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Press release from CNW Group

Foraco International Reports Q1 2010; Marked by Acquisitions

Tuesday, May 11, 2010

Foraco International Reports Q1 2010; Marked by Acquisitions08:00 EDT Tuesday, May 11, 2010/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES NOR FOR DISSEMINATION IN THE UNITED STATES/TORONTO and MARSEILLE, France, May 11 /CNW/ - Foraco International SA (the "Company" or "Foraco"), a leading global provider of diversified drilling services, today reported unaudited financial results for its first quarter of 2010. All figures are reported in Euros ((pnds stlg)), unless otherwise indicated.Q1 2010 Highlights: << - Revenue for the three-month period ended March 31, 2010, decreased to (pnds stlg)17.8 million from (pnds stlg)22.4 million over the corresponding period last year. This decrease is due to the combination of: (i) phasing of projects both in the Water segment (decrease of (pnds stlg)2.6 million) and in the Mining segment (decrease of (pnds stlg)2.0 million), most of these projects having been resumed by the end of the quarter, and (ii) the relocation of equipment to mobilize new contracts in the Mining segment in West and Central Africa, with corresponding revenue generated at the end of the quarter only. These factors impacted the very end of 2009, as disclosed last quarter, and the first half of the three-month period ended March 31, 2010. The equipment utilization rate in March 2010 has returned to a level comparable to that of the first quarter of 2009. - Gross profit including depreciation expense for the three-month period ended March 31, 2010, amounted to (pnds stlg)3.9 million (or 22% of revenue) compared to (pnds stlg)6.5 million (or 29% of revenue) a year ago. The Company was able to maintain a constant high level of contract gross margins but was impacted on the one hand by the reduced activity which resulted in a lower absorption of fixed operational costs, and on the other by a higher level of depreciation expense. - Despite the lower level of activity during this quarter, the Company managed to generate a net profit after tax amounting to (pnds stlg)0.8 million and a positive cash flow from operations of (pnds stlg)0.9 million. - During the quarter, the Company announced it has entered into binding agreements to acquire a 50% controlling interest in LLC Eastern Drilling Company ("EDC"), a Russian company; and a 100% interest in Adviser Drilling SA ("Adviser"), a Chilean company. - On March 8, 2010, the Board of Directors proposed a dividend payment of (pnds stlg)0,028 per share to be approved by the shareholders at the Company's General Meeting to be held on May 18, 2010. >> "The very end of 2009 and the beginning of the first quarter of 2010 were affected by a combination of adverse factors including the scheduled termination of certain significant contracts, the delays in the commencement of new projects, and the mobilization of equipment for new contracts. Since mid-February, the level of activity has returned, back in line with our expectations," said Daniel Simoncini Chairman and Chief Executive Officer of Foraco. "During the quarter we also negotiated the acquisition of LLC Eastern Drilling Company in Russia and Adviser Drilling SA in Chile, which represents a strategic milestone in the Company's transformation towards becoming a major global provider of drilling services.""We would like to emphasize that despite the adverse effect of this temporary slowdown, we managed to generate a net profit and a positive cash flow from operations during the quarter. The individual projects we performed during this period continued to deliver a strong level of gross margin, which partially offset the under-absorption of our fixed costs resulting from the slow start during the quarter," said Jean-Pierre Charmensat, Vice-CEO and Chief Financial Officer of Foraco. "We are also confident that the integration of Adviser Drilling SA will be financially accretive, and will generate significant synergies on both short and long term."Financial ResultsForaco's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"), rather than Canadian Generally Accepted Accounting Principles ("Canadian GAAP"), and as such may not be directly comparable to the financial statements of other Canadian issuers. << (In thousands of (pnds stlg)) Three-month % chance Three-month ----------- -------- ----------- period ended period ended ------------ ------------ (unaudited) March 31, 2010 March 31, 2009 -------------- -------------- Reporting segment ----------------- Mining....................... 13,664 -13% 15,665 Water........................ 4,151 -38% 6,710 ----- ---- ----- Total revenue................ 17,815 -20% 22,375 ------ ---- ------ ------ ---- ------ Geographical region ------------------- Africa....................... 8,236 -31% 11,902 Europe....................... 434 -83% 2,589 Asia Pacific................. 4,069 164% 1,539 Americas..................... 5,076 -20% 6,345 ----- ---- ----- Total revenue................ 17,815 -20% 22,375 ------ ---- ------ ------ ---- ------ >> For the three-month period ended March 31, 2010, revenue totaled (pnds stlg)17.8 million compared to (pnds stlg)22.4 million for the three-month period ended March 31, 2009.The decrease in revenue in the Mining segment amounted to (pnds stlg)2.0 million or 13%. This trend was observed at the very end of the last quarter of 2009 and during the first half of the three-month period ended March 31, 2010. This decrease can be explained by (i) a (pnds stlg)2.2 million decrease in Europe explained by the completion as scheduled of a significant contract in northwestern Russia in November 2009 and (ii) the slow start for mining activity in Canada (decrease of (pnds stlg)1.3 million) and in Africa (decrease of (pnds stlg)1.3 million) where the Company relocated equipment to mobilize new contracts. This decrease was only partially offset by (pnds stlg)2.5 million of revenue in Asia Pacific generated during the first quarter of 2010.The new contracts which required mobilization in the Mining segment started generating revenue at the end of the quarterIn the Water segment, revenue decreased by 38%, from (pnds stlg)6.7 million during the first quarter of 2009 to (pnds stlg)4.2 million in 2010. This decrease is attributed to the postponement of the starting date of some important water projects in the Sub-Saharan region of Africa. These projects had resumed by the end of the quarter.After this period of lower activity from the end of 2009 to February 2010, the utilization rate in March 2010 returned to a level comparable to that of the first quarter of 2009. << ------------------------------------------------------------------------- Gross Profit Q1 ------------------------------------------------------------------------- (In thousands of (pnds stlg)) Three-month % Chg Three-month (unaudited) period ended period ended March 31, 2010 March 31, 2009 ------------------------------------------------------------------------- Reporting segment Mining 2,805 -38% 4,531 Water, 1,120 -43% 1,959 ----- ---- ----- Total gross profit 3,925 -40% 6,490 ----- ---- ----- ----- ---- ----- ------------------------------------------------------------------------- >> For the three-month period ended March 31, 2010, gross profit decreased by (pnds stlg)2.6 million (from (pnds stlg)6.5 million to (pnds stlg)3.9 million). This decrease in gross profit results from the impact of the reduced activity which generated (i) a lower level of gross profit ((pnds stlg)1.3 million) although most of the contracts have experienced an operational performance comparable to that of the same quarter last year, and (ii) an under-absorption of fixed operational costs ((pnds stlg)0.9 million). In addition, depreciation expenses increased by (pnds stlg)0.3 million. Depreciation expenses represented 12.3% of revenue during the first quarter of 2010 compared to 8.0% in the same quarter last year. << ------------------------------------------------------------------------- Operating Expenses Q1 (excluding cost of sales) ------------------------------------------------------------------------- (In thousands of (pnds stlg)) Three-month % Three-month (unaudited) period ended Chg period ended March 31, 2010 March 31, 2009 ------------------------------------------------------------------------- Selling, general and administrative 2,790 10% 2,530 Other (income) and expense, net (23) N/S (120) Total operating expenses 2,767 15% 2,412 ----- --- ----- ----- --- ----- ------------------------------------------------------------------------- >> For the three-month period ended March 31, 2010, the increase in operating expenses (excluding cost of sales) could be limited to (pnds stlg)0.4 million in spite of the inclusion of the SG&A costs of Mosslake ((pnds stlg)0.3 million) and of certain transaction costs related to the acquisition of Adviser ((pnds stlg)0.2 million). << ------------------------------------------------------------------------- (In thousands of (pnds stlg)) Three-month % Three-month (unaudited) period ended period ended March 31, 2010 Chg March 31, 2009 ------------------------------------------------------------------------- Reporting Segment Mining & Energy 683 -76% 2,844 Water, Environmental & Infrastructure 475 -62% 1,236 --- ---- ----- Total Operating Profit 1,158 -72% 4,080 ----- ---- ----- ----- ---- ----- ------------------------------------------------------------------------- >> Operating profit decreased to (pnds stlg)1.2 million for the three months ended March 31, 2010, compared to (pnds stlg)4.1 million for the three months ended March 31, 2009. This variation is primarily due, on the one hand, to the lower level of activity and its impact on gross profit and on the other, to the aforementioned increase in Selling, General and Administrative expenses. << ------------------------------------------------------------------------- Income Q1 ------------------------------------------------------------------------- (In thousands of (pnds stlg)) Three-month % Three-month (unaudited) period ended Chg period ended March 31, 2010 March 31, 2009 ------------------------------------------------------------------------- Revenue 17,815 -20% 22,375 Gross Profit(1) 3,925 -40% 6,490 Operating Expenses(2) 2,767 2% 2,410 Operating Profit 1,158 -72% 4,080 Net Earnings 767 -71% 2,715 EPS before minority interests in (pnds stlg) (basic and diluted) (pnds stlg)0.01 (pnds stlg)0.05 ------------------------------------------------------------------------- (1) Includes amortization and depreciation expenses (2) Excludes cost of sales >> Net financial expenses totaled (pnds stlg)0.1 million for the three-month period ended March 31, 2010, compared to nil for last year's corresponding period.Balance SheetAs at March 31, 2010, the positive cash position net of debt amounted to (pnds stlg)5.5 million compared to (pnds stlg)9.4 million as at December 31, 2009. Cash and cash equivalents are mainly comprised of (pnds stlg)10.1 million of short-term deposits held at top-tier European financial institutions. The Company had drawn (pnds stlg)1.1 million from a total of (pnds stlg)22.6 million in available short-term credit facilities.Currency and Exchange RateThe average exchange rate between (pnds stlg) and C$ in Q1 2010 was C$1.44 to (pnds stlg)1.00. The closing rate at the end of March 31, 2010, was C$1.37 to (pnds stlg)1.00.OutlookThe Company's business strategy is to continue to grow through the development and optimization of its service offering across geographical regions and industry segments, as well through the expansion of its customer base. Foraco expects it will continue to execute its strategy through a combination of organic growth and development, and acquisitions of complementary businesses in the drilling services industry.Foraco's unaudited Financial Statements and Management's Discussion & Analysis ("MD&A"), for the three month periods ended March 31, 2010, are available via Foraco's website at www.foraco.com and will be available on www.sedar.com.Conference Call and WebcastOn Tuesday, May 11th 2010 at 10:00 am EDT, Management of the Company will host a conference call to review these financial results. The call will be hosted by Daniel Simoncini, Chairman and CEO, and Jean-Pierre Charmensat, Vice-CEO and CFO. You can join the call by dialing 1 - 888 231 - 8191 or 647-427-7450. Please call in 15 minutes prior to the call to secure a line. 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://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3064820 or at www.foraco.com.Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be needed to hear the webcast. An archived replay of the webcast will be available for 90 days.About Foraco International SAForaco International SA (TSX: FAR) is a global leading drilling services company that provides turnkey solutions for mining, energy, water and infrastructure projects. Supported by its founding values of integrity, innovation and involvement, Foraco has grown into a global enterprise with operations in 20 countries across five continents. For more information about Foraco, visit www.foraco.com.To receive Company press releases, please email jennie@chfir.com and mention "Foraco News" on the subject line."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, 2010, 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.%SEDAR: 00025480EFor further information: please contact CHF Investor Relations at: Jeanny So, Director of Operations, Email: jeanny@chfir.com, Tel: (416) 868-1079 x 225