TORONTO and MARSEILLE, France, May
3, 2019 /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 2019. All figures are expressed in US Dollars
(US$) unless otherwise indicated.
"The first quarter is traditionally the weakest of the year for
our industry. The beginning of the year has shown interesting signs
confirming the continuation of a period of sustained activity for
the group. In Q1 2019 we posted US$ 45.2
million revenue, a 13% increase compared to Q1 last year.
The utilization rate of our fleet of rigs was 46% in Q1 2019
compared to 40% in Q1 2018. Canada
and Australia continue to lead the
way with revenue increases exceeding 20% and we are pleased to
report that Brazil, one of our
long standing key market is now among our fast growing regions with
a 76% growth compared to the same period last year" commented
Daniel Simoncini, Chairman and
Co-CEO of Foraco. "Our operational performance is in line with our
expectations and our new innovative services are well received by
customers. We have been able to secure a number of contracts with
improved pricing conditions. There is scope to further profitable
growth and we still have development potential".
"In Q1 2019, we recorded an EBITDA of US$
3.4 million versus US$ 2.3
million in Q1 2018, a 48% increase. Our free cash flow
before debt servicing improved from US$ 7.3
million negative in Q1 2018 to US$
1.0 million positive in Q1 2019, a US$ 8.3 million increase. We now benefit from the
price renegotiations and increases which we have gradually
introduced in 2018. This, together with the satisfactory
operational performance of our contracts, the better absorption of
our fixed costs and the control over our selling general and
administrative costs, contributed to the improved financial
performance. We managed to keep our capex at a reasonable level and
succeeded in optimizing our working capital position" added
Jean-Pierre Charmensat, Co-CEO and Chief Financial Officer. "During
this transition quarter impacted by the seasonality of our
activity, our net debt position excluding lease obligations
remained unchanged. We implemented the new accounting standard IFRS
16 confirming the absence of significant operating lease
commitment".
Three months Q1 2019 Highlights – Q1 2019
Revenue
- Q1 2019 revenue amounted to US$ 45.2
million compared to US$ 40.0
million in Q1 2018, an increase of 13%.
- The utilization rate was 46% in Q1 2019 compared to 40% in Q1
2018 (51% in Q4 2018, 46% in Q3 2018 and 43% in Q2 2018).
Profitability
- The Q1 2019 gross margin including depreciation within cost of
sales was US$ 4.2 million compared to
US$ 3.0 million in Q1 2018, this
improvement is mainly due to increased revenue, improvement of
gross margin rate and a better absorption of fixed operational
costs.
- During the quarter, EBITDA amounted to US$ 3.4 million (or 7.6% of revenue), compared to
US$ 2.3 million (or 5.6% of revenue)
for the same quarter last year.
Net debt
- The net debt excluding the impact of the implementation of IFRS
16 was US$ 130.4 million as at
March 31, 2019 compared to
US$ 130.4 million as at December 31, 2018. The increase linked to
capitalized interests was compensated by a favorable exchange rate.
The net debt including the impact of IFRS 16 implementation is
US$ 134.5 million as at March 31, 2019.
Financial results
Revenue
(In thousands of US$)
- (unaudited)
|
Q1
2019
|
%
change
|
Q1
2018
|
Reporting
segment
|
|
|
|
Mining
|
43,654
|
14%
|
38,393
|
Water
|
1,547
|
-4%
|
1,615
|
Total
revenue
|
45,201
|
13%
|
40,008
|
|
|
|
|
Geographic
region
|
|
|
|
Europe, Middle East
and Africa
|
9,197
|
-10%
|
10,267
|
South
America
|
9,758
|
23%
|
7,939
|
North
America
|
19,092
|
21%
|
15,836
|
Asia
Pacific
|
7,154
|
20%
|
5,966
|
Total
revenue
|
45,201
|
13%
|
40,008
|
Q1 2019 revenue amounted to US$ 45.2
million compared to US$ 40.0
million in Q1 2018, an increase of 13%.
In EMEA, revenue decreased by 10%, to US$
9.2 million in Q1 2019 from US$ 10.3
million in Q1 2018, as a result of a decreased activity in
Africa, partially compensated by a
slight increase in activity in Russia.
Revenue in South America
increased by 23% at US$ 9.8 million
in Q1 2019 (US$ 7.9 million in Q1
2018). The activity in Brazil
increased by 76% thanks to increased activity with major clients
and restart of activity with junior companies. This increase was
partially offset by a slowdown in Chile.
Revenue in North America
increased by 21% to US$ 19.1 million
in Q1 2019 from US$ 15.8 million in
Q1 2018; This increase is mainly due new developments in
underground activity since last year, as well as continued
sustained activity with major clients.
In Asia Pacific, Q1 2019
revenue amounted to US$ 7.2 million,
an increase of 20% mainly due to the increased volume with our
existing clients and start of new contracts.
Gross profit
(In thousands of US$)
- (unaudited)
|
Q1 2019
|
%
change
|
Q1
2018
|
Reporting
segment
|
|
|
|
Mining
|
4,078
|
53%
|
2,674
|
Water
|
159
|
-47%
|
298
|
Total gross
profit / (loss)
|
4,237
|
43%
|
2,971
|
The Q1 2019 gross margin including depreciation within cost of
sales was US$ 4.2 million (or 9.4% of
revenue) compared to US$ 3.0 million
(or 7.4% of revenue) in Q1 2018, this improvement is mainly due to
increased revenue, improvement of gross margin rate and a better
absorption of fixed operational costs.
Selling, General and Administrative Expenses
(In thousands of US$)
- (unaudited)
|
Q1
2019
|
%
change
|
Q1
2018
|
Selling, general and
administrative expenses
|
5,163
|
0%
|
5,171
|
Despite the higher level of activity, SG&A remained stable
compared to the same quarter last year. As a percentage of revenue,
SG&A decreased from 12.9% in Q1 2018 to 11.4% in Q1 2019.
Operating result
(In thousands of US$)
- (unaudited)
|
Q1
2019
|
%
change
|
Q1
2018
|
Reporting
segment
|
|
|
|
Mining
|
(18)
|
n/a
|
(1,981)
|
Water
|
(918)
|
n/a
|
(219)
|
Total operating
profit / (loss)
|
(936)
|
n/a
|
(2,200)
|
The operating loss was US$ 0.9
million, a US$ 1.3 million
improvement as a result of increased activity, improved gross
margin and stabilization of SG&A expenses.
Financial position
The following table provides a summary of the Company's cash
flows for Q1 2019 and Q1 2018:
(In thousands of
US$)
|
Q1
2019
|
Q1
2018
|
|
|
|
Cash generated by
operations before working capital requirements
|
3,445
|
2,245
|
|
|
|
Working capital
requirements
|
1,489
|
(7,295)
|
Income tax paid
(received)
|
(903)
|
6
|
Purchase of equipment
in cash
|
(3,025)
|
(2,289)
|
|
|
|
Free Cash Flow
before debt servicing
|
1,006
|
(7,333)
|
|
|
|
Debt
variance
|
(1,143)
|
2,180
|
Interests
paid
|
(800)
|
(886)
|
Acquisition of
treasury shares
|
(5)
|
(16)
|
|
|
|
Net cash generated
/ (used in) financing activities
|
(1,948)
|
1,278
|
|
|
|
Net cash
variation
|
(942)
|
(6,055)
|
|
|
|
Foreign exchange
differences
|
(273)
|
199
|
|
|
|
Variation in cash
and cash equivalents
|
(1,215)
|
(5,856)
|
In Q1 2019, the cash generated from operations before working
capital requirements amounted to US 3.4 million compared to
US$ 2.2 million in Q1 2018.
In Q1 2019, the working capital requirement was a positive
US$ 1.5 million mainly due to
sustained activity in both Q4 18 and Q1 19. This is to be compared
with a US$ (7.3) million need in Q1
2018 linked to a lower level of activity in Q4 2017.
During the quarter, Capex amounted to US$
3.0 million in cash, compared to US$
2.3 million in cash in Q1 2018. The Capex mainly relates to
rods and ancillary equipment.
Free cash flow before debt servicing was US$ 1.0 million in Q1 2019 compared to
US$ (7.3) million in Q1 2018.
As at March 31, 2019, cash and
cash equivalents totaled US$ 9.9
million compared to US$ 11.1
million as at December 31,
2018. Cash and cash equivalents are mainly held at or
invested within top tier financial institutions.
As at March 31, 2019, net debt
excluding IFRS 16 implementation amounted to US$ 130.4 million (US$
130.4 million as at December 31,
2018 and US$ 135.3 million as
at March 31, 2018).
Bank guarantees as at March 31,
2019 totaled US$ 2.5 million
compared to US$ 1.7 million as at
December 31, 2018. The Company
benefits from a confirmed contract guarantee line of € 12.7 million
(US$ 14.2 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.
As part of the May 2017 debt
reorganization, certain key financial covenants were set including;
minimum cash, leverage ratio and limitation to capital expenditure.
In December 2018, a new set of
covenants applicable to the year 2019 was agreed with the lenders.
As at March 31, 2019, 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 Q1 2019.
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$) (unaudited)
|
Q1
2019
|
Q1
2018
|
|
|
|
Operating profit /
(loss)
|
(926)
|
(2,200)
|
Depreciation
expense
|
4,325
|
4,413
|
Non-cash employee
share-based compensation
|
45
|
45
|
EBITDA
|
3,444
|
2,258
|
IFRS 16 implementation had a positive impact on Q1 2019 EBITDA
for an amount of US$ 265
thousand.
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 3, 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/1997232/1F9E7127FC8DF8474604E9EA7BDC1218
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 May 29,
2019, 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