Finning International Inc.

Well, thank you very much, operator, and thanks everyone for joining us. On the call with me today are Scott Thomson, President and CEO; Steve Nielsen, CFO; and Anna Marks, Senior Vice President, Corporate Controller.

Following the remarks by Scott and Steve, we will open up the line to questions. An audio file of this conference call will be archived at finning.com.

Before I turn it over to Scott, I want to remind everyone that some of the statements provided during this call and information on the slides is forward-looking. This forward-looking information is subject to risks, uncertainties and other factors as discussed in our annual information form under Key Business Risks and forward-looking information and in our MD&A under Risk Factors and Management and forward-looking disclaimer.

Please treat this information with caution, as Finning's actual results performance or achievements could differ materially from current expectations. Except as required by law, we do not undertake any obligation to update this information.

Scott, over to you.

Good morning. I’m pleased with our third quarter results particularly given strong challenging market conditions across all of our regions.

The team has done a good job winning important deals, gaining market share, keeping costs under control and prudently managing the inventory. Earnings per share was up 10% on a 4% increase in revenue.

Free cash flow turned positive as we continue to reduce inventory and control capital and rental expenditures. In South America, product support revenues increased by 15% and profitability in Chile returned to pre-ERP levels.

In Canada, cost discipline and operational improvements served us well. EBITDA margin was up 140 basis points from Q3, Q3 2018 to 12.8%, in part due to positive SG&A leverage.

U.K. and Ireland continue to deliver strong results while preparing to meet customer requirements as Brexit unfolds.

I will now provide an update for each of our regions starting with Canada. Activity and construction coal mining and more recently Forestry continues to be slow.

Equipment utilization hours are down from a year-ago. The size of the smaller equipment market has also declined.

We are pleased that we were able to expand our market share under these conditions. We began to right size the Canadian operations for this environment earlier in 2019 and those efforts continued in Q3.

This will set us up for even better performance in the quarters to come. Strong activity levels in the oil sands drove Canada's revenue in Q3.

We're also seeing continued strength in component rebuild activity with our OEM facility in Edmonton, set to deliver record volumes again this year. We do expect some significant capital inflows into Western Canada in the next few years.

LNG should proceed as the federal and provincial governments are supportive of development, and we have seen some equipment orders the Trans Mountain Pipeline, we are certainly feeling positive about the medium to longer-term outlook for Western Canada. Let me now turn to South America.

In Argentina, the government imposed restrictive monetary policies following the primary elections in August, and business activity has contracted further. Argentina is now generating $200 million to $250 million a year in revenues.

We believe the business will operate at this level for the foreseeable future and have taken additional steps to reduce the cost structure and right size the business for this level of activity. During this period of political and economic uncertainty, we are managing our pace of exposure and remain focused on providing product support for our customers.

We achieved modest profitability in the quarter and we expect Argentina to remain profitable in 2020 with the cost reduction initiatives we have taken. In Chile, we've restored the flow of parts to the component rebuild center and our product support revenue is growing year-over-year.

Importantly, we have restored profitability in Chile to pre-ERP levels. Going forward, we expect the investment in technology will drive productivity improvements and make South America a higher performing dealership.

In Chile, the construction and power system markets continue to be healthy. We expect that the investment in infrastructure by the government will provide improved demand for equipment.

In mining, we are not seeing the equipment replacement cycle yet, but we are confident it will come. The environment is slowly improving.

The recent equipment order we received from Teck for their new QB2 mine is a good example. The deal is significant to us for a number of reasons.

This is the first significant investment in a Greenfield operation in Chile in a long-time signaling improved confidence in the copper market. This is the first deployment of the Caterpillar 794 electric drive truck in South America, and CAT’s autonomous solution has proven to be the world leader.

In addition to this Teck win, Anglo American just recently announced that it shows CAT autonomy for its 794 fleet at it's Peruvian mine. We are currently in conversations with most mining customers in Chile regarding their equipment needs and new technology.

This is very encouraging and reaffirms our constructed view on the outlook for Chilean copper mining. We are closely monitoring the recent social unrest in Chile.

Our top priority is the safety of our employees in the country. We've experienced only modest disruptions to our operations so far.

The situation remains fluid and we are working closely with our customers, employees to minimize the impact on our business. This morning, we announced that Marcello Marchese, President of Finning South America will retire at the end of this year.

Marcello has served Finning for nearly two decades in senior positions. He has been South America's President for seven years, and has proven to be an innovator who has led the business during a period of challenging economic and political conditions.

I'm very pleased that Marcello will continue to work with us as Chair of the newly formed Finning South America Advisory Council. This council will consist of senior business leaders in Chile and Argentina, and will provide guidance and insights to the Finning Board and me on geopolitical, economic, social and industry issues in South America.

I thank Marcello for his commitment and dedication and I'm looking forward to working with him as Chair of Finning's Advisory Council. Succeeding Marcello will be Juan Pablo Amar.

Juan Pablo joined Finning in 1992 and has been Finning’s Senior Vice President of Operations for Chile and Bolivia since 2017. Prior to his current role, Juan Pablo has held other leadership positions at FINSA, including VP of Human Resources and VP of Finance.

Juan Pablo’s experience and deep operational knowledge had prepared him to lead our business in South America. Between now and the end of the year, Marcello and Juan Pablo will work closely together to ensure a seamless leadership transition.

In the U.K., the uncertainty around Brexit is impacting customer confidence, particularly in the construction sectors. Despite a difficult political and economic backdrop, the U.K.

and Ireland business has performed well. Looking ahead, we believe the U.K.

Government remains committed to supporting the economy and investing in infrastructure, specifically in large scale projects such as rail, power and airports. In summary, market conditions in all of our regions are challenging.

We expect revenue in Q4 to approximate last year and 2020 to be about flat from a top line perspective year-over-year. The good news is that the positive results of running a more agile business are starting to show.

For the past three years, our earnings have been growing faster than revenues. We are achieving operating efficiencies in competitive markets.

Our cost structure in Canada has been reduced and profitability in South America is recovering. By focusing on controlling the controllables, we've positioned the business to generate a fourth consecutive year of earning increases in 2020, even in a low growth revenue environment.

I will now turn it over to Steve.

Thank you, Scott. Our third quarter results reflect the improved execution as we were managing headwinds in each of our regions by remaining focused on one, maintaining cost discipline, SG&A as a percentage of net revenue was down 60 basis points from the third quarter of last year to 18.3%, two, improving profitability in South America, Chile's EBIT margin was up year-over-year and sequentially, three growing earnings at a higher rate than revenue.

Adjusted earnings per share was up 10% on a 4% increase in revenue, driven primarily by improved profitability in South America. Fourth, monetizing excess inventory, inventory was down by over $150 million from June 30 and inventory turns are improving and fifth, generating positive free cash flow.

Free cash flow was $165 million in the third quarter, and we expect to again generate strong free cash flow in the fourth quarter. Overall, we had a very solid quarter.

In Canada, net revenues was up 7%, driven largely by mining equipment deliveries to the oil sands, and $31 million of net revenue from 4Refuel. Product support was flat year-over-year as strong activity in the oil sands and component volumes at OEM were offset by a slowdown in the construction sector.

In Alberta and Saskatchewan, challenging ground conditions due to unseasonably wet weather impacted construction activity and reduced machine utilization hours. In British Columbia, forestry activity has slowed as lumber prices have declined, leading to mill closures.

Cost discipline and operational improvements lowered SG&A as a percentage of net revenue in Canada by 100 basis points year-over-year. This allowed us to maintain profitability as the revenue mix shifted to a higher proportion of new equipment sales.

In South America, growth in mining product support in Chile was the main revenue driver in the third quarter. The equipment sales were lower-year-over as we had some significant mining and power systems deliveries in Chile in the third quarter of last year, which were not repeated this quarter.

In Argentina, our team is continuing to face a challenging environment, including restrictive monetary policies imposed by the government on September 1. The adjustments to earnings per share this quarter include $0.02 related to the negative impact due to the significant devaluation of the Argentine Peso and $0.01 for severance restructuring costs incurred in Argentina to further align our business to the lower market activity expected from these governmental actions.

Importantly, we achieved higher EBITDA and improved profitability in South America. Adjusted EBITDA as a percentage of net revenue was up 190 basis points from the third quarter of 2018 to 11.2% driven by improved operating performance.

As Scott mentioned, profitability in Chile returned to pre-ERP implementation levels. Argentina was modestly profitable in the third quarter on an adjusted earnings basis.

In the U.K. and Ireland, power system sales were below third quarter of last year when we benefited from large project deliveries to the electricity capacity market.

Construction sales were comparable to the same quarter last year as lower new equipment sales in the quarter were partly offset by growth in product support. The benefit of IFRS 16 and a higher proportion of product support increased the EBITDA margin by 60 basis points to 8.3%.

We are pleased with our results in the U.K. particularly in light of the ongoing Brexit uncertainty, which continues to weigh on customer confidence.

Our consolidated backlog was approximately $850 million at the end of September down from approximately $900 million at the end of June as equipment deliveries outpaced order intakes in the third quarter, and equipment availability improved. We continue to actively quote for significant mining orders, large infrastructure opportunities such as Trans Mountain and LNG Canada also bode well for future orders.

Year-to-date, we reduced our capital excuse me net rental expenditures by over 30% compared to 2018. We remain focused on monetizing inventory and delivering strong free cash flow in the fourth quarter.

I will now turn it back to Mauk for questions and answers.

Operator, that concludes our remarks. Before we go to the Q&A, you request everyone on the line that to 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, can you please open up the lines.

Good morning.

Hi Jacob.

Yes, I wanted to start-off maybe asking about a backlog, so down quarter-on-quarter and sharp year-on-year because you had a couple of wins in their QB2 Ireland Power Systems. So it looks like LATAM okay, the Canada is down maybe just talk a bit about what you're thinking here in the foreseeable future for backlog?

Sure, thanks. So I mean, you summarized that pretty good.

So the backlogs down modestly across the company, little bit up in South America, little bit down relatively in Canada. I think when you look at activity levels, we feel really good about the mining business in Canada.

And you look at the OEM business that's going to have another record year from a rebuild perspective and we expect that to continue and continue to grow into 2020. There is some softness on the construction side.

And you see that, we see that on our machine utilization numbers and industry activity is down year-over-year. I think we've offset that somewhat with market penetration gains.

But it's a market that's a little challenged. I guess the last thing I would say is in terms of QB2, not all of that is in the backlog.

And so don't assume that all has been put in the backlog and offset some of the weakness that you might otherwise assume in Western Canada.

How would the pipelines TMX sum up?

Yes, so the team actually starting to see some orders on TMX. And they're not overly material right now, but there is some equipment ordering that has been done.

And we expect that to be meaningful opportunity for us probably $150 million type opportunity. And then on the LNG piece towards back end of the next year, we're expecting to see some, some activity on that as well.

So I think medium term, although near-term, it's a little bit challenging market, I think medium term, it becomes a lot more constructive.

And maybe my second question here just on inventory level. So it's a nice inventory reduction, maybe you can talk a bit about the split between new and used and any costs associated with that inventory reduction if there was an inventory reduction in the used?

So we are carrying a little bit extra inventory, new equipment in Canada. And as you recall, we've talked a lot about pulling back on ordering towards the end of last year in anticipation of the revenue declines or the activity declines.

And so we're in relatively good shape, but there's some excess to the tune of probably $80 million, $80 million to $100 million. And that, frankly, has allowed us to, I think be a little bit more aggressive than we otherwise would have been in the market and help us on the market share side.

In South America, it's not new equipment, it’s parts and this is just working through the SAP implementation. And again, we have about $100 million of inventory there relative to what we would otherwise have, which will actually the teams done a good job in both cases, through the third quarter we will continue to see significant reductions in the fourth quarter, and a little of that will flow into the start of next year, which will position us for another good free cash flow year in 2020.

Thank you very much.

Good morning. Hey good morning, thanks.

Hey Yuri.

Thanks Scott. Just trying to square your flat revenue outlook for 2020 with your incrementally upbeat tone on the Chilean mining cycle, quoting activity in Canada seems pretty good in mining TMX LNG product support growth.

So what are some of the -- if those are the outputs, what are the takes in the current year outlook?

Sure. So first one, I give that 2020 outlook, we're still in the planning stages for 2020.

We have a lot of visibility into Q4 and that's why we talked about the flat revenue as we look out to 2020, we're still doing the work but I think it's fair to say it's going to be a low growth type year. And when you look at the puts and takes, we are seeing some weakness in the U.K., and I think the election hopefully will bring some certainty or more certainty to that market and they help.

But there's been some weakness there. In Canada again back to the Jacob’s comments, I think we're seeing a lot of good momentum in the OEM, the mining space, but the construction business is challenged, industry activity is down year-over-year, and I think that's probably going to continue into 2020.

And then in South America, we have seen some significant moves by customers like Teck on QB2 but those are not going to hit us necessarily right out of the gate in 2020. And I think right, we haven't yet seen that replacement cycle take-off in Chile.

And so product support has done well this quarter, I think will continue to grow. Mining equipment is up 7% or 8% year-to-date.

I think that will continue to grow incrementally. But when you take all that in conjunction, it feels like a low growth environment to us for 2020.

So the lack of visibility is on the equipment side rather than the product support side of the business?

Correct.

Yes, sorry. Second one and final just your -- as your free cash flow look for the year for 2019 changed at all, I think you were kind of pointing to marginally positive free cash flow and just remind us or update us on your capital allocation priorities here between paying down debt and buying back stock?

Sure. So we will have a very strong fourth quarter like we have in the last six years and so that will get us to that free cash flow breakeven type range, a little bit probably softer than we start said at the start of the year, but still very strong fourth quarter.

And then when we look at priorities, I mean the first priority is making sure the balance sheet is strong. And we'll do that.

And then once we've done that, we'll make sure we look at the value trade-off of repurchasing our own shares relative to the free cash flow generation, and that would be definitely something we'll be looking at to the back half of the year.

Okay, thanks Scott, I will turn it over.

Thanks very much and good morning. I'm going to tread some ground here that's already been tread to some extent.

But clearly, your revenue outlook for the balance of the year has moderated. And I'm just curious how you would break that down by geography?

Yes, I mean it has. But it’s not a significant moderation, right.

I mean, it's I think we said 9% and we were 4% or 5% this quarter, and we're saying flat. So you're right, it's a little bit of moderation, I think probably on the margin a little bit softer in Canada than we're thinking, but modestly, and that would again be the construction segment.

And then second, I think if you look at Chile with some of the challenging issues there right now, you can see GDP forecasts have come down 3.5% to 2.2% and you're going to see a little bit of headwinds in the fourth quarter associated with some of our branches not operating at full capacity on the construction side. Now, I want to put that in perspective 65% of our revenues and 85% of product support in Chile is associated with mining and mining has not been disrupted.

But there is a little bit of challenging environment around the branch network for the construction side in Chile. So I think it'd be the combination of those two things, Cherilyn that makes us a little bit more conservative as we look at the fourth quarter.

Okay. And then just on product support in South America.

Can you comment on how much of your growth rate would be sort of same-store versus to what extent you're still working through backlog related to the ERP implementation?

I think there’s -- I don't honestly I don't think there's a lot associated with the backlog from the ERP. I think when you compare year-over-year, it's a little bit of a challenging comp, as you recall, because Argentina started to really weakened last year at this time, and so it's good growth.

And I think we'll continue to see good comparables to judge against. But there's not a huge pent-up demand here from ERP that we're working through.

We've had the flow now working since end of March. So this is a huge pent-up demand.

This is organic growth, run rate growth.

Okay, that's helpful. That's my two, thank you.

Okay, thanks Cherilyn.

Hey good morning guys, thanks.

Hey Ross.

Hey Scott, how would you compare your inventory situation to the industrial recession from a few years ago, I think you said, you've got about maybe $80 million of excess. So what did that look like in kind of like late 2014, early to mid-2015?

Yes, so we're in a much better place today. And I think if you look at that downturn with the oil price, we’re probably to up to $250 million of excess inventory.

And here that's kind of $80 million and I think it’s aligned with what we've been talking about is slowing that ordering activities back to the November, December period. So that feels much better in Canada today than it did in 2013 and 2014.

I think in South America, it's a little bit of different story has nothing to do with economic activity. It was us trying to take care of our customers, by making sure we had inventories when we were challenged with that system implementation.

I think the good news about that is it's fast moving parts, and it is parts and you see the product support growth in regions. So in some ways, I'm feeling a lot better than 2014.

And then if we bridge the backlog, Q2 to Q3, it looks like implied orders are up like 9% year-on-year. Did you agree with that and just can you remind us what the normal seasonal pattern is from Q3 to Q4 on orders, just wondering if orders can be flattish Q3 to Q3 based on what you're seeing now?

I don't have the order number in front of me and I think it's you have to keep it in mind, this is pretty lumpy business, particularly on the mining side. So when you look at South America, for example, this quarter, we were pretty low on equipment.

But it was lumpy mining impact year-over-year or year-to-date, I think we're up 8% or 9%. And in Canada, as we head to the back half of the year, there's no real seasonality impact on third, fourth quarter I mean, I think people are pretty busy and you're not going to see a dip or increase one way or the other on the revenue side.

Okay, Got it, can you compare that the order in -- well I don’t know if it’s in order yet but in Anglo America, Anglo American mine for the CAT 794 can you quantify that at all? Or at least maybe compare it in size to the Teck order?

Yes, so that's not -- the Peru -- as you know, Ross, the Peru isn't my dealership. So I just quoted publicly available information.

And the reason I highlighted that for people was it was another implementation of the 794. And it was another implementation of CAT autonomy.

But in terms of the size, I'm not in a position to talk about it.

Okay, got it. Thanks very much.

Yes, thanks Ross.

Hey good morning.

Hey Michael.

Just back on the 2020 guidance there. With your call for about flat revenue for 2020, can you help us frame where you think the earnings growth can come from, maybe outside of cycling over the ERP issues and the cost reductions in Canada?

Well, that's a big part of it. Do you say cycling over it, sorry what was that, I didn’t hear that last.

Yes, the lapping of the ERP issues through...

Yes, sorry. So I think a big part of it is the cost initiatives.

So I think this is where I was heading. And if you look at the SG&A reduction in the business, it's been very significant.

And we started this process early in 2019 and you are starting to see the benefit from it. And so as you look at 2020, which even in a low growth environment have more heavily weighted to product support, which helps and off of a lower cost base.

That's what's going to give you the earnings torque over and above the revenue growth. And that's why we feel confident in talking about another year of earnings growth in excess of revenue growth.

Okay, that's helpful. Then even in Western Canada, I mean, that's tracking to record levels this year, obviously different story in South America, given the issues there.

In the MD&A, Scott, you mentioned that there's an understanding for what the business needs to continue to capture market share and provide ongoing stability. I think you also called it making sort of a South America higher-performing dealership.

Could you elaborate on that a little bit into 2020?

Yes, so I think one of the challenges we've had in South America is increased labor costs without labor productivity improvements. And so thinking back to the technology investment we've made that was with the aim of improving the cost side of the equation.

And that was then compounded by the steps we took in Q1 to restructure that business. So when you look into 2020, with ERP now behind us, we're feeling very confident that we're going to continue to show improvements in that South American business despite some of the issues that are currently there with Argentina and the social unrest in Chile.

I think the team has done a great job getting on top of Argentina really quickly. That's now a very small part of the business.

And this will be from a profitability perspective where we want it. And in Chile I think you potentially could have a little bit of headwinds in this quarter from a revenue perspective.

But as we look up to 2020, we feel very confident that we're going to see continued improvements from a profitability perspective and a lot of that is going to be on the cost side.

Okay. And on the comments around capture or market capture, I mean, is that mostly related to mining and the new proposition around the 794 on the autonomous truck?

Yes, I think it's a combination of much improved performance of the 797 mechanical drive truck, a new proposition with the 794 electric drive truck, and then autonomous solution that is getting a lot of traction with miners worldwide and the combination of those three things along with spending, support and service, I think puts us in a very good position to capture more market share. And that is why, we were so pleased with QB2 win in Teck, I think it shows a lot of confidence in what we're doing in the auto parts segment.

Perfect, thanks for taking the questions, Scott.

Thanks Michael.

Good morning guys.

Hi Ben.

Is there anything in the labor agreement that was signed that represents some kind of an offset to your cost savings? There must have been some terms of wage increases in such that would be factored into the equation?

Yes, so it's sort of a three-year deal was ratified those that aren't aware October 8, so it expires April 30, 2022. And the wage increases we think are fair for both the employees and the company and reflective of the environment we're in.

And that's all around the 2.5% range.

And over and above that, you can still get leverage operating leverage in the business. That doesn't mean clearly, you said you're pretty confident about the earnings growth on flat revenue, but this must be some component of a headwind for you?

I mean, it's a little bit of a headwind. But I think this is just another year of the journey we've been on and you look at the SG&A as a percentage of sales with how much we've been able to drive improvements on that front.

And now, what Kevin and the team, how they're thinking about the business in this quarter, it must be, I don't have the history in front of me, but it must be the lowest SG&A to sales that we've had in the Canadian business but definitely, there's something happening around. And as I look at those changes that were made in the first quarter and Kevin thinking about this business at a mid-cycle type mentality, I feel confident that we're going to continue to see improvements as we look to 2020.

Yes, and for sure you guys deserve a lot of credit for that SG&A unfortunately, not to take away from it. But as you've made those, as you've achieved those savings, you've also been pressured on the gross margin side, competitive nature or cost of labor on your service business, whatever, probably a mix of all those sorts of things.

But how is that? How's that looking for 2020 in terms of pressure on gross margins?

Yes, I think that's a good point. And we've been managing a very challenging economic environment.

And I think what the way we're thinking about it is the volume margin trade-off and if you look at second quarter, we had record revenue, record EBIT, record EBITDA. And that's even back Kramer in Canada.

And I do think there's a big services opportunity here for us to get after. And we're in a great position to do that now with 80% of our machines connected.

And so I don't see, I see continued improvement on the SG&A side, I see a continued competitive market environment, particularly in mining, but I can continue to see improvements in profitability when those two things are combined and volume.

Right. If I could just sneak one last one in there on a similar topic just you've been very focused, very clear on ROIC as a guiding metric.

The spin-off is peak from a couple of years ago for the last few quarters, I think it was down again this quarter, even with some freeing-up of the inventory. How much of that is the 4Refuel acquisition depressing ROIC?

And when or can that number start going in the other direction?

Yes, no it's good point and I think the two drivers of it this year would be the excess inventory that we talked about and the 4Refuel acquisition of $240 million 4Refuel acquisition. The 4Refuel performance is doing really well up year-over-year significantly and so the proposition associated with 4Refuel has proven itself out and we've actually got some wins now on the joint go-to-market which is it's really good solution selling of fuel with our proposition, it's been well received as that those revenue synergies come through the 4Refuel ROIC will improve significantly.

And as we think about the inventory reduction that we're going to do through the back half of the year, and then hopefully get through it to a much more normal inventory turns type position in Canada, you'll continue to see ROIC improvements in our Canadian business.

Okay, thanks very much.

Great, thanks Ben.

Okay, thank you for taking my questions. Just on the cost savings initiatives, would you say that they're largely structural, where if demand levels do increase, you could run at relatively the current cost base?

I do, I mean I think a big part of the improvement in the cost base is how we're thinking about the distribution network, and we have reduced our bricks and mortar footprint significantly. We've focused various facilities to do specific jobs.

And so each facility now has their own mandate for what they do. We've improved the e-commerce distribution of our business considerably.

And I think those, all those three things drive out costs in a structural fashion. And again, I think those things are going to continue for the next couple of years.

And so I feel good about the structural improvements we’re making in that business.

Okay, and on the inventory side, I think you're running around $2.3 billion or $2.2 billion in inventory. What do you think is the optimal range of inventory relative to the current earnings base of the platform?

Yes, I mean, I think we've got $80 million too much in Canada with $100 million too much in South America I talked about that. We probably have $10 million as a contingency in Brexit in the U.K.

And so if you had that $200 million of inventory monetized to free cash flow, which will do over the next six months, we're going to feel a lot better about the inventory turns position.

Okay. Thanks and then I know, previously, you had a few charts around the rebuild cycle on the 797 and the D11 and D10 dozers.

Any update there? Is that still a potential opportunity?

And do you see it kind of moving forward?

I mean I think that's another driver. I mean, this is not all a cost story.

I mean, there's I think this product support and rebuild opportunity is a significant one. OEM for those of you who visited couple weeks ago, or a month ago, I think would have would agree that it's very busy.

We're going to have another record year in the OEM, from both a revenue and a profitability perspective and in our view, given the aging of the fleet that's going to continue. So I do think that's another reason when you think about the mix of equipment and components and parts that I'm pretty encouraged about the outlet for our Canadian business.

Okay. So in 2020, revenue is flat, but arguably, we should see a higher mix of repair service parts versus new sales relative to 2019.

Is that fair to say?

Yes, I think what we're seeing is the weakness of the new equipment side, but continued growth in the product support side.

Okay, thanks for taking my question. I'll turn it over.

Thanks, Derek

Hi, good morning.

Hi, Maxim.

Scott, just one micro question. I mean, obviously, the forecasting of revenue has been a bit of a moving target on that LTM basis.

And obviously a lot of that is driven by trade uncertainty, I mean like assuming that we do have some sort of resolution on that front. How do you think the behavior of your client base could potentially change and how that could translate into revenue?

I'm just trying to get a better understanding of potential sensitivity modeling for 2020 on that front as possible?

I think copper price helps right and where the copper price has been trending, I think it's made some of these decisions from miners a little bit more difficult. Again, another reason why I was really encouraged by the QB2 Teck commitment because that’s a $5 billion commitment into Chile in the copper.

And so if you have a little bit more strength on that copper price, I think that ultimately, I'm not saying anything you guys don't know, but that would ultimately help us from an activity perspective, particularly on the new equipment side, particularly on the new equipment side, because all of these miners in South America right now are evaluating either debottlenecking or new growth opportunities and we're in discussions with them, but higher copper price helps obviously.

Yes for sure. Do you mind maybe commenting on the age of equipment in FINSA in general?

Yes, I actually don’t have the number, it was not as old as our Canadian, the fleet in Canada. But again, they haven't had a significant refleeting there for the six years that I've been here.

And so I do think that, the time is coming, where you're going to need to see a refleeting and I think you hear that consistently from Caterpillar as well, when they talk about their mining business. So no new, I would be aligned with how Caterpillar views the world from that perspective.

Right. So I guess the bottom line is that if we have a bit of a reprieve on a macro side plus a bit of a refleeting dynamic, I mean late 2020, 2021 could build in pretty good from that perspective?

That's our view. And obviously in an uncertain environment but that is our view in terms of how we think about the Chile business.

Okay, all right. Thank you very much.

That’s it from me.

Great.

So this concludes the call. Thank you, operator and thank you everyone for listening.