Increased revenue by 37% and EBITDA by 88%
YoY
TORONTO and MARSEILLE, France, Nov. 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 third quarter 2018 today. All
amounts are denominated in US Dollars (US$) unless otherwise
indicated.
"With US$46 million in revenue, a
37% increase quarter over quarter, Q3 2018 confirms the positive
trend observed since 2017. On a year to date basis, the 2018
revenue exceeds the comparative period of 2017 by 31%. In the
quarter, high growth regions include Canada, Australia, Russia and Chile." commented Daniel Simoncini, Chairman and Co-CEO of Foraco.
"Our utilization rate also increased to 46% this quarter, compared
to 35% in Q3 2017. During the low part of the cycle, we continued
to enhance our technical capability, maintaining our fleet to a
high standard and leading industry technological changes, such as
the implementation of remote control rigs. This together with our
strategy to serve major mining companies in their main countries of
operation and retain key employees throughout the industry cycles
provide us a competitive advantage in the current market
upturn."
"In Q3 2018, we recorded an EBITDA of US$6.3 million, an 88% increase compared to Q3
2017. Our contracts are delivering their expected margins in all
countries. We managed to keep our SG&A expenses stable despite
a significant increase in activity. Our EBIT is positive at
US$2.1 million this quarter and is
also positive on a year to date basis. We believe that there is
scope for even greater progress, given that selling prices have not
yet recovered and we have not reached our full capacity" added
Jean-Pierre Charmensat, Co-CEO and Chief Financial Officer. "The
activity increase generates additional requirements in working
capital and CAPEX. We invested US$3.6
million in relation to new contracts. As a result, our net
debt as at September 30, 2018 amounts
to US$131.0 million. We continue to
focus on the generation of operating cash flow and the optimization
of our working capital."
Q3 2018 Highlights
Revenue
- Q3 2018 revenue amounted to US$ 46.4
million compared to US$ 33.9
million in Q3 2017, an increase of 37%.
- The utilization rate was 46% in Q3 2018 (43% in Q2 2018 and 40%
in Q1 2018) compared to 35% in Q3 2017.
Profitability
- The Q3 2018 gross margin including depreciation within cost of
sales was US$ 7.3 million (or 15.7%
of revenue) compared to US$ 4.2
million (or 12.5% of revenue) in Q3 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$ 6.3 million (or 13.5% of revenue), compared
to US$ 3.3 million (or 9.8% of
revenue) for the same quarter last year.
YTD Q3 2018 Highlights
Revenue
- YTD Q3 2018 revenue amounted to US$
132.1 million compared to US$ 100.8
million in YTD Q3 2018, an increase of 31%.
Profitability
- YTD Q3 2018 gross margin including depreciation within cost of
sales was US$ 16.4 million (or 12.4%
of revenue) compared to US$ 9.8
million (or 9.7% of revenue) in YTD Q3 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 nine-month period, EBITDA amounted to US$ 13.7 million (or 10.4% of revenue) compared
to US$ 8.2 million (or 8.2% of
revenue) for the same period last year.
Net debt
- The net debt was US$ 131.0
million as at September 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, partially
compensated by a favorable exchange rate.
Selected financial data
(In thousands of
US$)
(unaudited)
|
|
|
Three-month period
ended September
30,
|
|
|
Nine-month period ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
46,353
|
|
33,868
|
|
|
132,055
|
|
100,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
(1)
|
|
|
7,286
|
|
4,233
|
|
|
16,439
|
|
9,788
|
|
As a percentage of
sales
|
|
|
15.7%
|
|
12.5%
|
|
|
12.4%
|
|
9.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
6,260
|
|
3,335
|
|
|
13,710
|
|
8,247
|
|
As a percentage of
sales
|
|
|
13.5%
|
|
9.8%
|
|
|
10.4%
|
|
8.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit /
(loss)
|
|
|
2,089
|
|
(1,283)
|
|
|
933
|
|
(5,831)
|
|
As a percentage of
sales
|
|
|
4.5%
|
|
-3.8%
|
|
|
0.7%
|
|
-5.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss)
for the period
|
|
|
(855)
|
|
(2,717)
|
|
|
(6,995)
|
|
(8,710)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the
Company
|
|
|
(737)
|
|
(2,963)
|
|
|
(6,683)
|
|
(8,412)
|
|
Non-controlling
interests
|
|
|
(118)
|
|
246
|
|
|
(312)
|
|
(298)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS (in US
cents)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.82)
|
|
(3.31)
|
|
|
(7.45)
|
|
(9.38)
|
|
Diluted
|
|
|
(0.82)
|
|
(3.31)
|
|
|
(7.45)
|
|
(9.38)
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
|
|
|
|
(1) This
line item includes amortization and depreciation expenses related
to operations
|
Financial results
Revenue
(In thousands of US$)
- (unaudited)
|
Q3
2018
|
%
change
|
Q3
2017
|
YTD
Q3
2018
|
%
change
|
YTD
Q3
2017
|
Reporting
segment
|
|
|
|
|
|
|
Mining
|
45,285
|
38%
|
32,750
|
128,374
|
35%
|
94,855
|
Water
|
1,068
|
-4%
|
1,118
|
3,681
|
-38%
|
5,904
|
Total
revenue
|
46,353
|
37%
|
33,868
|
132,055
|
31%
|
100,759
|
|
|
|
|
|
|
|
Geographic
region
|
|
|
|
|
|
|
Europe, Middle East
and Africa
|
10,094
|
13%
|
8,969
|
33,517
|
-1%
|
33,944
|
South
America
|
7,832
|
14%
|
6,884
|
23,874
|
7%
|
22,359
|
North
America
|
19,274
|
72%
|
11,181
|
50,916
|
74%
|
29,311
|
Asia
Pacific
|
9,153
|
34%
|
6,834
|
23,748
|
57%
|
15,145
|
Total
revenue
|
46,353
|
37%
|
33,868
|
132,055
|
31%
|
100,759
|
Q3 2018
Q3 2018 revenue amounted to US$ 46.4
million compared to US$ 33.9
million in Q3 2017, an increase of 37%.
In EMEA, revenue increased by 13%, to US$
10.1 million in Q3 2018 from US$ 9.0
million in Q3 2017, as a result of a higher level of
activity in Russia, partially
compensated by a decreased activity in France and in Africa.
Revenue in South America
increased by 14% at US$ 7.8 million
in Q3 2018 (US$ 6.9 million in Q3
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 72% to US$ 19.3
million in Q3 2018 from US$ 11.1
million in Q3 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, Q3 2018
revenue amounted to US$ 9.2 million,
an increase of 34% mainly due to new contracts initiated in the
second half of 2017 in Australia.
YTD Q3 2018
YTD Q3 2018 revenue amounted to US$ 132.1
million compared to US$ 100.8
million in YTD Q3 2017, an increase of 31%.
In EMEA, revenue decreased by 1%, to US$
33.5 million in YTD Q3 2018 from US$
33.9 million in YTD Q3 2017, as a result of the decreased
activity in France and in
Africa, only partially compensated
by a higher level of activity in Russia.
Revenue in South America
increased by 7% to US$ 23.9 million
in YTD Q3 2018 (US$ 22.4 million in
YTD Q3 2017). The increase of activity in Chile more than compensated the slowdown in
Brazil.
Revenue in North America
strongly increased by 74% to US$ 50.9
million in YTD Q3 2018 from US$ 29.3
million in YTD Q3 2017. Compared to last year, the Company
gained new contracts with major and junior companies and increased
activity on ongoing contracts in an overall growing market.
In Asia Pacific, YTD Q3 2018
revenue amounted to US$ 23.7 million,
an increase of 57% mainly due to new contracts initiated in the
second half of 2017 in Australia.
Gross profit
(In thousands of US$)
-
(unaudited)
|
Q3
2018
|
%
change
|
Q3
2017
|
YTD
Q3
2018
|
%
change
|
YTD
Q3
2017
|
Reporting
segment
|
|
|
|
|
|
|
Mining
|
7,194
|
58%
|
4,554
|
16,308
|
64%
|
9,942
|
Water
|
92
|
n/a
|
(321)
|
131
|
n/a
|
(154)
|
Total gross
profit / (loss)
|
7,286
|
72%
|
4,233
|
16,439
|
68%
|
9,788
|
Q3 2018
The Q3 2018 gross margin including depreciation within cost of
sales was US$ 7.3 million (or 15.7%
of revenue) compared to US$ 4.2
million (or 12.5% of revenue) in Q3 2017. This 72%
improvement is mainly due to increased revenue and performance of
contracts, as well as a better absorption of fixed operational
costs.
YTD Q3 2018
YTD Q3 2018 gross margin including depreciation within cost of
sales increased by 68% compared to the same period last year. As a
percentage of revenue, the gross margin increased from 9,7% to
12.4%. 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$)
- (unaudited)
|
Q3
2018
|
%
change
|
Q3
2017
|
YTD
Q3
2018
|
%
change
|
YTD
Q3
2017
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
5,197
|
-3%
|
5,356
|
15,506
|
2%
|
15,154
|
Q3 2018
Despite the higher level of activity, SG&A decreased by
US$ 0.2 million compared to the same
quarter last year. As a percentage of revenue, SG&A decreased
from 15.8% in Q3 2017 to 11.2% in Q3 2018.
YTD Q3 2018
Despite the higher level of activity, SG&A only increased by
US$ 0.4 million compared to the same
period last year. As a percentage of revenue, SG&A decreased
from 15.0% in YTD Q3 2017 to 11.7% in YTD Q3 2018.
Operating result
(In thousands of US$)
-
(unaudited)
|
Q3
2018
|
%
change
|
Q3 2017
|
YTD
Q3
2018
|
%
change
|
YTD
Q3
2017
|
Reporting
segment
|
|
|
|
|
|
|
Mining
|
2,117
|
n/a
|
(785)
|
1,550
|
n/a
|
(4,795)
|
Water
|
(28)
|
n/a
|
(498)
|
(617)
|
n/a
|
(1,036)
|
Total gross
profit / (loss)
|
2,089
|
n/a
|
(1,283)
|
933
|
n/a
|
(5,831)
|
Q3 2018
The operating profit was US$ 2.1
million, a US$ 3.4 million
improvement as a result of increased activity, improved gross
margin rate and stabilization of SG&A expenses.
YTD Q3 2018
The operating profit was US$ 0.9
million, a US$ 6.8 million
improvement compared to YTD Q3 2017 as a result of increased
activity, improved gross margin rate and stabilization of SG&A
expenses.
Financial position
The following table provides a summary of the Company's cash
flows for YTD Q3 2018 and YTD Q3 2017:
(In thousands of
US$)
|
YTD
Q3
2018
|
YTD
Q3
2017
|
|
|
|
Cash generated by
operations before working capital requirements
|
13,824
|
8,247
|
|
|
|
Working capital
requirements
|
(7,912)
|
(4,896)
|
Income tax paid
(received)
|
(1,548)
|
103
|
Purchase of equipment
in cash
|
(9,433)
|
(6,629)
|
|
|
|
Free Cash Flow
before debt servicing
|
(5,069)
|
(3,175)
|
|
|
|
Debt
variance
|
3,127
|
13,576
|
Interests
paid
|
(2,660)
|
(2,809)
|
Acquisition of
treasury shares
|
(58)
|
(37)
|
|
|
|
Net cash generated
/ (used in) financing activities
|
409
|
10,730
|
|
|
|
Net cash
variation
|
(4,660)
|
7,555
|
|
|
|
Foreign exchange
differences
|
(895)
|
649
|
|
|
|
Variation in cash
and cash equivalents
|
(5,555)
|
8,204
|
In YTD Q3 2018, the cash generated from operations before
working capital requirements amounted to US 13.8 million compared
to US$ 8.2 million in YTD Q3
2017.
Due to increased activity in the first nine months of 2018, the
level of working capital requirements was US$ 7.9 million (US$ 4.9
million in 2017).
During the period, Capex amounted to US$
9.4 million in cash, compared to US$
6.6 million in cash in YTD Q3 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$
(5.1) million in YTD Q3 2018 compared to US$ (3.2) million in YTD Q3 2017.
As at September 30, 2018, cash and
cash equivalents totaled US$ 9.0
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 September 30, 2018, net debt
amounted to US$ 131.0 million
(US$ 127.2 million as at June 30, 2018, US$ 135.3
million as at March 31, 2018
and US$ 122.7 million as at
December 31, 2017).
Bank guarantees as at September 30,
2018 totaled US$ 1.5 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 September 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 Q3 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)
|
Q3
2018
|
Q3
2017
|
YTD
Q3
2018
|
YTD
Q3
2017
|
Operating profit /
(loss)
|
2,089
|
(1,283)
|
933
|
(5,831)
|
Depreciation
expense
|
4,126
|
4,585
|
12,644
|
13,988
|
Non-cash employee
share-based compensation
|
45
|
33
|
133
|
91
|
EBITDA
|
6,260
|
3,335
|
13,710
|
8,247
|
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 November 2, 2018, Company
Management will conduct a conference call at 11:00 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/1870641/F6787B9FF1E5073B277D9EA41DA2954C
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