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Press release from CNW Group

Aecon reports second quarter 2011 results

Tuesday, August 02, 2011

Aecon reports second quarter 2011 results17:54 EDT Tuesday, August 02, 2011Revenues and operating profit up, strong outlook reaffirmedTORONTO, Aug. 2, 2011 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported its results for the second quarter of 2011.HighlightsSecond quarter revenues reached $758 million (vs. $680 million in same quarter of 2010), with gains reported in each segment.EBITDA increased to $29.0 million ($22.0 million in 2010) in the quarter and operating profit grew to $13.9 million ($10.6 million in 2010), largely due to stronger results in the Infrastructure segment.Adjusted earnings per share of $0.07 in the quarter ($0.10 in 2010) reflects increased equipment depreciation and financing costs associated with the launch of Aecon Mining and convertible debentures issued in the fourth quarter of 2010.The key market factors shaping Aecon's outlook at the beginning of the year remain largely in place, reaffirming Aecon's positive outlook for the second half of 2011 and 2012.  Three Months Ended June 30 (1)        Six Months Ended         June 30 (1)$ millions, except per share amounts 2011 2010   2011 2010           Revenues$758$680  $1,271$1,106Gross profit 48.9 51.6   65.1 72.0EBITDA (2) 29.0 22.0   14.9 19.5Depreciation and  amortization (15.1) (11.4)   (29.7) (21.4)Operating profit (loss) (3) 13.9 10.6   (14.8) (1.9)Financing charges, net (6.9) (2.9)   (13.3) (6.5)Fair value gain (loss) on debentures (4.8) 2.0   2.9 10.3Income tax recovery (expense) 0.1 (1.7)   7.2 1.8Profit (loss) attributable to shareholders 0.7 7.2   (20.8) 1.8Adjusted profit (loss) attributable to shareholders (4) 4.1 5.7   (22.9) (5.6)Adjusted earnings (loss) per share (diluted) (5) 0.07 0.10   (0.42) (0.10)Backlog - June 30$2,181$2,722      (1)     Prior period results have been restated to an IFRS basis and therefore are comparable with the current period.(2)     EBITDA represents earnings or losses before net financing expense, income taxes, depreciation and amortization, and non-controlling interests.(3)     Operating profit (loss) represents the profit (loss) from operations before net financing expense, income taxes and non-controlling interests.(4)     Adjusted profit (loss) attributable to shareholders represents the profit (loss) attributable to shareholders adjusted to exclude the after-tax fair value gain (loss) on the embedded derivative portion of Aecon's convertible debentures.(5)     Adjusted earnings (loss) per share (diluted) represents earnings (loss) per share calculated using adjusted profit (loss) attributable to shareholders.Outlook, Backlog and New Business Awards"I believe that Aecon's position of strength in key markets and the bright future of Canada's infrastructure, resources and power markets, combined with our focus on project execution and risk management, will result in the strengthening of Aecon's financial performance in the second half of 2011 and through 2012," said John M. Beck, Aecon's Chairman and CEO.New contract awards of $641 million in the quarter compare to $1.3 billion in the same quarter last year, reflecting the fact that two of Aecon's largest-ever project awards were received in the second quarter of 2010. In the same context, backlog at June 30, 2011 was $2.2 billion, compared to $2.7 billion a year earlier.Not included in backlog but important to Aecon's prospects due to the significant volumes involved are the expected revenues from Aecon's growing alliances and supplier-of-choice arrangements, including for example most of Aecon's mining and utilities businesses, where the value and/or timing of work to be carried out is not specified.Second Quarter Business HighlightsIn May, Aecon announced that a joint venture in which Aecon is a 40% partner was awarded a $150 million contract for the Port Mann main water supply tunnel in Vancouver.Also in May, Aecon announced that it had been awarded contracts totalling $26 million for construction services at two natural gas compressor stations in Ontario owned by Union Gas.In July, Aecon announced that it had been awarded contracts totalling $64 million for construction services on Highway 400, north of Barrie, Ontario, and Highway 407 ETR, north of Toronto.Throughout the quarter, Aecon continued to purchase shares under a normal course issuer bid, launched in March of this year that enables it to purchase up to 5,527,277 common shares of Aecon over a 12-month period. At June 30, 2011, Aecon had acquired an aggregate of 891,100 common shares, all of which were subsequently cancelled.Segmented Results Aecon reports its results in three operating segments: Infrastructure, Industrial and Concessions.  The Buildings division, previously a segment reported separately, now forms part of Aecon's Infrastructure segment.Infrastructure The Infrastructure segment includes all aspects of civil construction from highways, bridges and tunnels to airports, marine facilities, transit and power projects as well as utilities construction, buildings construction and mining operations.Financial Highlights (1)(2)($ millions)Three MonthsEnded June 30 Six MonthsEnded June 30  2011 2010    2011 2010  Revenues$398$363   $  657$  600  EBITDA 9.9 (5.4)    (12.1) (18.7)  Segment operating profit (loss)  1.4 (11.3)    (29.8) (29.5)  Operating profit margin 0.3% (3.1)%    (4.5)% (4.9)%  Backlog - June 30$1,757$1,850         (1) Segment operating profit or loss represents the profit or loss from operations, before net interest expense, income taxes, non-controlling interests and corporate allocations of overhead costs and capital charges.(2) Operating profit margin is calculated as segment operating profit (loss) as a percentage of revenues.Second quarter revenues of $398 million in the Infrastructure segment were $35 million, or 10%, higher than in the same period last year, with increases from mining, utilities, and civil and materials operations offsetting a decrease in buildings operations.  The increase in mining operations reflects the commencement of operations in August 2010 of Aecon Mining.For the three and six months ended June 30, 2011, the operating results in the Infrastructure segment increased/(decreased) from the same period last year as follows:   ($ millions) Three months ended Six months ended         June 30 June 30Civil and Materials Gain on sale of land in 2010   -  (7.0) Other (0.5)     -Utilities 12.7  16.2Mining (13.1) (18.7)Buildings   13.69.2Increase (decrease) in segment operating profit  12.7  (0.3)Utilities operations benefitted from an improved market this quarter compared to 2010, especially in Ontario.  Aecon Mining is still in ramp-up mode, with its initial maintenance and repair program peaking in the first half of 2011.  As expected, these factors, along with the seasonally slow second quarter due to spring thaw in the oilsands, resulted in an operating loss in Aecon Mining. Aecon Mining is expected to generate an operating profit in the second half of the year.  The reduction in operating losses in Buildings was primarily due to the quarter-over-quarter impact of profit write downs taken on certain projects in 2010.New contract awards of $407 million in the quarter compare to $975 million in the same quarter last year, reflecting the fact that two of Aecon's largest-ever project awards were received in the second quarter of 2010. Similarly, backlog at June 30, 2011 was $1.8 billion, compared to $1.9 billion a year earlier.IndustrialIndustrial operations include all of Aecon's industrial manufacturing and construction activities including in-plant construction, fabrication of specialty pipe, assembly of custom module units and the design and manufacture of once-through heat recovery steam generators.Financial Highlights($ millions)Three MonthsEnded June 30       Six Months     Ended June 30  2011  2010    2011  2010Revenues$335 $298   $569 $468EBITDA 17.7  27.1    25.6  36.4Segment operating profit 13.2  23.9    17.7  30.4Operating profit margin 4.0%  8.0%    3.1%  6.5%Backlog - June 30$424 $872        Second quarter revenues of $335 million in the Industrial segment were $38 million or 13% higher than in 2010.  Most of the increase in revenues came from heavy industrial operations, which benefitted from its exposure to the strong commodities mining sector.  IST also recorded higher revenues in the quarter primarily reflecting the impact of a higher order backlog this year.For the three and six months ended June 30, 2011, operating profit in the Industrial segment increased/(decreased) over the same period last year as follows:    ($ millions)  Three months Six months  ended June 30 ended June 30Heavy Industrial (construction & fabrication)  (10.8)  (14.5)Mechanical  (0.4)    (0.1)IST   0.5       1.9Decrease in segment operating profit (10.7)   (12.7)Most of the decrease in operating profit from heavy industrial operations was due to additional margin reported on the close out of a large project in the second quarter of 2010.  The improvement in IST was mostly as a result of higher volumes in 2011 and from favourable period-over-period foreign exchange rate impacts on earnings.Backlog of $424 million at June 30, 2011 was $448 million lower than last year primarily due to lower backlog in heavy industrial and mechanical operations in Western Canada.  New contract awards of $209 million in the second quarter of 2011 were $81 million lower than in the same period in 2010.  While industrial activity has generally been slower to recover from the impact of the recession than originally anticipated, the outlook for the sector remains strong and backlog levels are expected to build over the next several quarters.ConcessionsThe Concessions segment includes the development, operation and financing of infrastructure projects by way of public-private partnership, build-own-operate-transfer or other alternative financing contract structures.Financial Highlights($ millions)  Three Months   Ended June 30             Six Months          Ended June 30   2011 2010    2011 2010 Revenues$26$21   $49$42 EBITDA 7.1 6.6    13.7 13.2 Segment operating profit 6.3 5.0    12.1 10.2 Operating profit margin 24.1% 24.0%    24.8% 24.4% Most of the revenue increases in 2011 have come from Aecon's interest in the operator of the Cross Israel Highway and other affiliates in Israel.  The higher revenues reflect the addition of two new operations and maintenance contracts in Israel in mid-2010 and higher volumes on the main highway.For the three and six months ended June 30, 2011, operating profit in the Concessions segment increased/(decreased) over the same period last year as follows:   ($ millions) Three months ended Six months ended June 30 June 30Quito Airport Concessionaire 0.9  0.9Operating and Maintenance Services - Israel 0.9  1.5Other (0.5) (0.5) Increase in segment operating profit 1.3  1.9The increase in operating profits from the Quito airport concessionaire is primarily due to lower amortization charges following the extended opening date for the new airport, which at June 30 was approximately 79% complete.  The higher operating profits from Israel reflect the two new operations and maintenance contracts and higher volumes on the main highway.Consolidated ResultsThe Consolidated Results for the three and six months ended June 30, 2011 and 2010 are available at the end of this News Release.Balance Sheet Highlights (thousands of dollars) (unaudited) June 30, 2011  Dec. 31, 2010      Cash and cash equivalents and restricted cash$126,644$308,653Other current assets 863,646 1,010,417Property, plant and equipment 469,422 444,276Other long-term assets 403,762 358,059Total Assets$                 1,863,474$            2,121,405     Current liabilities$791,816$1,075,038Non-recourse project debt 103,868 27,333Other long-term debt 115,552 129,435Convertible debentures 249,849 249,751Other long-term liabilities 179,943 180,250     Equity 422,446 459,598Total Liabilities and Equity$1,863,474$2,121,405Conference CallA conference call has been scheduled for Wednesday, August 3, 2011 at 10:30 a.m. ET to discuss Aecon's 2011 second quarter financial results.  Participants should dial 416-981-9039 or 1-800-741-8620 at least 10 minutes prior to the conference time of 10:30 a.m.  A replay will be available after 12:30 p.m. at 1-800-558-5253 or 416-626-4100 until midnight on August 10, 2011.  The pass code is 21533819.About AeconAecon Group Inc. is Canada's largest publicly traded construction and infrastructure development company. Aecon and its subsidiaries provide services to private and public sector clients throughout Canada and on a selected basis internationally. Aecon is pleased to be recognized as one of the 50 Best Employers in Canada as published by Maclean's Magazine.The information in this press release includes certain forward-looking statements. These "forward-looking" statements are based on currently available competitive, financial and economic data and operating plans but are subject to risks and uncertainties.  In addition to general global events outside Aecon's control, there are factors which could cause actual results, performance or achievements to vary from those expressed or inferred herein including risks associated with an investment in the common shares of Aecon and the risks related to Aecon's business, including Large Project Risk and Contractual Factors. Risk factors are discussed in greater detail in the section on "Risk Factors" in the Annual Information Form filed on March 30, 2011 and available at  Forward-looking statements include information concerning possible or assumed future results of operations or financial position of Aecon, as well as statements preceded by, followed by, or that include the words "believes," "expects," "anticipates," "estimates," "projects," "intends," "should" or similar expressions.  Important factors, in addition to those discussed in this document, could affect the future results of Aecon and could cause those results to differ materially from those expressed in any forward-looking statements.Caution Regarding Non-GAAP Earnings MeasuresThis press release is based on reported earnings in accordance with International Financial Reporting Standards ("IFRS").  It is also based on EBITDA, Operating Profit, Adjusted Profit (Loss) Attributable to Shareholders and Adjusted Earnings (Loss) Per Share.  These non-GAAP measures are derived from the Consolidated Financial Statements but do not have a standardized meaning prescribed by IFRS.  Management believes that a significant number of the users of its Management's Discussion and Analysis ("MD&A") analyze the Corporation's results based on these performance measures and that this presentation is consistent with industry practice.  Backlog is not a recognized performance measure under GAAP and does not have any standardized meaning prescribed by GAAP.  Aecon believes that backlog is a useful complementary measure, commonly used by management and the investment community, to evaluate the Company's projected activity in future periods.  There is no direct comparable measure to backlog in GAAP.  Additional information on Non-GAAP Measures is included in the Company's MD&A. CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010(in thousands of Canadian dollars, except per share amounts) (unaudited)       For the three months ended For the six months ended  June 30 June 30 June 30 June 30  2011 2010 2011 2010             Revenue$758,441 $679,698 $1,270,456 $1,106,012Direct costs and expenses (709,595)  (628,144)  (1,205,362)  (1,034,031)Gross profit 48,846  51,554  65,094  71,981             Marketing, general and administrative expenses (28,167)  (29,986)  (60,228)  (57,040)Depreciation and amortization (15,063)  (11,404)  (29,732)  (21,469)Income (loss) from construction projects accounted for using the equity method 7,147  411  7,910  (1,712)Other income (loss) 1,116  26  2,159  6,303Operating profit (loss) 13,879  10,601  (14,797)  (1,937)             Finance income 1,848  2,895  4,306  5,259Finance costs (8,787)  (5,857)  (17,601)  (11,637)Fair value gain (loss) on convertible debentures (4,761)  2,016  2,879  10,266Profit (loss) before income taxes 2,179  9,655  (25,213)  1,951Income tax (expense) recovery 98  (1,734)  7,249  1,800Profit (loss) for the period$2,277 $7,921 $(17,964) $3,751Attributable to:             Shareholders$678 $7,156 $(20,805) $1,844 Non-controlling interests 1,599   765   2,841  1,907  $2,277  $7,921  $(17,964) $3,751                          Basic earnings (loss) per share$0.01  $0.13  $(0.38) $0.03Diluted earnings (loss) per share$0.01  $0.12  $(0.38) $0.00For further information: Mitch Patten Senior Vice President, Corporate Affairs Aecon Group Inc. 416-297-2615