Finning International Inc

TSX:FTT

Earnings Call Analysis

Positive Q3 Performance with Focused Growth Strategy

Q3 showcased robust performance with strong product support revenue up 13% year-over-year and new equipment sales surging by 28%, indicating a solid demand across regions. The company's operating model is now strategically aimed at resilience, targeting increased contracted revenues, variable cost structures, and speedier capital turnover. Canada's adjusted return on invested capital (ROIC) improved significantly, up by 170 basis points, heralding continuous growth, particularly in Western Canada. In South America, new equipment sales jumped by 37%, with the overall business poised for expansion amid an optimistic mining sector stimulated by rising copper demand. Despite a 17% dip in net revenue from last year in the UK and Ireland, product support revenues grew by 6%, signaling durability in their operations. The company's equipment backlog stood at $2.3 billion. With these encouraging developments, the company is committed to its long-term strategy for sustainable growth.

Introduction to Earnings Call and Forward-Looking Statements

During the earnings call, investors were informed about the opportunity to ask questions after the prepared remarks. The call was webcast and accompanied by slides on Finning's website, with archived audio and presentations available for further review. A 2023 Investor Day held in Chile provided a refreshed strategy and key objectives which investors could access online. Caution regarding forward-looking statements was advised, directing attention to specific disclosures outlining the associated risks.

Strategic Focus and Customer Integration

The company outlined its strategic focus on product support to build customer loyalty and drive value. The aim is to capitalize on full asset lifecycle support, expanded rebuild business, and growing equipment population. Optimizing the operating model to build a more resilient business, including variabilizing costs and increasing working capital velocity, was emphasized. The company also expressed enthusiasm for opportunities in the used equipment market, rental services, and power solutions, including an electrification initiative.

Regional Performances Amid Challenges

The company's regions showed strong performance despite challenges like wildfires in Canada and economic conditions in Argentina due to presidential elections. The teams demonstrated strength and adaptability in coping with these events.

Financial Resilience and Operational Efficiency

The company was pleased with product support revenue growth of 13%, strong operating margins, and improved return on invested capital. A focus was placed on improving invested capital performance for higher returns and resilience. Operational efficiencies such as warehouse automation and planning component exchanges were highlighted as areas of improvement.

Detailed Quarterly Performance Breakdown

Net revenue for Q3 reached $2.4 billion, a 16% increase from the previous year, with strong contributions from new equipment deliveries and product support volumes, particularly in mining. EPS rose by 9% to $1.07. Operating margins remained solid, but gross profit percentage decreased slightly due to a high proportion of large mining equipment sales. The equipment backlog stood at $2.3 billion, indicating strong ongoing activity. Free cash flow was at breakeven, and the net debt to adjusted EBITDA ratio was 1.8x at September's end.

Outlook for Canada, South America, and U.K. & Ireland

Canada's new equipment sales surged, led by mining deliveries, with adjusted ROIC improving significantly. The region is expected to grow steadily going forward. In South America, new equipment sales rose due to large mining equipment orders, especially in Chile, and product support sales grew. South America achieved its highest ROIC to date. Political changes and supply chain improvements are set to drive further growth. In contrast, U.K. and Ireland faced a reduced net revenue due to softer construction equipment sales, counterbalanced by stronger power systems revenue and solid EBIT percentages.

Sustained Enthusiasm Despite External Pressures

The executives expressed contentment with Q3 results and momentum, remaining focused on executing the refreshed strategy for long-term growth and resilience despite challenges such as supply chain pressures and political uncertainties in regions like Argentina.

Invested Capital and Working Capital Management

The company is eyeing enhanced invested capital turns and velocity, with strong free cash flow expected in Q4 and plans established for improvement in the years 2024 and 2025. The ultimate goal is a free cash flow conversion target of 50%, contingent on market growth trajectories.

Inventory Investments and Strategic Capital Allocation

Approximately $1.2 billion was invested in inventory since 2022 due to increased unit costs and strong demand. With supply chains easing, inventory levels are anticipated to optimize while maintaining adequate sales support. The company's focus is not on absolute inventory levels but rather on achieving higher velocity to support ongoing growth.

Earnings Call Transcript 2023-Q3

[Operator]

This is the conference operator. Welcome to the Finning International Inc. Third Quarter 2023 Investor Call and Webcast.[Operator Instructions]I would now like to turn the conference over to Greg Palaschuk, Executive Vice President and Chief Financial Officer. Please go ahead.

[Greg Palaschuk, executive]

Thank you, operator. Good morning, everyone, and welcome to Finning's third quarter earnings call. Joining me on today's call is Kevin Parkes, our President and CEO. Following our remarks today, we'll 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 that we will reference during our prepared remarks. The slides are posted on our website as well. An audio file of this call and the accompanying presentation will be archived. In addition, in September, we hosted our 2023 Investor Day in AntofaGasta Chile, which laid out a refreshed strategy and key objectives going forward. On our website, you can review our slide presentation as well as the full webcast of our Investor Day. 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 10 and 11 for important disclosures about forward-looking information as well as currency and specified financial measures, including non-GAAP financial measures. Please note that forward-looking information is subject to risks, uncertainties and other factors as discussed in our annual information form under key business risks and in our MD&A under Risk Factors and Management and forward-looking information disclaimer. Please treat this information with caution as our actual results could differ materially from current expectations. Kevin, over to you.

[Kevin Parkes, executive]

Thank you, Greg, and good morning, everyone. At our recent Investor Day in Chile, we presented our refreshed strategic priorities. I'll speak to our quarter through those priorities. And as Greg mentioned, we do have the webcast and the presentation in the Investors section of our website. And for those of you that have a chance see and hear the presentation, I encourage you to do so. Following my remarks, Greg will provide additional details around our third quarter results. Please turn to Slide 2. We delivered another strong quarter in Q3 through strong execution. Driving our product support business remains our primary strategic objective. Product support builds customer loyalty through greater integration with our customers and the performance of their equipment. It is our biggest value driver, the largest opportunity for profitable growth and the most resilient part of our business. We are capturing greater share of product support across the full asset life cycle, growing customer value agreements, expanding our rebuild business and strategically growing our equipment population in our territories. Optimizing our operating model and culture around full cycle resilience is a new explicit strategic objective. This includes building more contracted revenues and costs, finding ways to variabilize our cost structure and increasing working capital velocity. Building greater resilience into our business will provide more security and certainty for our employees, better support for our customers and more reliable and consistent returns for our investors.Finally, thing, we're building a sustainable growth platform. In addition to driving product support, we are excited about growing our addressable marketing used equipment, rental and power assistance. Billings equipment capability is a great way to increase the installed base in our markets, grow aftermarket opportunities while also helping build full cycle resilience. We plan to grow our rental business and increase our customer base, specifically around retail customers. We're also increasing our capabilities in both prime standby power solutions as well as capacity power to support the growing demand for electrification.Please turn to Slide 3. Our regions delivered strong performance in Q3 while managing through some unique challenges. And most in Canada, whilst others impacted many of the communities in which we operate, the safety of our employees, their families and their communities became our primary objective at times through this summer. In South America, the team is managing through a very difficult operating and economic environment in Argentina related to the presidential elections. I'm really proud of how our teams continue to demonstrate our strength and resilience while providing important support for our customers, being great colleagues and important members of their communities. We are pleased with our product support growth, strong operating margins and return on invested capital. Our revenue mix shifted due to a high proportion of large mining equipment we delivered from our backlog to install our -- to increase our installed base and product support opportunity. Our product support revenue was up 13% year-over-year, growing across all regions. Since Q3 of last year, we've added 370 technicians globally to support an increased number of product support contracts and strong demand for rebuilds. As we highlighted at our Investor Day, we are very focused on improving our invested capital performance to drive ROIC hire and build greater resilience into our business. Initiatives underway in each of our regions are in place to drive more efficiency in our operations, higher velocity in our invested capital while most importantly, increasing our customer service levels. Key focus areas include automating our warehouse operations, working closely with customers on planning component exchanges and rebuilds and increasing lost in our new equipment preparation.Improving supply chain is a positive for our customers, our operations and our business performance, and we are pleased with the progress. Our adjusted return on invested capital was 20.2% and in Q3, up 190 basis points from a year ago led by South America. Looking ahead, we are excited about sustainable growth at Finning, while building capabilities and empowering people, our people to drive long-term customer loyalty. We expect continued momentum in our business to be supported by robust customer activity across our diverse end markets, healthy equipment backlog that stands at $2.3 billion and a strong demand for service. From a regional standpoint, Chile is a premium business and mobilizing for growth. Our Canada business is positioned for steady growth. It has the largest addressable market in each of rental used equipment and power systems. And our U.K. and Ireland business is resilient, showing best practices to drive innovation and efficiency across our company. I will now hand you back to Greg to provide a greater level of detail on our third quarter results.

[Greg Palaschuk, executive]

Thank you, Kevin. I'll talk about our third quarter performance in more detail, including our regional results. And I'm turning to Slide 4. Q3 was another strong quarter. Net revenue was $2.4 billion, up 16% from Q3 2022. We saw strong new equipment deliveries and product support volumes in Q3, led by mining. We're also pleased with the momentum in our Power Systems business across all regions, underpinned by strong demand and effective project execution. EPS of $1.07 was up 9% from Q3 2022. Operating margins were solid and SG&A as a percentage of net revenue was below 17% in the quarter. The proportion of large lower-margin mining deliveries in the revenue mix and higher financing costs were the main reasons for EPS to grow at a slower rate than revenue compared to Q3 2022. But Q3 2022 was also a very strong quarter, and we're pleased with the steady growth in earnings year-over-year. Q3 free cash flow was at breakeven and our net debt to adjusted EBITDA was 1.8x at the end of September. On Slide 5, you can see changes in our net revenue by line of business compared to Q3 2022 and the comparison of our backlog by market sector. New equipment sales were up 28%, led by mining deliveries in Canada and Chile as well as higher power system sales in all regions. Product support revenue was strong in all regions, up 13% on a consolidated basis. Our equipment backlog of $2.3 billion is down slightly from the end of June. Equipment backlog in South America grew driven by significant mining orders was offset by lower equipment backlog in Canada due to strong deliveries and lower equipment backlog in the U.K. and Ireland. Our coning activity remains robust in mining and power systems with customers continuing to increase capital expenditures and operating budgets to support fleet investment and production increases. Our mining and power systems equipment backlog continues to grow as a proportion, representing roughly 45% and 25%, respectively, of total equipment backlog as of September 30. We see supply chain improvements as a positive in our Canadian and Chilean construction businesses, we are seeing core market share improve as a result.Turning to Slide 6, which shows our EBIT performance. Gross profit was up 14% on strong new equipment and product support volumes. As a percentage of net revenue, gross profit was down 30 basis points, primarily due to a higher proportion of large mining deliveries in the revenue mix. In the third quarter, we delivered 26 ultra-class trucks, which as highlighted at our Investor Day is great for long-term product support growth. SG&A as a percent of net revenue was 16.9%, up 20 basis points from Q3 2022. EBIT was up 12%. EBIT as a percentage of net revenue was a solid 10.3%. Now moving to our Canadian results and outlook, which are summarized on Slide 7. New equipment sales were up 57%, led by mining deliveries to oil sands customers. Product support revenue increased by 10%, led by mining, including higher rebuild activity. We're also driving strong growth in Power Systems business in Canada with Power Systems Equipment backlog up significantly from Q3 2022. EBIT was up 10% and EBIT as a percentage of net revenue was 10.8% below Q3 2022, again, due to a higher proportion of large mining equipment sales in the revenue mix. Canada's adjusted ROIC increased 170 basis points from Q3 2020, driven by improved invested capital turnover and strong operating margins. Western Canada is well positioned for steady growth going forward. Our mining and energy customers are financially healthy and increasing investments into their fleet and production. General sand demand for product support is expected to remain strong, and we are in active discussions with customers planning for major results.Turning to South America on Slide 8. In functional currency, new equipment sales were up 37%, driven by deliveries of large mining equipment in Chile. Product support sales were up 12%, also led by strong mining activity. EBIT was up 20% and EBITDA as a percentage of net revenue was 12.3%, which was comparable to Q3 of 2022. South America generated ROIC of 27.6%, up 490 basis points from Q3 2022, our highest relic to date, reflecting both improved profitability and invested capital turns. As reviewed in detail in Antofagasta in September, our business in Chile is mobilizing for growth. The strong outlook for mining supported by growing demand for copper and improved political clarity. We're encouraged by recent government approvals of large-scale brownfield expansions and increasing customer confidence to invest in new projects. We continue to see demand for large contractors supporting mining operations in Chile, while infrastructure construction activity is expected to remain stable. Additionally, Power Systems activity is growing in industrial and data center markets. In Argentina, we're operating in an environment of high inflation, significant currency restrictions and import regulations that are impacting our business. While we are actively managing and mitigating these risks, the significant and prolonged important currency restrictions put in place during the current election process has increased the risk and likelihood of losses and negative tax impacts in the fourth quarter.Please turn to Slide 9 for our results in the U.K. and Ireland. In functional currency, net revenue decreased by 17% from Q3 2022 due to lower equipment sales and construction, which was partially offset by higher Power Systems revenues. Product support revenue was up 6%, driven by strong customer activity and equipment utilization and power systems. EBIT as a percentage of net revenue was a solid 5.9%, reflecting our continuous focus on growing the product support business. Product support activity in the U.K. and Ireland is expected to be resilient with steady machine utilization and growing contribution from Hydroquip. As HS2 deliveries are now complete, we continue to expect lower new equipment sales in the U.K. compared to the record doubles of 2022. In Power Systems, we continue to expect strong demand for both primary and backup power generation in the data center and utility applications. In summary, we're pleased with the Q3 results and continued momentum. Our focus is squarely on executing the refreshed strategy as outlined at Investor Day to drive product support full cycle resilience and sustainable growth for the long term. Operator, I'll now turn the call back to you for questions.

[Operator]

We'll now begin the question-and-answer session. [Operator Instructions]The first question comes from Yuri Lynk with Canaccord Genuity.

[Yuri Lynk, analyst]

Greg, can you ring fence for us the potential loss in Argentina that you alluded to?

[Greg Palaschuk, executive]

Yes, sure. So as we've talked about in previous discussions. So Argentina is a business that's fairly small. We keep it in a box. We've typically focused more on product support. But what we've seen is a pretty unique circumstance really through the election process as they've got the peg at about MXN350. In the past, historically, if you had kind of 2 weeks without access to U.S. dollars, that would be unusual, and we're now more at the 2-month point. So we just have a higher exposure through that period. So we'll manage through that as effectively as we can, the elections on the 19th. And so there could be an impact from that have to see how it plays out. But ultimately, we'll put Argentina back in the box after that process and probably a tighter box than ever. And so while it might be notable in the quarter in the grand scheme has been not a huge impact.

[Kevin Parkes, executive]

Yes. I would just add as well that one of the best ways for Argentina to work through this is developed to develop the resources in country, which are gathering more and more momentum. And obviously, we are well placed to support that resource development, which we believe long term will help us through this -- will help through the situation in the short to medium term, but long term is still an exciting opportunity.

[Yuri Lynk, analyst]

And what about the tax impact, like what would your effective tax rate be in the fourth quarter?

[Greg Palaschuk, executive]

Yes. I mean, it also depends on the level of devaluation that occurs post election. So our tax pools would be in pesos, and so it would be directly correlated with whatever level of devaluation occurs post.

[Yuri Lynk, analyst]

Okay. Just last quick one for me on SG&A. What -- I think it was down quite nicely as a percent of revenue in South America, but not so much in Canada. Can you just speak to the nature of the expenses that you incurred there, particularly around the fixed variable split between them?

[Greg Palaschuk, executive]

Yes, sure. So I mean, I think SG&A was down slightly quarter-over-quarter, but on a bit lower revenue. We're always pleased to keep that below 17% and continue to have that as the key goal. You'd have within the quarter in Canada, you'd have a little bit of a nonrecoverable time due to some of the disruption on a couple of branch closures for part of the quarter. And then otherwise, just due to the strong performance, we've got some higher short-term incentive comp numbers within Canada. I guess that would be the 2 to call out.

[Operator]

The next question is from Steve Hansen with Raymond James.

[Steven Hansen, analyst]

 Just a question on product support. The consolidated number was up quite nicely in the period as you highlighted. The Canadian operations did dip sequentially though quarter-over-quarter. Just curious what's going on in that specific instance? And how do you think about the ramp going forward given the large peso deliveries you've been doing, just help us through maybe some of the forward cadence on that.

[Kevin Parkes, executive]

Yes, sure, Steve. So I mean, the first thing is when you talk about the debt, I mean it's on really strong comps on the back of quite a favourable pricing environment as well. We're very optimistic about product support growth, as we mentioned in our Investor Day. In fact, since our Investor Day, I would say that our outlook over the next period of time or 12 months is probably at the top end of that range. But we did talk about product support growth, growth levels moderating as we move forward. And that's what you're seeing right now, the levels that we were growing at will moderate over time. And obviously, just think about the pricing impacts in the last 12 months.

[Steven Hansen, analyst]

Okay. Helpful. And then just on the used equipment side, I understand the initiatives are relatively new. But maybe just help us understand sort of how we should think about that growth as well because we did see some fairly sizeable year-over-year dips in certainly in the Canadian business, but also in the U.K. as well as Canada in particular, would be my focal point. How should we think about the growth on the use side there?

[Kevin Parkes, executive]

 Yes. We're happy with the progress of making used equipment. We're super excited about some of the initiatives that we spoke about at the Investor Day and that will come to life in Q4. Specifically around Canada, that was an extremely strong quarter in Q3. So pretty unrepeatable used equipment offer deliveries in Q3 last year related to the ability to get new product. And so we're very creative to get product in the hands of our customers in Q3 last year. So that's the biggest comparison. There's no doubt that the used equipment market is softening. So that would be an additional factor. But the big biggest issue in Canada was the comparisons. And the softness issue would be the same narrative for the U.K.

[Operator]

Next question is from Jacob Bout with CIBC.

[Jacob Bout, analyst]

I had a question on backlog, looking for a bit more granularity. Maybe we'll just start specifically with Canada, obviously, strong deliveries in the quarter, but do you expect a relo going into the fourth quarter and 2024? And are you seeing any weakness at all in Canada. I know some of your competitors are calling out in construction markets.

[Kevin Parkes, executive]

Yes. So the first thing to say, I don't think the backlog is the best measure of forward-looking activity. I know some of the people spoke to this over the past few weeks. But obviously, there are things in backlog over the last 2 years that wouldn't typically go into backlog under a normal free supply or a better supply environment. And so there's definitely an impact in construction because construction is where the supply has improved more so than in the larger engines and larger mining equipment. And so we are very optimistic about the order intake levels and the activity levels we'll see. It's hard to say whether the backlog will continue to build because obviously, I just described the improving supply chain provides more fluidity in the sales outlook. But we're happy with the growth of the outlook in Canada as it relates to construction. -- and we're really happy with the market share gains that we're seeing there. So I would not describe our construction equipment market in Canada, a softening.

[Jacob Bout, analyst]

Okay. And then how about the U.K. and Ireland?

[Kevin Parkes, executive]

Yes. So the U.K. Ireland is soften the market is reducing there for sure. And that's on the back of the comparisons with the HS2 deliveries last year. So that is more challenging. Again, we've seen good, more recently good order intake levels as some of the larger rental companies look forward into next year and start their reload reloading their fleets or putting orders into real out their fleet. So I've been pretty encouraged quite recently about the order intake levels. But there's no doubt that there is a little softening in the U.K. as it relates to construction equipment. That is competitive as well by the supply chain is improving faster in the U.K. as well because of the mix of products they sell there. So one of the most improved supply chain is around excavators, which would be a much greater mix of the U.K. sales compared to Canada or South America. So I think the combination of a slowing market and improved supply means that we're carrying a little too much stock there. But it's healthy is young and the team are working through it, and we're optimistic with the recent performance.

[Jacob Bout, analyst]

And then how much pressure on pricing is there as a result of the improving supply chain?

[Kevin Parkes, executive]

We have to be competitive. Our margins, as you can see in Q3 remain strong, and we're very focused on being competitive in our marketplace. We've been selling acceptable premiums forever, and we continue to do that. And so we will -- we are growing share in Canada and Chile. And so I think the team are well versed and well they have strong capabilities and they'll be able to sell the premiums and the value proposition that we have. So we don't see that pressure.

[Operator]

Our next question is from Cherilyn Radbourne with TD Cowen.

[Cherilyn Radbourne, analyst]

We've seen a couple of drawn equity income pickup in Canada from pipeline machinery. So I was hoping you could give us a bit of color on how that business is performing and what kind of forward visibility it has.

[Greg Palaschuk, executive]

Sure. Yes. No, we've seen a nice pickup. I mean, there was certainly some difficult years in there where a lot of their activity from the U.S. actually shifted up to Canada. But as you can see, the activity in the U.S. has picked up quite strongly, and you've seen some M&A activity start to happen and some more activity levels. So some of that gear will shift down to the U.S., but it's -- that business has really picked up, and we expect that to continue into next year.

[Cherilyn Radbourne, analyst]

And then in terms of the CapEx increase that was telegraphed in the press release, can you help us understand how much of that is related to the rental fleet and strategic mining truck investments? And how much just relates to the timing of planned facility disposals?

[Greg Palaschuk, executive]

Sure. Yes. So I mean, obviously, through the year, the growth that we've seen has been healthy as the year has progressed, but also as we highlighted at Investor Day in strategic areas of focus, including rental. So some of it would have been higher rental investment but also fewer disposals than we planned at the beginning of the year. And we've got some good value assets in that fleet that we'd like to keep running for longer as well as some deferred on deferred real estate sale that will move into next year as well as some investments in mining truck fleet some to support some contract product support contracts we've won, but also some has just demonstrated the new capabilities with potential Conquest customers. So I'd say that's roughly about 1/3, 1/3, 1/3.Â

[Operator]

Our next question is from Devin Dodge with BMO Capital Markets.

[Devin Dodge, analyst]

A lot of my questions have been answered. Just one for me, probably for Greg, but there's a pretty sizeable increase in working capital in the quarter. How should we be thinking about working capital in Q4 and that outlook for full year free cash flow?

[Greg Palaschuk, executive]

Sure. Yes. So throughout the business, and we've got quite a bit of growth across the complex. We've got a lot of backlog that's getting closer to delivery here through the end of the year and to the start of next year. And so you've got that, which is at an elevated level. Also service work in progress, very healthy accounts receivable also. So you've got the working capital use there. But normal seasonality, we would expect strong free cash flow in the fourth quarter. And then as we highlighted at Investor Day, we recognise that there's work to do to increase invested capital turns and velocity, and we've got plans in place in each of the regions, and those teams are working away and mobilising to make that a big priority in 2024 and 2025 as discussed at Investor Day.

[Devin Dodge, analyst]

Okay. And just a quick follow-up. When we think about 2024, do you think -- is it reasonable to assume that you guys could get to that 50% free cash flow conversion you've talked about previously?

[Greg Palaschuk, executive]

So I think it will depend on the growth trajectory. Of course, that's a more steady growth environment. That would be the target. We'll see how it ultimately plays out in terms of end markets. As we highlighted at Investor Day, we see mobilisation in Chile, steady growth in Canada and resilience in the U.K. So that's overall a pretty steady market. Those are the sorts of markets where that conversion makes good sense, but we'll have to ultimately see how that plays out.

[Operator]

[Operator Instructions] The next question is from Michael Doumet with Scotiabank.

[Michael Doumet, analyst]

The first question, I guess, just... Following up on some of the discussion with Jacob and Devon. Just on inventories, you've invested about $1.2 billion in inventory since the beginning of 2022, and I understand that unit costs have risen and demand is also strong. But just trying to get a sense, given supply chains are easing, how far you are from where you think inventory should be to support this level of sales.

[Kevin Parkes, executive]

Yes. So I mean, I'll give you quit the Investor Day, Michael, we put a pretty explicit invested capital target out there, of which a good proportion of that will come from inventory inventory optimisation we improved our invested capital turns in the quarter, but the growth we're still growing at a healthier rate than we've described in the long-term outlook in our Investor Day. So there's no doubt that we will see inventory levels optimizing. We see that already happening in Construction Equipment. But our Power Systems business is up 50% year-over-year. It's another key part of our strategic plan. There's some long lead time and long large engines in that. And of course, the mining -- the mining equipment is very lumpy in terms of how it comes to us and how we get out to customers. And it's not as fluid as we would have experienced in the past and certainly not as fluid as we aim to be in the future. And so I think it's a big part of our strategic objective, and you can expect us to focus a lot on that as we move forward and improve the velocity that we're seeing in there. But we're more concerned with the velocity than we are at the absolute level because the absolute level supports the growth that we're seeing in the company.

[Michael Doumet, analyst]

That's helpful. And then with the exception of Argentina, I mean, I read your commentary on the regional outlook is largely unchanged. I'm just curious, given how interest rates have moved up in the last few months, whether your visibility into 2024 is better or worse than your visibility into 2023 at this point of last year? Just trying to get a sense for that, please.

[Kevin Parkes, executive]

I would say it is definitely, Michael. I would say our visibility into next year right now in all regions. And I would say, if you think about the main sector that's impacted by the higher interest rates would be construction equipment. And I feel better about construction equipment than I did even in the summer. It's normalizing. It's competitive. But as I said, we delivered more large construction equipment in September in South America than we ever had by some considerable distance, some had. And so the teams are absolutely focused on winning market share regardless of the condition. Our market share levels offer us an opportunity regardless of the market conditions. And so I would say we're optimistic. And as we think about the Investor Day commentary, particularly in Canada, our expectations or outlook would be at the top end of that range for 2024.

[Operator]

This concludes the question-and-answer session. I'd like to turn the conference back over to Greg Palaschuk for any closing remarks.

[Greg Palaschuk, executive]

Great. Thank you, operator. This concludes our question-and-answer session. I'd like to -- well, and thank you, everybody, for participating, and I hope you have a safe day.

[Operator]

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