Foraco International Reports Q3 2015
Positive EBIT; 20% EBITDA Margin
TORONTO and MARSEILLE, France, Nov. 2, 2015 /CNW/ - Foraco International SA (TSX:FAR) (the "Company" or "Foraco"), a leading global provider of mineral drilling services, today reported unaudited financial results for its third quarter 2015. All figures are reported in US Dollars (US$), unless otherwise indicated.
"Q3 2015 continued to be affected by the prolonged slowdown in the industry. Excluding the effect of the exchange rate variations, our revenue decreased by 17% compared to the same quarter last year. Our utilization rate hit a low of 30%. This was more than offset by the good operating performance of our contracts and the positive effects of our cost reduction plan" said Daniel Simoncini, Chairman and co-CEO of Foraco. "The necessary resizing of the Company which enabled us to post improved operating results, was achieved without detriment to our quality of services, our flexibility or our capacity to innovate."
"During the quarter, the Company's revenue was affected by significant variations in foreign exchange rates, mainly in Canada, Brazil, Australia and Russia, where most of the Company's activity is based. In spite of this, EBITDA for the quarter continues to be satisfactory at US$6.2m, or 20% of revenue. In addition, we are pleased to report $7.2m of free cash flow for the period, also reflecting the good monitoring of our working capital" commented Jean-Pierre Charmensat, co-CEO and Chief Financial Officer. "At the end of Q3 2015, our net debt amounts to US$ 93.4m, compared to US$ 96.7m at year-end 2014 and US$ 97.7m at the end of Q2 2015. We continue to work hard to further improve results."
Three months Q3 2015 Highlights
Revenue
- Q3 2015 revenue amounted to US$ 31.1 million compared to US$ 51.6 million in Q3 2014, a decrease of 40%. Using Q3 2014 exchanges rates, Q3 2015 revenue decreased by 17%.
- The utilization rate was 30% in Q3 2015 compared to 37% in Q3 2014.
Profitability
- The Q3 2015 gross margin including depreciation within cost of sales was US$ 4.4 million compared to US$ 3.3 million in Q3 2014. The reduction in revenues was compensated by the effect of the cost cutting actions and the performance on contracts, as most projects have delivered their expected gross margin.
- SG&A costs reduced by US$ 2.0 million between Q3 2014 and Q3 2015 as a result of foreign exchange variances and the cost cutting action plans.
- EBIT amounted to US$ 0.2 million in Q3 2015 compared to US$ (2.8) million in Q3 2014.
- During the quarter, EBITDA amounted to US$ 6.2 million (or 20% of revenue) compared to US$ 5.4 million (or 11% of revenue) for the same quarter last year.
- Capital expenditure was US$ 3.0 million in Q3 2015 compared to US$ 3.9 million in Q3 2014. This Capex is mainly linked to new contracts.
Nine-months Q3 2015 (YTD Q3 2015) Highlights
Revenue
- YTD Q3 2015 revenue amounted to US$ 108.2 million compared to US$ 145.4 million for the same period last year, a decrease of 26% or 4% excluding the impact of exchange rates.
Profitability
- YTD Q3 2015 gross margin including depreciation within cost of sales was US$ 6.6 million compared to US$ 6.8 million in YTD Q3 2014. The Company encountered a certain number of operational difficulties in Q1. In Q2 and Q3, most contracts delivered their expected gross margin and the company continues to benefit from the cost cutting action plan.
- SG&A costs reduced by US$ 5.4 million (or 28%) between YTD Q3 2014 and YTD Q3 2015. Excluding the impact of exchange rates amounting to US$ 1.3 million, SG&A reduced by US$ 1.7 million as a result of the cost cutting action plans and US$ 0.5 million related to the payment of a receivable provided for in Q4 2014.
- Capital expenditures were US$ 7.1 million in YTD Q3 2015 compared to US$ 7.4 million in YTD Q3 2014.
Selected financial data
| (In thousands of US$) |
Three-month period ended |
Nine-month period ended |
||||||||
| (unaudited) |
September 30, |
September 30, |
||||||||
| 2015 |
2014 |
2015 |
2014 |
|||||||
| Revenue |
31,051 |
51,580 |
108,156 |
145,432 |
||||||
| Gross profit (1) |
4,412 |
3,287 |
6,611 |
6,808 |
||||||
| As a percentage of sales |
14.2% |
6.4% |
6.1% |
4.7% |
||||||
| EBITDA |
6,162 |
5,447 |
11,823 |
12,735 |
||||||
| As a percentage of sales |
19.8% |
10.6% |
10.9% |
8.8% |
||||||
| Operating profit / (loss) |
210 |
(2,784) |
(7,551) |
(12,307) |
||||||
| As a percentage of sales |
0.7% |
-5.4% |
-7.0% |
-8.5% |
||||||
| Profit / (loss) for the period |
(973) |
(3,509) |
(9,584) |
(13,517) |
||||||
| Attributable to: |
||||||||||
| Equity holders of the Company |
(1,286) |
(3,564) |
(9,452) |
(13,502) |
||||||
| Non-controlling interests |
313 |
55 |
(132) |
(15) |
||||||
| EPS (in US cents) |
||||||||||
| Basic |
(1.45) |
(4.01) |
(10.70) |
(15.21) |
||||||
| Diluted |
(1.45) |
(4.01) |
(10.70) |
(15.21) |
||||||
| (1) includes amortization and depreciation expenses related to operations |
||||||||||
Financial results
Revenue
| (In thousands of US$) - (unaudited) |
Q3 2015 |
% change |
Q3 2014 |
YTD Q3 |
% change |
YTD Q3 |
| 2015 |
2014 |
|||||
| Reporting segment |
||||||
| Mining......................................................... |
28,535 |
-40% |
47,197 |
95,650 |
-25% |
127,958 |
| Water......................................................... |
2,516 |
-43% |
4,383 |
12,506 |
-28% |
17,474 |
| Total revenue............................................. |
31,051 |
-40% |
51,580 |
108,156 |
-26% |
145,432 |
| Geographic region |
||||||
| Europe, Middle East and Africa....................... |
8,302 |
-30% |
11,897 |
33,710 |
-10% |
37,378 |
| South America.............................................. |
7,572 |
-44% |
13,402 |
26,555 |
-40% |
44,180 |
| North America.............................................. |
6,874 |
-39% |
11,236 |
23,863 |
-16% |
28,370 |
| Asia Pacific.................................................. |
8,303 |
-45% |
15,045 |
24,028 |
-32% |
35,503 |
| Total revenue............................................. |
31,051 |
-40% |
51,580 |
108,156 |
-26% |
145,432 |
Q3 2015
Q2 2015 revenue amounted to US$ 43.8 million compared to US$ 48.4 million in Q2 2014, a decrease Q3 2015 revenue amounted to US$ 31.1 million compared to US$ 51.6 million in Q3 2014, a decrease of 40%. Using Q3 2014 exchanges rates, Q3 2015 revenue decreased by 17%.
In EMEA, revenue decreased by 30% (5% increase excluding the foreign exchange impact mainly linked to the Russian Ruble variance), from US$ 11.9 million in Q3 2014 to US$ 8.3 million in Q3 2015. In Africa some water contracts were postponed from Q3 to Q4 and 2016.
Revenue in South America amounted to US$ 7.6 million in Q3 2015 (US$ 13.4 million in Q3 2014), a decrease of 44% or 15% excluding the foreign exchange impact, mainly due to reduced activity in Chile partially offset by increased operations in Brazil.
Revenue in North America decreased by 39% or 27% excluding the impact of exchange rates, due to pressure on prices and the non-renewal of contract.
In Asia Pacific, Q3 2015 revenue amounted to US$ 8.3 million, a decrease of 45%, or 30% excluding the impact of exchange rates, due to the early termination of contract.
YTD Q3 2015
YTD Q3 2015 revenue amounted to US$ 108.2 million compared to US$ 145.4 million in YTD Q3 2014, a decrease of 26% or 7% excluding the impact of exchange rates.
In EMEA, revenue decreased from US$ 37.4 million in YTD Q3 2014 to US$ 33.7 million in YTD Q3 2015. Excluding the foreign exchange impact mainly linked to the Russian Ruble variance, revenue increased by 18% compared to the same period last year.
Revenue in South America amounted to US$ 26.6 million in YTD Q3 2015 (US$ 44.2 million in YTD Q3 2014), a decrease of 40%. In Brazil, revenue increased by 12% excluding the impact of exchange rates compared to the same period last year. In YTD Q3 2015, the activity in Chile reduced by 74% compared to YTD Q3 2014 due to contracts being halted and adverse climate conditions.
Revenue in North America decreased by 16% but was stable when excluding the impact of exchange rates.
In Asia Pacific, YTD Q3 2015 revenue amounted to US$ 24.0 million, a decrease of 32% or 18% excluding the impact of exchange rates, mainly due to pressure on selling prices, a lower utilization rate and the early termination of contract.
Gross profit
| (In thousands of US$) - (unaudited) |
Q3 2015 |
% change |
Q3 2014 |
YTD Q3 |
% change |
YTD Q3 |
| 2015 |
2014 |
|||||
| Reporting segment |
||||||
| Mining................................................. |
4,647 |
81% |
2,568 |
6,759 |
36% |
4,955 |
| Water................................................. |
(235) |
-133% |
719 |
(148) |
-108% |
1,853 |
| Total gross profit / (loss) .............. |
4,412 |
34% |
3,287 |
6,611 |
-3% |
6,808 |
Q3 2015
Q3 2015 gross margin including depreciation within cost of sales was US$ 4.4 million compared to US$ 3.3 million in Q3 2014. The reduction in revenues was compensated by the effect of the cost cutting actions and the performance on contracts, as most projects have delivered their expected gross margin.
YTD Q3 2015
YTD Q3 2015 gross margin including depreciation within cost of sales was US$ 6.6 million compared to US$ 6.8 million in YTD Q3 2014. The Company encountered a certain number of operational difficulties in Q1. In Q2 and Q3, most contracts have delivered their expected gross margin and the company benefits from the cost cutting action plans.
Selling, General and Administrative Expenses
| (In thousands of US$) - (unaudited) |
Q3 2015 |
% change |
Q3 2014 |
YTD Q3 2015 |
% change |
YTD Q3 2014 |
| Selling, general and administrative expenses |
4,115 |
-32% |
6,071 |
13,676 |
-28% |
19,115 |
Q3 2015
SG&A costs reduced by US$ 2.0 million between Q3 2014 and Q3 2015 as a result of the foreign exchange variance and the continued cost cutting action plans.
YTD Q3 2015
SG&A costs reduced by US$ 5.4 million (or 28%) between YTD Q3 2014 and YTD Q3 2015. Excluding the impact of exchange rates amounting to US$ 2.8 million, SG&A reduced by US$ 2.1 million as a result of the cost cutting action plans and US$ 0.5 million related to the payment of a receivable provided for in Q4 2014.
Operating result
| (In thousands of US$) - (unaudited) |
Q3 2015 |
% change |
Q3 2014 |
YTD Q3 |
% change |
YTD Q3 |
| 2015 |
2014 |
|||||
| Reporting segment |
||||||
| Mining ........................................................ |
778 |
n/a |
(2,986) |
(5,759) |
-51% |
(11830) |
| Water......................................................... |
(568) |
n/a |
202 |
(1,792) |
276% |
(477) |
| Total operating profit / (loss) .............. |
210 |
n/a |
(2,784) |
(7,551) |
-39% |
(12,307) |
Q3 2015
Operating profit was US$ 0.2 million, a US$ 3.0 million increase compared to Q3 2014.
YTD Q3 2015
The operating loss decreased by US$ 4.8 million as a result of the developments mentioned previously.
Financial position
The following table provides a summary of the Company's cash flows for YTD Q3 2015 and YTD Q3 2014:
| (In thousands of US$) |
YTD Q3 2015 |
YTD Q3 2014 |
| Cash generated by/(used in) operations before working capital requirements............................. |
11,764 |
13,271 |
| Working capital requirements......................................................................................................... |
(480) |
(961) |
| Interest and tax............................................................................................................................... |
(3,982) |
(4,146) |
| Net cash flow generated from operating activities............................................................. |
7,302 |
8,164 |
| Purchase of equipment in cash...................................................................................................... |
(6,679) |
(6,888) |
| Consideration payable related to acquisitions................................................................................ |
(1,111) |
(500) |
| Net cash used in investing activities...................................................................................... |
(7,790) |
(7,388) |
| Free cash flow............................................................................................................................. |
(488) |
776 |
| Debt variance................................................................................................................................. |
(4,013) |
(10,273) |
| Dividends paid................................................................................................................................ |
- |
(1,086) |
| Net cash used in financing activities...................................................................................... |
(4,013) |
(11,359) |
| Net cash variation ...................................................................................................................... |
(4,501) |
(10,583) |
| Foreign exchange differences ...................................................................................................... |
(2,824) |
(780) |
| Variation in cash and cash equivalents.................................................................................. |
(7,325) |
(11,363) |
In YTD Q3 2015, the net cash flow generated from operating activities amounted to US$ 7.3 million compared to US$ 8.2 million during YTD Q3 2014.
During the period, Capex amounted to US$ 6.7 million in cash and US$ 0.4 million through capital leases, compared to US$ 6.9 million in cash and US$ 0.5 million through capital leases in YTD Q3 2014. Five second hand rigs were acquired in connection with new contracts and to replace obsolete equipment which was retired from service. The total rig count remains at 302.
As at September 30, 2015, cash and cash equivalents totaled US$ 15.9 million compared to US$ 23.2 million as at December 31, 2014. Cash and cash equivalents are held at or invested within top tier financial institutions.
As at September 30, 2015, net debt amounted to US$ 93.4 million (US$ 96.7 million as at December 31, 2014). The ratio of debt (net of cash) to shareholders' equity increased from 0.67 as at December 31, 2014 to 0.96 as at September 30, 2015.
On September 30, 2015, financial debts and equivalents amounted to US$ 109.3 million (US$ 119.9 million as at December 31, 2014):
| Maturity |
Credit lines |
October 1, |
October 1, |
October 1, |
October 1, |
October 1, |
Total |
| Drawn credit lines rolled over on a yearly basis |
2,054 |
- |
- |
- |
- |
- |
2,054 |
| Long term financing related to: |
|||||||
| - Drawn credit lines rolled over confirmed for at least 12 months |
47,890 |
- |
- |
- |
- |
- |
47,890 |
| - Brazil acquisition |
- |
- |
3,560 |
3,560 |
3,560 |
10,681 |
|
| - Australia acquisition |
- |
- |
5,563 |
5,563 |
5,563 |
5,563 |
22,252 |
| - Acquisition of fixed assets |
- |
4,257 |
8,550 |
6,905 |
4,146 |
1,520 |
25,378 |
| - Acquisition of fixed assets through capital leases |
- |
618 |
230 |
135 |
14 |
- |
998 |
| Total |
49,944 |
4,876 |
17,903 |
16,164 |
13,284 |
7,083 |
109,253 |
| (*) The non-current portion of long term debt, i.e. from October 1, 2016 onwards, is US$54,434 thousand |
|||||||
Presently the Company has used and unused short-term credit facilities amounting to US$ 60.3 million, of which US$ 49.9 million was drawn down as of September 30, 2015. Other facilities are granted individually by various banks, mainly in Chile, Brazil, Australia and Canada. They are generally granted on a yearly basis and are subject to review at certain dates.
Going concern and impairment testing
Current economic conditions make forecasting difficult, and there is the possibility that the Company's actual operating performance during the coming year may be different from expectations. Based on internal forecasts and projections that take into account reasonably possible changes in the Company's operating performance, the Company believes that it has adequate financial resources to continue in operation and meet its financial commitments for a period of at least twelve months provided it continues to benefit from the support of its lenders. The next testing date for the main bank covenant is December 31, 2015. At this stage, the Company does not anticipate any breach of covenants. Please note that significant further negative variations in exchange rates, which are not under the Company's control, may impact the calculation of the net debt to EBITDA ratio.
As previously discussed, during the quarter, the Company's performance improved compared to previous quarters. On this basis, there is no indication that impairment testing is necessary as at September 30, 2015.
Currency exchange rates
The exchange rates for the periods under review are provided in the Management's Discussion and Analysis of Q3 2015.
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.
Reconciliations of the various non IFRS measures are as follows:
EBITDA
| (In thousands of US$) |
Q3 |
Q3 |
YTD Q3 |
YTD Q3 |
| (unaudited) |
2015 |
2014 |
2015 |
2014 |
| Operating profit / (loss)................................................. |
210 |
(2,784) |
(7,551) |
(12,307) |
| Depreciation expense .................................................. |
5,781 |
7,917 |
18,861 |
24,098 |
| Non-cash employee share-based compensation.......... |
171 |
314 |
514 |
944 |
| EBITDA ........................................................................ |
6,162 |
5,447 |
11,823 |
12,735 |
Net debt:
| Q3 2015 |
Q4 2014 |
|||
| Cash and cash equivalents................................... |
15,900 |
23,225 |
||
| Borrowings - Non-current portion......................... |
(102,324) |
(109,312) |
||
| Borrowings - Current portion................................ |
(6,930) |
(10,053) |
||
| Consideration payable related to acquisitions....... |
- |
(528) |
||
| Total Net Debt.................................................... |
(93,354) |
(96,667) |
Outlook
The Company's business strategy is to wait 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 on its strategy primarily through organic growth in the near future.
Conference call and webcast
On November 2, 2015, 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 http://event.on24.com/r.htm?e=1085278&s=1&k=1E64AB6BFA1A0285D4E6BE329BAFF840
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 23 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 31, 2015, 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: Brenda Patterson-Mack ([email protected]), Tel: (647) 351-5483
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