respect to the some opportunities with Caterpillar, what new opportunities to buy a Tier 3 engines at attractive price or what’s your thoughts about the current opportunities these days?

The question was about opportunities with Caterpillar to buy Tier 2 engines.

Tier 3 engines, yes, because we’re seeing some of your competitors making a move and buy a bunch of Tier 3 engines with respect to Caterpillar so, I was wondering if you saw similar opportunities on your side?

Actually I don’t know the answer to your question yet and what I’ll tell you is that Juan Carlos and I are going to spend the week in Peoria at the end of August and this is – it’s my efforts to integrate myself more closely into the Caterpillar family and so we are spending the week down there, there is a lot of issues on the agenda, but I will raise that and understand what opportunities that are out there and whether those are something we should be pursuing or not.

Okay, thanks for the time.

Thanks, Benoit.

Thank you very much operator and thank you everyone for your participation. We look forward to speaking with you again after the third quarter.

Bye for now.