Shares of Finning International, the Canadian dealer for Caterpillar products, fell sharply following the company's announcement of lower fourth-quarter profit. The decline in profit was attributed to a significant foreign currency impact in Argentina.
In the quarter ended December 31, Finning reported a profit of C$85 million, or C$0.59 per share, compared to C$136 million, or C$0.89 per share, in the same period last year. The per-share earnings included a charge of C$0.37 related to a foreign exchange loss in Argentina.
The devaluation of the peso currency in Argentina, as part of new economic measures by President Javier Milei, was aimed at addressing the fiscal deficit and combating inflation. Analysts believe that the impact of this devaluation on Finning was larger than initially anticipated.
Excluding one-off items and foreign currency effects, Finning's profit per share was C$0.96, slightly below analyst expectations of C$0.97, according to FactSet. Despite this, revenue remained relatively unchanged from the previous year at C$2.66 billion.
In addition to the foreign currency impact, Finning also faced challenges in Canada, including delayed program starts and the completion of major projects. However, there is optimism regarding the company's outlook in Canada, particularly in construction, as major pipeline projects approach completion.
Looking ahead, Finning expects 2024 to be a year of moderating growth, considering the Argentinian foreign exchange devaluation as a one-time event.
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