Foraco International reports Q2 2022

Revenue up 14%, EBITDA up 22%

TORONTO and MARSEILLE, France, July 28, 2022 /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 second quarter 2022. All figures are expressed in US Dollars (US$) unless otherwise indicated.

"Revenue for the second quarter of 2022 was US$ 86.5 million, up 14% compared to the same quarter last year. The rigs utilization rate is unchanged YoY at 60% reflecting a gradual and ongoing higher revenue per rig coming from both bigger rigs utilization and ongoing prices adjustment. Our TTM revenue at US$ 293.7 million is a marker of our continuing growth since 2016. This trend shows no sign of slowing down with continued demand for copper, nickel and lithium, linked to energy transition. We have also benefited from our unique expertise in water related services which we have progressively deployed in all our regions. The bidding activity is particularly sustained for this period of the year, mainly with Tier One companies." said Daniel Simoncini, Chairman and Co-CEO. "Profitability of our operations also improved despite challenges such as supply chains issues, the availability of workforce, inflationary pressures and Covid-19 variants. In the present context our focus remains on quality of service as customers turn to longer term contracts."

"Our operational performance translates into the continuing improvement of our key profitability indicators. Q2 2022 EBITDA reached US$ 17.8 million (21% of revenue), a 22% increase compared to Q2 2021 (US$ 14.7 million or 20% of revenue). Our Q2 TTM EBITDA, reached US$ 49.6 million, a record high over the last decade,". said Jean-Pierre Charmensat, Co-CEO and CFO. "With the net debt position at US$ 91.1 million, our leverage ratio improved to 1.8 despite the ramp-up of our working capital due to the Company's growth. This confirms our capacity to finance our ambitious Capex and development program. The intake of a higher proportion of long-term contracts gives us the opportunity to leverage the learning curve of our operations and provides us with better visibility on our financial perspectives. We nevertheless remain focused on cost control as we are convinced that it is a vital issue in securing long-term relationships with our clients." 

Income Statement

(In thousands of US$) (unaudited)		Three-month  period ended    June 30,					Six-month period ended     June 30
			2022		2021			2022		2021
Revenue			86,498		75,668			1,54,239		1,30,219
Gross profit / (loss) (1)			18,787		15,809			28,348		21,850
As a percentage of sales			21.7 %		20.9 %			18.4 %		16.8 %
EBITDA			17,867		14,705			26,394		19,819
As a percentage of sales			20.7 %		19.4 %			17.1 %		15.2 %
Operating profit / (loss)			12,617		10,049			16,227		10,852
As a percentage of sales			14.6 %		13.3 %			10.5 %		8.3 %
Profit / (loss) for the period			7,164		5,656			7,942		4,691
Attributable to:
Equity holders of the Company			5,059		3,805			4,887		2,809
Non-controlling interests			2,105		1,851			3,055		1,882
EPS (in US cents)
Basic			5.12		4.27			4.95		3.15
Diluted			4.99		4.15			4.82		3.06

     (1) This line item includes amortization and depreciation expenses related to operations

Highlights – Q2 2022

Revenue

• Revenue for Q2 2022 amounted to US$ 86.5 million compared to US$ 75.7 million in Q2 2021, an increase of 14%.
• Rig utilization rate was 60% in Q2 2022 similar to Q2 2021.

Profitability

• Q2 2022 gross margin including depreciation within cost of sales was US$ 18.8 million (or 21.7% of revenue) compared to US$ 15.8 million (or 20.9% of revenue) in Q2 2021, an increase of 19%.
• Ongoing contracts reported solid performances. Increased costs are passed on most of the selling prices upon the renewal and the negotiation of long-term contracts.
• During the quarter, EBITDA amounted to US$ 17.9 million (or 20.7% of revenue), compared to US$ 14.7 million (or 19.4% of revenue) for the same quarter last year, an increase of 22 %.

Highlights – H1 2022

Revenue

• H1 2022 revenue amounted to US$ 154.2 million compared to US$ 130.2 million in H1 2021 an increase of 18%.

Profitability

• H1 2022 gross margin including depreciation within cost of sales was US$ 28.3 million (or 18.4% of revenue) compared to US$ 21.9 million (or 16.8% of revenue) in H1 2021.
• During the semester, EBITDA amounted to US$ 26.4 million (or 17.1% of revenue), compared to US$ 19.8 million (or 15.2% of revenue) for the same period last year.

Financial results

Revenue     

(In thousands of US$) - (unaudited)	Q2 2022	% change	Q2 2021	H1 2022	% change	H1 2021
Reporting segment
Mining	73,453	13 %	64,737	132,804	21 %	109,839
Water	13,045	19 %	10,931	21,435	5 %	20,380
Total revenue	86,498	14 %	75,668	154,239	18 %	130,219
Geographic region
North America	26,598	3 %	25,723	48,198	9 %	44,358
Europe, Middle East and Africa	20,989	-14 %	24,474	36,158	-16 %	43,302
South America	25,001	95 %	12,819	45,700	104 %	22,399
Asia Pacific	13,910	10 %	12,652	24,184	20 %	20,160
Total revenue	86,498	14 %	75,668	154,239	18 %	130,219

Q2 2022

Revenue for the quarter increased from US$ 75.7 million in Q2 2021 to US$ 86.5 million in Q2 2022 (+ 14%).

The increase in revenue in the Mining and Water segment is the result of the favorable market dynamics with long-term rolling contracts which started in 2021, and the capacity of the Company to deliver despite the Covid-19 variants which caused some delays to operations.

Activity in North America increased slightly with revenue at US$ 26.6 million in Q2 2022 compared to US$ 25.7 million in Q2 2021. The region faces continuing crewing issues.

In the EMEA, revenue for the quarter was US$ 21.0 million compared to US$ 24.5 million in Q2 2021, a decrease of 14%. In Africa, activity decreased by 30% compared to Q2 2021 mainly due to the phasing of contracts and logistic challenges. The activity remained stable in the other regions (Europe and CIS).

Revenue in South America increased by 95% to US$ 25.0 million in Q2 2022 (US$ 12.8 million in Q2 2021). This increase is mainly linked to new long-term contracts mobilized during the first quarter.

In Asia Pacific, Q2 2022 revenue amounted to US$ 13.9 million, an increase of 10% reflecting quarter over quarter the ongoing improvement of the activity with two significant long-term contracts initiated during the period.

H1 2022

H1 2022 revenue amounted to US$ 154.2 million compared to US$ 130.2 million in H1 2021, an increase of 18%.

The increase in revenue is the result of the combination of favorable market dynamics and the capacity of the Company to deliver despite the Covid-19 variants which caused some delays to operations.

Revenue in North America increased by 9% to US$ 48.2 million in H1 2022 from US$ 44.4 million in H1 2021, a growth driven by long term contracts which started during the period.

In EMEA, revenue decreased by 16%, to US$ 36.2 million in H1 2022 from US$ 43.3 million in H1 2021. In Africa, activity decreased by 36% compared to H1 2021 mainly due to the phasing of contracts and logistic challenges. The activity remained stable in the other regions (Europe and CIS).

Revenue in South America increased by 104% to US$ 45.7 million in H1 2022 (US$ 22.4 million in H1 2021). This increase is mainly linked to new long-term contracts mobilized during the period.

In Asia Pacific, H1 2022 revenue amounted to US$ 24.2 million, an increase of 20% reflecting the ongoing improvement of the activity with significant long-term contracts beginning during the period.

Gross profit

(In thousands of US$) - (unaudited)	Q2 2022	% change	Q2 2021	H1 2022	% change	H1 2021
Reporting segment
Mining	15,511	21 %	12,870	23,226	32 %	17,622
Water	3,276	11 %	2,939	5,121	21 %	4,228
Total gross profit / (loss)	18,787	19 %	15,809	28,348	30 %	21,850

Q2 2022

The Q2 2022 gross margin including depreciation within cost of sales was US$ 18.8 million (or 21.7% of revenue) compared to US$ 15.8 million (or 20.9% of revenue) in Q2 2021. Most ongoing contracts reported solid performances. All regions operated in a tight labor market and experienced inflation of costs impacting project gross margins.

H1 2022

The H1 2022 gross margin including depreciation within cost of sales was US$ 28.3 million compared to US$ 21.8 million in H1 2021. Most ongoing contracts reported solid performances. All regions operated in a tight labor market and experienced inflation of costs impacting project gross margins.

Selling, General and Administrative Expenses

(In thousands of US$) - (unaudited)	Q2 2022	% change	Q2 2021	H1 2022	% change	H1 2021
Selling, general and administrative expenses	6,170	7 %	5,760	12,121	10 %	10,998

Q2 2022

SG&A increased compared to the same quarter last year mainly due to the level of activity. As a percentage of revenue, SG&A decreased from 7.6% in Q2 2021 to 7.1% in Q2 2022.

H1 2022

SG&A increased by 10% compared to the same period last year. As a percentage of revenue, SG&A decreased from 8.4% to 7.9% of revenue.

Operating result

(In thousands of US$) - (unaudited)		Q2 2022	% change	Q2 2021	H1 2022	% change	H1 2021
Reporting segment
Mining	10,272		29 %	7,942	12,773	53 %	8,363
Water	2,345		11 %	2,107	3,453	39 %	2,489
Total operating profit / (loss)	12,617		26 %	10,049	16,227	50 %	10,852

Q2 2022

The operating profit was US$ 12.6 million, resulting in a US$ 2.6 million increase thanks to the increased activity and margins and the continuing focus on costs control.

H1 2022

The operating profit was US$ 16.2 million in H1 2022, a US$ 5.4 million improvement compared to H1 2021 as a result of the increase in activity and the continued control over the operations and SG&A expenses.

Financial position

The following table provides a summary of the Company's cash flows for H1 2022 and H1 2021:

(In thousands of US$)	H1 2022	H1 2021
Cash generated by operations before working capital requirements	26,394	19,819
Working capital requirements	(12,427)	(3,011)
Income tax paid	(3,980)	(3,126)
Purchase of equipment in cash	(8,574)	(10,463)
Free Cash Flow before debt servicing	1,412	3,219
Debt variance	3,252	(3,132)
Interests paid	(4,645)	(775)
Acquisition of treasury shares	(749)	(225)
Dividends paid to non-controlling interests	-	-
Net cash generated / (used in) financing activities	(2,142)	(4,132)
Net cash variation	(730)	(913)
Foreign exchange differences	397	37
Variation in cash and cash equivalents	(332)	(876)
Cash and cash equivalents at the end of the period	23,592	20,084

In H1 2022, the cash generated from operations before working capital requirements amounted to US$ 26.4 million compared to US$ 19.8 million in H1 2021.

In H1 2022, the working capital requirement was US$12.4 million compared to a US$ 3.0 million in the same period last year. The increase of the working capital requirement is the result of the activity ramp-up.

During the period, Capex totaled US$ 8.6 million in cash compared to US$ 10.5 million in H1 2021. Capex relates essentially to the acquisition of rigs, major rig overhauls, ancillary equipment and rods.

As at June 30, 2022, cash and cash equivalents totaled US$ 23.6 million compared to US$ 23.9 million as at December 31, 2021. Cash and cash equivalents are mainly held at or invested within top tier financial institutions.

As at June 30, 2022, the net debt including operational lease obligations (IFRS 16) amounted to US$ 91.1 million (US$ 85.7 million as at December 31, 2021).

Bank guarantees as at June 30, 2022 totaled US$ 7.5 million compared to US$ 9.0 million as at December 31, 2021.  The Company benefits from a confirmed contract guarantee line of € 6.5 million (US$ 6.8 million).

Company in favour of the new shareholders. As part of the financial reorganization, the Company deleveraged its balance sheet, extended its debt maturity through the end of 2025 and eased its financial constraints and covenants.

Strategy

The Company's strategy is to secure its position as a leading actor in the mineral drilling services sector, assisting its customers to explore or manage their deposits throughout the whole cycle, with a special focus on life of mines extension activity. As developed economies focus on "green" recovery, there will be an increased need for key resources such as copper, nickel, lithium, and special attention to water management. The Company anticipated the increased environmental, social and governance (ESG) requirements. The Company intends to develop and grow its services offered across the world with a focus on high tech drilling services, optimal commodities mix with a significant involvement in water related drilling services and stable jurisdictions.  The Company expects it will execute its strategy primarily through organic growth in the near future.

General economic environment

The Company continues to report improved key profitability indicators compared to pre-Covid-19 activity levels in the context of favourable market conditions for the industry in which the Company operates. However, the economic instability resulting from continuing health crisis and the recent geopolitical events has impacted the Company's activity with challenges such as supply chains, availability of workforce and inflationary pressures. While the favourable market conditions prevailing in the industry show no sign of slowing down, there does remain a level of uncertainty.

Currency exchange rates.

The exchange rates for the periods under review are provided in the Management's Discussion and Analysis of Q2 2022.

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)	Q2 2021	Q2 2020	H1 2021	H1 2020
Operating profit / (loss)...........................................................	10,049	6,062	10,852	6,186
Depreciation expense ............................................................	4,606	4,054	8,867	8,350
Non-cash employee share-based compensation...................	50	45	100	90
EBITDA .................................................................................	14,705	10,161	19,819	14,626

Conference call and webcast

On July 28, 2022, 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 1-866-652-5200 or 1-412-317-6060.  You will be put on hold until the conference call begins. A live audio webcast of the Conference Call will also be available

https://app.webinar.net/mbAJNLeP6Bv

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 March 30, 2021, 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

Please contact: Fabien Sevestre ([email protected]), Tel: [phone]