Business strengthening continues – Revenue
increase by 32%
TORONTO and MARSEILLE,
France, May
7, 2018 /CNW/ - Foraco International SA (TSX:FAR) (the
"Company" or "Foraco"), a leading global provider of mineral
drilling services, today released its unaudited financial results
for the first quarter 2018. All figures are expressed in US Dollars
(US$) unless otherwise indicated.
"Q1 2018 revenue is the strongest first quarter since 2014 and
the overall strongest quarter since Q2 2015. This performance is a
direct consequence of our solid order book, which we reported at
year end while North America,
Australia and Russia were the most active regions. We expect
others will soon follow as we hope this consolidation part of the
cycle will continue in the coming quarters and eventually bring the
other regions back to good levels of activity," commented
Daniel Simoncini, Chairman and
Co-CEO of Foraco. "Our utilization rate increased to 40%, up 5%
compared to one year earlier, but mainly driven by improvements in
countries where the average revenue per rig is high. We anticipated
this recovery of activity and are pleased to report that our
operational teams responded efficiently to this challenge, which
contributed to the performance of our contracts."
"The combination of the positive factors reported above is
reflected in the upward trend of our Q1 profitability, usually
affected by the adverse seasonal impact of the start-up of new
projects. Our revenue increased by 32% and our EBITDA by 73%
compared to the same quarter last year," added Jean-Pierre
Charmensat, Co-CEO and Chief Financial Officer. "Due to seasonality
and the improvement in activity, our working capital requirements
increased by US$ 7.3 million during
the quarter. This should progressively reverse during the year and
the Company's financial metrics should then fully benefit from the
operational performance. We are confident that the positive trends
will continue, and our focus will be to remain cautious on CAPEX
and cash management in order to consolidate our financial position.
On April 26, 2018, in order to
finance the increased activity, the Company drew an additional €2.5
million from its main lenders."
Three months Q1 2018 Highlights – Q1 2018
Revenue
- Q1 2018 revenue amounted to US$ 40.0
million compared to US$ 30.3
million in Q1 2017, an increase of 32%. Mining activity
increased by 37%, whereas the water activity decreased by 30%.
Profitability
- The Q1 2018 gross margin including depreciation within cost of
sales was US$ 3.0 million (or 7.4% of
revenue) compared to US$ 1.5 million
(or 5.0% of revenue) in Q1 2017. This improvement is mainly due to
increased revenue, which generated a better absorption of fixed
operational costs.
- During the quarter, the EBITDA amounted to US$ 2.3 million compared to US$ 1.3 million for the same quarter last
year.
Net debt
- The net debt was US$ 135.3
million as at March 31, 2018
compared to US$ 122.7 million as at
December 31, 2017. The reduction in
cash available is mainly attributable to higher working capital
requirements linked to the increased activity.
Financial results
Revenue
|
(In thousands of US$)
- (unaudited)
|
Q1
2018
|
%
change
|
Q1
2017
|
Reporting
segment
|
|
|
|
Mining
|
38,393
|
37%
|
28,008
|
Water
|
1,615
|
-30%
|
2,316
|
Total
revenue
|
40,008
|
32%
|
30,324
|
|
|
|
|
Geographic
region
|
|
|
|
Europe, Middle East
and Africa
|
10,267
|
-10%
|
11,360
|
South
America
|
7,939
|
7%
|
8,469
|
North
America
|
15,836
|
87%
|
7,404
|
Asia
Pacific
|
5,966
|
93%
|
3,091
|
Total
revenue
|
40,008
|
32%
|
30,324
|
Q1 2018 revenue amounted to US$ 40.0
million compared to US$ 30.3
million in Q1 2017, an increase of 32%.
In EMEA, revenue decreased by 10% to US$
10.3 million in Q1 2018 from US$ 11.4
million in Q1 2017, as a result of the lower activity in
France and in Africa partially compensated by a higher level
of activity in Russia.
Revenue in South America
amounted to US$ 7.9 million in
Q1 2018 (US$ 7.4 million in Q1
2017), an increase of 7% mainly due to phasing of activity in
Brazil partially compensated by
increased activity in Chile.
Revenue in North America
strongly increased by 87% to US$ 15.4
million in Q1 2018 from US$ 8.5
million in Q1 2017. Compared to last year, the Company
benefited from new contracts with major companies and junior
companies and increased activity on ongoing contracts in an overall
growing market.
In Asia Pacific, Q1 2018
revenue amounted to US$ 6.0 million,
an increase of 93% mainly due to new contracts initiated over the
last six months in Australia.
Gross profit
|
(In thousands of US$)
- (unaudited)
|
Q1
2018
|
%
change
|
Q1
2017
|
Reporting
segment
|
|
|
|
Mining
|
2,674
|
83%
|
1,460
|
Water
|
297
|
560%
|
45
|
Total gross
profit / (loss)
|
2,971
|
97%
|
1,505
|
The Q1 2018 gross margin including depreciation within cost of
sales was US$ 3.0 million (or 7.4% of
revenue) compared to US$ 1.5 million
(or 5.0% of revenue) in Q1 2017. This improvement is mainly due to
increased revenue, which generated a better absorption of fixed
operational costs. Contracts generally performed as expected.
Selling, General and Administrative Expenses
(In thousands of US$)
- (unaudited)
|
Q1
2018
|
%
change
|
Q1
2017
|
Selling, general and
administrative expenses
|
5,171
|
5%
|
4,916
|
The increase in SG&A was limited to 5%, to be compared to a
32% increase in revenue.
Operating result
|
(In thousands of US$)
- (unaudited)
|
Q1
2018
|
%
change
|
Q1
2017
|
Reporting
segment
|
|
|
|
Mining
|
(1,981)
|
n/a
|
(3,130)
|
Water
|
(219)
|
n/a
|
(330)
|
Total operating
profit / (loss)
|
(2,200)
|
n/a
|
(3,460)
|
The operating loss was US$ (2.2)
million, a US$ 1.3 million
improvement as a result of increased gross margin.
Financial position
The following table provides a summary of the Company's cash
flows for Q1 2018 and Q1 2017:
(In thousands of
US$)
|
Q1
2018
|
Q1
2017
|
|
|
|
Cash generated by
operations before working capital requirements
|
2,245
|
1,303
|
|
|
|
Working capital
requirements
|
(7,295)
|
833
|
Income tax paid
(received)
|
6
|
(581)
|
Purchase of equipment
in cash
|
(2,289)
|
(1,403)
|
|
|
|
Free Cash Flow
before debt servicing
|
(7,333)
|
152
|
|
|
|
Debt
variance
|
2,180
|
1,772
|
Interests
paid
|
(886)
|
(769)
|
Acquisition of
treasury shares
|
(16)
|
(11)
|
|
|
|
Net cash generated
/ (used in) financing activities
|
1,278
|
992
|
|
|
|
Net cash
variation
|
(6,055)
|
1,144
|
|
|
|
Foreign exchange
differences
|
199
|
116
|
|
|
|
Variation in cash
and cash equivalents
|
(5,856)
|
1,260
|
In Q1 2018, the cash generated from operations before working
capital requirements amounted to US 2.2 million compared to
US$ 1.3 in Q1 2017.
Due to seasonality and a solid activity in the second part of
the quarter, the level of working capital requirements was
US$ 7.3 million. This level of
capital requirements should progressively reverse going
forward.
During the quarter, Capex amounted to US$
2.3 million in cash, compared to US$
1.4 million in cash in Q1 2017. The total rig count remains
unchanged at 302.
As a result of the working capital requirements and the Capex,
free cash flow before debt servicing was US$
(7.3) million in Q1 2018 compared to US$ 0.2 million in Q1 2017.
As at March 31, 2018, cash and
cash equivalents totaled US$ 8.7
million compared to US$ 14.6
million as at December 31,
2017.
As at March 31, 2018, net debt
amounted to US$ 135.3 million
(US$ 122.7 million as at December 31, 2017).
Bank guarantees as at March 31,
2018 totaled US$ 3.2 million
compared to US$ 4.0 million as at
December 31, 2017. The Company
benefits from a confirmed contract guarantee line of €12.7 million
(US$ 15.6 million).
Going concern and impairment testing
The positive trend in commercial activity reported over the last
few quarters gains strength. However, current economic conditions
in the industry still make forecasting uncertain, and there is the
possibility that the Company's actual operating performance during
the coming year may be different from expectations. Going concern
is assessed based on internal forecasts and projections that take
into account reasonably possible changes in the Company's operating
performance.
On May 11, 2017, the Company
completed its debt reorganization consisting of (i) a new
money injection of €23 million (US$ 25
million) in the form of bonds with a 5-year term, including
€18 million (US$ 19.8 million)
available at closing, and (ii) the postponing of the
instalment of most of the Company's existing long-term financing
which takes the form of 5-year term subordinated bonds.
As part of the debt reorganization, certain key financial
covenants were set, including minimum cash, leverage ratio and
limitation to capital expenditure. A waiver was obtained to offset
the negative impact of the exchange rates and of the working
capital requirements linked to the increased activity. As at
March 31, 2018, the Company met its
covenants.
On the basis of the above, the Company believes that it will
have adequate financial resources to continue in operation for a
period of at least twelve months. Accordingly, the Company
continues to adopt the going concern basis in preparing its
financial statements.
Currency exchange rates
The exchange rates for the periods under review are provided in
the Management's Discussion and Analysis of Q1 2018.
Non-IFRS measures
EBITDA represents Net income before interest expense, income
taxes, depreciation, amortization and non-cash share based
compensation expenses. EBITDA is a non-IFRS quantitative measure
used to assist in the assessment of the Company's ability to
generate cash from its operations. The Company believes that the
presentation of EBITDA is useful to investors because it is
frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in the drilling
industry. EBITDA is not defined in IFRS and should not be
considered to be an alternative to Profit for the period or
Operating profit or any other financial metric required by such
accounting principles.
Net debt corresponds to the current and non-current portions of
borrowings and the consideration payable related to acquisitions,
net of cash and cash equivalents.
Reconciliation of the EBITDA is as follows:
(In thousands of
US$)
(unaudited)
|
Q1
2018
|
Q1
2017
|
|
|
|
Operating profit /
(loss)
|
(2,200)
|
(3,460)
|
Depreciation
expense
|
4,413
|
4,734
|
Non-cash employee
share-based compensation
|
45
|
29
|
EBITDA
|
2,258
|
1,303
|
Outlook
The Company's business strategy is to actively prepare for the
next growth phase of the metallic commodities cycle in the best
possible conditions through the development and optimization of its
services offered across its range of geographical regions, industry
sectors, commodities and customers. The Company expects it will
execute its strategy primarily through organic growth in the near
future.
Conference call and webcast
On May 7, 2018, Company Management
will conduct a conference call at 9:00 am
ET to review the financial results. The call will be hosted
by Daniel Simoncini, Chairman and
co-CEO, and Jean-Pierre Charmensat, co-CEO and CFO.
You can join the call by dialing 1-888-231-8191 or
1-647-427-7450. You will be put on hold until the conference call
begins. A live audio webcast of the Conference Call will also be
available through:
https://event.on24.com/wcc/r/1669527/1133C26A83E925A577FB45B5756921AD.
An archived replay of the webcast will be available for 90
days.
About Foraco International SA
Foraco International SA (TSX: FAR) is a leading global mineral
drilling services company that provides a comprehensive and
reliable service offering in mining and water projects. Supported
by its founding values of integrity, innovation and involvement,
Foraco has grown into the third largest global drilling enterprise
with a presence in 22 countries across five continents. For more
information about Foraco, visit www.foraco.com.
"Neither TSX Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Exchange) accepts
responsibility for the adequacy or accuracy of this release."
Caution concerning forward-looking statements
This document may contain "forward-looking statements" and
"forward-looking information" within the meaning of applicable
securities laws. These statements and information include
estimates, forecasts, information and statements as to Management's
expectations with respect to, among other things, the future
financial or operating performance of the Company and capital and
operating expenditures. Often, but not always, forward-looking
statements and information can be identified by the use of words
such as "may", "will", "should", "plans", "expects", "intends",
"anticipates", "believes", "budget", and "scheduled" or the
negative thereof or variations thereon or similar terminology.
Forward-looking statements and information are necessarily based
upon a number of estimates and assumptions that, while considered
reasonable by Management, are inherently subject to significant
business, economic and competitive uncertainties and contingencies.
Readers are cautioned that any such forward-looking statements and
information are not guarantees and there can be no assurance that
such statements and information will prove to be accurate and
actual results and future events could differ materially from those
anticipated in such statements. Important factors that could cause
actual results to differ materially from the Company's expectations
are disclosed under the heading "Risk Factors" in the Company's
Annual Information Form dated April 3,
2018, which is filed with Canadian regulators on SEDAR
(www.sedar.com). The Company expressly disclaims any intention or
obligation to update or revise any forward-looking statements and
information whether as a result of new information, future events
or otherwise. All written and oral forward-looking statements and
information attributable to Foraco or persons acting on our behalf
are expressly qualified in their entirety by the foregoing
cautionary statements.
SOURCE Foraco International SA