Revenue increase by 25% YOY - Business
strengthening confirmed
TORONTO and MARSEILLE, France, Aug.
2, 2018 /CNW/ - Foraco International SA (TSX:FAR) (the
"Company" or "Foraco"), a leading global provider of mineral
drilling services, released its unaudited financial results for the
second quarter 2018 today. All amounts are denominated in US
Dollars (US$) unless otherwise indicated.
"With US$46 million in revenue, Q2
2018 is our strongest quarter since Q3 2014, confirming the
positive trend observed throughout 2017 and Q1 2018. This
performance is primarily due to the continued growth in
Canada, Russia and Australia. In other regions where we operate,
the market recovery is still in its initial phase which gives us
opportunities for future developments." commented Daniel Simoncini, Chairman and Co-CEO of Foraco.
"Our utilization rate increased to 43% during the quarter, reaching
its highest level since 2013, but still significantly below the
rates reported before the industry downturn. In Q2, we are pleased
to report the satisfactory performance of our contracts which
confirms the agility of our organization and our ability to adapt
to an increasing demand and changing environments."
"In Q2 2018, we recorded an EBITDA of US$5.2 million, a 44% increase compared to Q2
2017. We believe that we can further increase our margins through
improved productivity, recovery in selling prices and a better
absorption of our fixed operational costs. Despite the activity
increase recorded in Q2 compared to Q1 2018, we managed to reduce
our working capital requirements by US$3
million during the quarter and we are still expecting
further improvements before the end of the year given the seasonal
nature of our activities." added Jean-Pierre Charmensat, Co-CEO and
Chief Financial Officer. "We invested US$3.5
million in CAPEX linked to new contracts and recorded a
positive free cash flow during the quarter. Our net debt decreased
from US$135 million as at
March 31, 2018 to US$127 million as at June
30, 2018, a US$8 million
improvement due to the impact of foreign exchange and to the
positive free cash flow generated during the quarter."
Q2 2018 Highlights
Revenue
- Q2 2018 revenue amounted to US$ 45.7
million compared to US$ 36.6
million in Q2 2017, an increase of 25%.
- The utilization rate was 43% in Q2 2018 (40% in Q1 2018)
compared to 39% in Q2 2017.
Profitability
- The Q2 2018 gross margin including depreciation within cost of
sales was US$ 6.2 million (or 13.5%
of revenue) compared to US$ 4.1
million (or 11.1% of revenue) in Q2 2017, this improvement
is mainly due to increased revenue and performance on contracts, as
well as a better absorption of fixed operational costs.
- During the quarter, EBITDA amounted to US$ 5.2 million compared to US$ 3.6 million for the same quarter last
year.
H1 2018 Highlights
Revenue
- H1 2018 revenue amounted to US$ 85.7
million compared to US$ 66.9
million in H1 2017, an increase of 28%.
Profitability
- H1 2018 gross margin including depreciation within cost of
sales was US$ 9.1 million (or 10.7%
of revenue) compared to US$ 5.6
million (or 8.3% of revenue) in H1 2017. This improvement is
mainly due to performance on contracts and a better absorption of
fixed operational costs linked to the revenue increase.
- During the semester, EBITDA amounted to US$ 7.5 million compared to US$ 4.9 million for the same period last
year.
Net debt
- The net debt was US$ 127.2
million as at June 30, 2018
compared to US$ 122.7 million as at
December 31, 2017. The increase is
mainly attributable to higher working capital requirements linked
to the increased activity.
Selected financial data
(In thousands of
US$)
(unaudited)
|
Three-month
period ended
June 30,
|
Six-month
period ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
45,694
|
|
36,567
|
|
85,701
|
|
66,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit /
(loss) (1)
|
|
6,182
|
|
4,050
|
|
9,153
|
|
5,555
|
As a percentage of
sales
|
|
13.5%
|
|
11.1%
|
|
10.7%
|
|
8.3%
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
5,193
|
|
3,610
|
|
7,451
|
|
4,912
|
As a percentage of
sales
|
|
11.4%
|
|
9.9%
|
|
8.7%
|
|
7.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit /
(loss)
|
|
1,044
|
|
(1,088)
|
|
(1,156)
|
|
(4,548)
|
As a percentage of
sales
|
|
2.3%
|
|
-3.0%
|
|
-1.3%
|
|
-6.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss)
for the period
|
|
(1,466)
|
|
(2,206)
|
|
(6,140)
|
|
(5,992)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
Equity holders of the
Company
|
|
(1,782)
|
|
(2,068)
|
|
(5,946)
|
|
(3,380)
|
Non-controlling
interests
|
|
316
|
|
(138)
|
|
(194)
|
|
(544)
|
|
|
|
|
|
|
|
|
|
EPS (in US
cents)
|
|
|
|
|
|
|
|
|
Basic
|
|
(1.99)
|
|
(2.31)
|
|
(6.63)
|
|
(6.08)
|
Diluted
|
|
(1.99)
|
|
(2.31)
|
|
(6.63)
|
|
(6.08)
|
(1)
|
This line item
includes amortization and depreciation expenses related to
operations
|
Financial results
Revenue
(In thousands of US$)
- (unaudited)
|
Q2 2018
|
|
%
change
|
|
Q2
2017
|
|
H1
2018
|
|
%
change
|
|
H1
2017
|
Reporting
segment
|
|
|
|
|
|
|
|
|
|
|
|
Mining
|
44,696
|
|
31%
|
|
34,097
|
|
83,089
|
|
34%
|
|
62,105
|
Water
|
998
|
|
-60%
|
|
2,470
|
|
2,612
|
|
-45%
|
|
4,796
|
Total
revenue
|
45,694
|
|
25%
|
|
36,567
|
|
85,701
|
|
28%
|
|
66,891
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic
region
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
and Africa
|
13,157
|
|
-3%
|
|
13,615
|
|
23,423
|
|
-6%
|
|
24,976
|
South
America
|
8,104
|
|
0%
|
|
8,071
|
|
16,043
|
|
4%
|
|
15,475
|
North
America
|
15,804
|
|
64%
|
|
9,661
|
|
31,640
|
|
75%
|
|
18,129
|
Asia
Pacific
|
8,629
|
|
65%
|
|
5,220
|
|
14,595
|
|
76%
|
|
8,311
|
Total
revenue
|
45,694
|
|
25%
|
|
36,567
|
|
85,701
|
|
28%
|
|
66,891
|
Q2 2018
Q2 2018 revenue amounted to US$ 45.7
million compared to US$ 36.6
million in Q2 2017, an increase of 25%.
In EMEA, revenue decreased by 3%, to US$
13.2 million in Q2 2018 from US$ 13.6
million in Q2 2017, as a result of the decreased activity in
France and in Africa, partially compensated by a higher
level of activity in Russia.
Revenue in South America
remained flat at US$ 8.1 million in
Q2 2018 (US$ 8.1 million in Q2 2017).
In Chile, the increased activity
was generated with new contracts for major clients. This increase
was compensated by a slowdown in activity with our major clients in
Brazil.
Revenue in North America
strongly increased by 64% to US$ 15.8
million in Q2 2018 from US$ 9.7
million in Q2 2017. Compared to last year, the Company
continued to benefit from new contracts with major companies and
junior companies and increased activity on ongoing contracts in an
overall growing market.
In Asia Pacific, Q2 2018
revenue amounted to US$ 8.6 million,
an increase of 65% mainly due to new contracts initiated in the
second half of 2017 in Australia.
H1 2018
H1 2018 revenue amounted to US$ 85.7
million compared to US$ 66.9
million in H1 2017, an increase of 28%.
In EMEA, revenue decreased by 6%, to US$
23.4 million in H1 2018 from US$ 25.0
million in H1 2017, as a result of the decreased activity in
France and in Africa, partially compensated by a higher
level of activity in Russia.
Revenue in South America
slightly increased to US$ 16.0
million in H1 2018 (US$ 15.5
million in H1 2017). The increase of activity in
Chile was compensated by the
decrease of activity in Brazil.
Revenue in North America
strongly increased by 75% to US$ 31.6
million in H1 2018 from US$ 18.1
million in H1 2017. Compared to last year, the Company
benefited from new contracts with major and junior companies and
increased activity on ongoing contracts in an overall growing
market.
In Asia Pacific, H1 2018
revenue amounted to US$ 14.6 million,
an increase of 76% mainly due to new contracts initiated in the
second half of 2017 in Australia.
Gross
profit
(In thousands of US$)
-
(unaudited)
|
Q2 2018
|
|
%
change
|
|
Q2
2017
|
|
H1
2018
|
|
%
change
|
|
H1
2017
|
Reporting
segment
|
|
|
|
|
|
|
|
|
|
|
|
Mining
|
6,440
|
|
64%
|
|
3,928
|
|
9,114
|
|
69%
|
|
5,388
|
Water
|
(258)
|
|
n/s
|
|
122
|
|
39
|
|
-77%
|
|
167
|
Total gross profit
/ (loss)
|
6,182
|
|
53%
|
|
4,050
|
|
9,153
|
|
65%
|
|
5,555
|
Q2 2018
The Q2 2018 gross margin including depreciation within cost of
sales was US$ 6.2 million (or 13.5%
of revenue) compared to US$ 4.1
million (or 11.1% of revenue) in Q2 2017. This improvement
is mainly due to increased revenue and performance of contracts, as
well as a better absorption of fixed operational costs.
H1 2018
H1 2018 gross margin including depreciation within cost of sales
increased by 65% compared to the same period last year. As a
percentage of revenue, the gross margin increased from 8,3% to
10.7%. This improvement is mainly due to performance on contracts
and a better absorption of fixed operational costs linked to the
revenue increase.
Selling, General and Administrative Expenses
(In thousands of US$)
- (unaudited)
|
Q2
2018
|
|
%
change
|
|
Q2
2017
|
|
H1
2018
|
|
%
change
|
|
H1
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
expenses
|
5,138
|
|
5%
|
|
4,882
|
|
10,309
|
|
5%
|
|
9,798
|
Q2 2018
SG&A increased by US$ 0.2
million compared to the same quarter last year. As a
percentage of revenue, SG&A decreased from 13.4% in Q2 2017 to
11.2% in Q2 2018.
H1 2018
SG&A increased by US$ 0.5
million compared to the same quarter last year. As a
percentage of revenue, SG&A decreased from 14.6% in H1 2017 to
12.0% in H1 2018..
Operating result
(In thousands of US$)
-
(unaudited)
|
Q2 2018
|
|
% change
|
|
Q2 2017
|
|
H1 2018
|
|
%
change
|
|
H1 2017
|
Reporting
segment
|
|
|
|
|
|
|
|
|
|
|
|
Mining
|
1,414
|
|
n/a
|
|
(880)
|
|
(567)
|
|
n/a
|
|
(4,010)
|
Water
|
(370)
|
|
n/a
|
|
(208)
|
|
(589)
|
|
n/a
|
|
(538)
|
Total gross profit
/ (loss)
|
1,044
|
|
n/a
|
|
(1,088)
|
|
(1,156)
|
|
n/a
|
|
(4,548)
|
Q2 2018
The operating profit was US$ 1.0
million, a US$ 2.1 million
improvement as a result of increased gross margin.
H1 2018
The operating loss was US$ (1.2)
million, a US$ 3.4 million
improvement compared to H1 2017 as a result of increased gross
margin.
Financial position
The following table provides a summary of the Company's cash
flows for H1 2018 and H1 2017:
(In thousands of
US$)
|
H1
2018
|
|
H1
2017
|
|
|
|
|
Cash generated by
operations before working capital requirements
|
7,564
|
|
4,912
|
|
|
|
|
Working capital
requirements
|
(4,369)
|
|
(2,646)
|
Income tax paid
(received)
|
(536)
|
|
(229)
|
Purchase of equipment
in cash
|
(5,823)
|
|
(3,596)
|
|
|
|
|
Free Cash Flow
before debt servicing
|
(3,164)
|
|
(1,559)
|
|
|
|
|
Debt
variance
|
2,639
|
|
14,822
|
Interests
paid
|
(1,914)
|
|
(2,532)
|
Acquisition of
treasury shares
|
(50)
|
|
(27)
|
|
|
|
|
Net cash generated
/ (used in) financing activities
|
675
|
|
12,263
|
|
|
|
|
Net cash
variation
|
(2,489)
|
|
10,704
|
|
|
|
|
Foreign exchange
differences
|
(728)
|
|
425
|
|
|
|
|
Variation in cash
and cash equivalents
|
(3,217)
|
|
11,129
|
In H1 2018, the cash generated from operations before working
capital requirements amounted to US 7.6 million compared to
US$ 4.9 million in H1 2017.
Due to seasonality and a strong activity in the first semester
of 2018, the level of working capital requirements was
US$ 4.4 million (US$ 2.6 million in 2017). This level of capital
requirements should progressively reverse going forward.
During the period, Capex amounted to US$
5.8 million in cash, compared to US$
3.6 million in cash in H1 2017. The Company acquired five
new rigs during the period linked to new contracts signed. Five
rigs were retired from service, the total rig count remains at
302.
As a result of the working capital requirements and the Capex,
free cash flow before debt servicing was US$
(3.2) million in H1 2018 compared to US$ (1.6) million in H1 2017.
As at June 30, 2018, cash and cash
equivalents totaled US$ 11.4 million
compared to US$ 14.6 million as at
December 31, 2017. Cash and cash
equivalents are mainly held at or invested within top tier
financial institutions.
As at June 30, 2018, net debt
amounted to US$ 127.2 million
(US$ 135.3 million as at March 31, 2018 and US$
122.7 million as at December 31,
2017).
Bank guarantees as at June 30,
2018 totaled US$ 1.9 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$ 14.7 million).
Going concern and impairment testing
Going concern is assessed based on internal forecasts and
projections that take into account the trend in the business in
which the Company operates and its capacity to address the market
and deliver its services. 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.
On May 11, 2017, the Company
completed its debt reorganization consisting (i) in 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) in 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. On April 26, 2018, the Company drew an additional €
2.5 million, corresponding to a portion of the second tranche of
the bonds amounting to € 5.0 million. € 2.5 million remains
available for drawdown until the end of 2018.
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 in March
to offset the negative impact of the exchange rates and of the
working capital requirements linked to the increased activity. As
at June 30, 2018, the Company met its
covenants. Nothing indicates that the Company will not respect its
covenants going forward within the next 12 month period.
Currency exchange rates
The exchange rates for the periods under review are provided in
the Management's Discussion and Analysis of Q2 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 EBITDA is as follows:
(In thousands of
US$)
(unaudited)
|
Q2
2018
|
|
Q2
2017
|
|
H1
2018
|
|
H1
2017
|
Operating profit /
(loss)
|
1,044
|
|
(1,088)
|
|
(1,156)
|
|
(4,548)
|
Depreciation
expense
|
4,106
|
|
4,669
|
|
8,519
|
|
9,403
|
Non-cash employee
share-based compensation
|
44
|
|
29
|
|
89
|
|
58
|
EBITDA
|
5,193
|
|
3,610
|
|
7,451
|
|
4,912
|
Outlook
The Company's business strategy is to actively participate in
the current growth phase of the metallic commodities cycle 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 August 2, 2018, Company
Management will conduct a conference call at 10:00 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/1806500/8FE9BF835A980CA7BAD903FF735D1B9A
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