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Press release from CNW Group

Foraco International Reports Q3 2011

Tuesday, November 08, 2011

Foraco International Reports Q3 201106:00 EST Tuesday, November 08, 2011Q3 Revenue up 59% at US$ 82.4 million, Net Earnings up 100% at US$ 8.7 million, EPS up 178% at US$ 9.45 centsTORONTO, Ontario / MARSEILLE, France, Nov. 8, 2011 /CNW/ - Foraco International SA (TSX: FAR) (the "Company" or "Foraco"), a leading global provider of diversified drilling services, today reported unaudited financial results for its third quarter 2011. All figures are reported in US Dollars (US$), unless otherwise indicated."We are pleased to report an excellent quarter with a record high activity and a growing profitability throughout all our segments and regions. We have now successfully completed the integration of all of our operations and have improved our EBIT by more than 610 base points over the last four quarters, reaching 15.7% in Q3 2011" said Daniel Simoncini, Chairman and CEO of Foraco. "Despite the financial markets current volatility and the softening of some metal prices during the summer, our commercial activity has been intense over the quarter. Our customers are maintaining their plans going forward and continue to demand more drilling services.""The Company has continued a significant capital expenditure programme during the quarter. At the end of September it was operating 188 drill rigs, with seven new additions in Q3 and the retirement of five. It is the Company policy to maintain a modern fleet of rigs in order to keep up in terms of safety and performance, and half of our fleet is under 5 years old," continued Jean-Pierre Charmensat, co-CEO and CFO of Foraco. "Despite this significant CAPEX programme, our cash position has actually improved as a result of the Company's strong financial performance and control. The net debt has been decreased to US$ 31.5 million, or 47% of our TTM EBITDA. Going forward we are cautiously optimistic and are gearing up to sustain solid activity in the coming quarters."Three Months Q3 2011 HighlightsIncreased Revenue Q3 2011 revenue increased by 59% to US$ 82.4 million from US$ 52.0 million in Q3 2010, representing US$ 30.4 million in organic growth.Increased ProfitabilityQ3 2011 gross profit including depreciation within cost of sales amounted to US$ 19.7 million, an increase of US$ 8.0 million or 68% on Q3 2010.Q3 2011 EBITDA amounted to US$ 20.7 million (25.1% of revenue) compared to US$ 12.4 million in Q3 2010 (23.9% of revenue).Q3 2011 net profit after tax amounted to US$ 8.7 million, an increase of US$ 4.3 million or double the Q3 2010 equivalent.Q3 2011 earnings per share amounted to 9.45 US$ cents (basic) and 9.38 US$ cents (diluted), compared to 3.39 US$ cents (basic) and 3.35 US$ cents (diluted) as reported in Q3 2010.Nine months YTD Q3 2011 HighlightsIncreased Revenue YTD Q3 2011 revenue amounted to US$ 226.0 million compared to US$ 112.4 million in YTD Q3 2010, an increase of 101% or US$ 113.6 million.The US$ 113.6 million increase is primarily the result of:US$ 67.9 million in organic growth,US$ 45.7 million in revenue from South America for the five-month period ended May 31, 2011 (US$ 29.4 million for the same period in 2010 before acquisition).Increased ProfitabilityYTD Q3 2011 gross profit including depreciation within cost of sales amounted to US$ 52.5 million, an increase of US$ 26.7 million or 103% on YTD Q3 2010.YTD Q3 2011 EBITDA amounted to US$ 55.4 million (24.5% of revenue) compared to US$ 26.1 million in YTD Q3 2010 (23.2% of revenue).YTD Q3 2011 net profit after tax amounted to US$ 23.2 million, an increase of US$ 15.2 million or 100% on YTD Q3 2010.YTD Q3 2011 earnings per share amounted to 25.75 US$ cents (basic) and 25.57 US$ cents (diluted), compared to 8.08 US$ cents (basic) and 7.96 US$ cents (diluted) as reported in YTD Q3 2010.Selected Financial Data(In thousands of US$)(unaudited) Three-month period ended September 30, Nine-month period ended September 30,   2011 2010 2011 2010             Revenue  82,408 51,992  225,997 112,431                         Gross profit (1)  19,705 11,741  52,547 25,894 As a percentage of sales  23.9% 22.6%  23.3% 23.0%             EBITDA  20,698 12,401  55,381 26,126 As a percentage of sales  25.1% 23.9%  24.5% 23.2%             Operating profit  12,938 6,515  33,339 11,933 As a percentage of sales  15.7% 12.5%  14.8% 10.6%             Profit for the period  8,652 4,319  23,163 7,965             EPS (in US$ cents)           Basic  9.45 3.39  25.75 8.08 Diluted  9.38 3.35  25.57 7.96 (1)     includes amortization and depreciation expensesFinancial 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.Revenue(In thousands of US$)(unaudited)Q3 2011 % change Q3 2010 YTD Q3 2011 % change YTD Q3 2010            Revenue                       Reporting segment           Mining 79,994 61% 49,810 214,063 118% 97,998Water 2,414 11% 2,182 11,934 -17% 14,432Total revenue 82,408 59% 51,992 225,997 101% 112,430            Geographic region           South America 29,834 54%     19,344 86,204 224%     26,586Africa 15,709 78% 8,819 51,047 45% 35,177North America 16,522 76% 9,397 43,698 97% 22,147Asia Pacific 10,021 56% 6,423 23,588 36% 17,392Europe 10,322 29% 8,009 21,461 93% 11,129Total revenue 82,408 59% 51,992 225,997 101% 112,430            Q3 2011Q3 2011 revenue amounted to US$ 82.4 million, an increase of US$ 30.4 million or 59% compared to Q3 2010. This quarter is the first comparable period since the integration of the South American and Russian operations at the end of May 2010.The Mining segment, up US$ 30.2 million, was driven by the contribution of all geographic areas benefiting from a strong worldwide demand.The Water segment was stable at US$ 2.2 million in Q3 2011 compared to US$ 2.4 million in Q3 2010. Activities in this segment are principally carried out in Africa.Revenue in South America amounted to US$ 29.8 million in Q3 2011 (US$ 19.3 million in Q3 2010) an increase of 54%. This was mainly generated by (i) a better utilization rate of equipment linked to strong demand (ii) a relocation of certain rigs within the region and (iii) 9 additional drills on long-term contracts with major companies in Chile.In Africa, the Q3 2011 revenue increased by US$ 6.9 million or 78% compared to Q3 2010. This is mainly due to the development of mining operations in West Africa. The Water segment was stable during the quarter.As a result of the strong market conditions in Canada, revenue in North America increased by 76% to US$ 16.5 million in Q3 2011 from US$ 9.4 million in Q3 2010. This increase is mainly due to the execution of contracts with major companies.In Asia-Pacific, Q3 2011 revenue amounted to US$ 10.0 million, an increase of US$ 3.6 million or 56% compared to Q3 2010. Both Australia and New Caledonia contributed to this increase. In Australia, as a result of its capital expenditure program, the Company started operations with 2 new drills for Reverse Circulation contracts.Revenue in Europe increased by US$ 2.3 million in Q3 2011 compared to Q3 2010, or 29% due to strong demand and an additional drill compared to Q3 2010. Here again, the activity is significantly higher than last year.Nine months YTD Q3 2011YTD Q3 2011 revenue amounted to US$ 226.0 million, an increase of 101% compared to YTD Q3 2010 (US$ 112.4 million).The Mining segment, up US$ 116.0 million or 118%, is driven by the contribution of operations in South America (US$ 86.2 million in YTD Q3 2011 compared to US$ 26.6 million in YTD Q3 2010) and a generally strong demand from which all operations benefited worldwide (US$ 56.4 million increase in revenue).Water segment revenue decreased by 17% from US$ 14.4 million to US$ 11.9 million in YTD Q3 2011. Activities in this segment are principally carried out in Africa.Revenue in South America amounted to US$ 86.2 million in YTD Q3 2011 compared to US$ 26.6 million in YTD Q3 2010 which represented only four month's activity. Revenue is high when compared to South America on an equivalent pro forma nine-month basis for YTD Q3 2010 (US$ 56.0 million). It is generated by long-term contracts with major companies in Chile.In Africa, the YTD Q3 2011 revenue increased by US$ 15.9 million or 45% compared to YTD Q3 2010. This is mainly the result of the Company's strategy to develop its mining operations in West Africa. The Water segment, decreased by US$ 2.5 million or 17% during the period due to the political turmoil in Ivory Coast in the first part of the year where the Company had to stop its operations, and in other countries some contracts ended during Q2 2011. New developments in the water segment are expected, in relation to the needs of the mining clients.As a result of the continuing improvements in market conditions in Canada during the year, revenue in North America increased by 97% to US$ 43.7 million in YTD Q3 2011 from US$ 22.1 million in YTD Q3 2010. Greater demand from the oil sands activity in central Canada and the development of long-term contracts with major companies in Western Canada and Ontario contributed to this increase.In Asia-Pacific, YTD Q3 2011 revenue amounted to US$ 23.6 million, an increase of US$ 6.2 million or 36% compared to YTD Q3 2010. Both Australia and New Caledonia contributed to this increase.Revenue in Europe amounted to US$ 21.5 million in YTD Q3 2011, an increase of US$ 10.3 million (or 93%) compared to YTD Q3 2010 due to the early restart of operations in Russia where all rigs were in operation during the second and third quarter. Revenue is high when compared to EDC on an equivalent pro forma nine-month basis for YTD Q3 2010 (US$ 13.8 million).Gross Profit(In thousands of US$)(unaudited) Q3 2011 % change Q3 2010 YTD Q3 2011 % change YTD Q3 2010Gross profit            Reporting segment            Mining  19,171 70% 11,275 49,866 124% 22,236Water  534 15% 466 2,681 -27% 3,658Total gross  profit  19,705 68% 11,741 52,547 103% 25,894Q3 2011Overall, Q3 2011 gross profit amounted to US$ 19.7 million (or 24% of revenue), an increase of US$ 8.0 million or 68% compared to Q3 2010 (US$ 11.7 million or 23% of revenue).In the mining segment, gross profit as a percentage of revenue is improving in all regions.In the Water segment, gross profit margins were stable.Overall, the Group is still focused on risk management when entering new contracts, on optimizing the use of its production equipment through long-term contracts, and on the proper execution of contracts.9 months YTD Q3 2011For the nine-month period ended September 30, 2011, gross profit amounted to US$ 52.5 million (or 23.3% of revenue), an increase of US$ 26.7 million or 103% compared to YTD Q3 2010 (US$ 25.9 million or 23.0% of revenue).In general, contracts performed well worldwide in the Mining segment.In the Water segment, gross profit margins decreased by 27% mainly due to the low level of activity during Q2 2011 which reduced the Company's capacity to absorb fixed costs.Selling, general and administrative expenses (SG&A)(In thousands of US$)(unaudited)Q3 2011 % change Q3 2010 YTD Q3 2011 % change YTD Q3 2010            Selling, general and administrative  expenses      6,744 29% 5,247 19,185 35% 14,207As a percentage of revenue 8%   10% 8%   13%Q3 2011Q3 2011 SG&A amounted to US$ 6.7 million, an increase of US$ 1.5 million or 29% compared to Q3 2010. As a percentage of revenue, SG&A are now 8% of revenue in Q3 2011 as compared to 10% of revenue in Q3 2010. As anticipated, SG&A as a percentage of revenue decreased as a result of the profitable growth strategy implemented by the Company.9 months YTD Q3 2011For the nine-month period ended September 30, 2011, SG&A amounted to US$ 19.2 million, an increase of US$ 5.0 million or 35% compared to the same period a year ago. As a percentage of revenue, SG&A are now 8% of revenue in YTD Q3 2011 as compared to 13% of revenue in YTD Q3 2010. As anticipated, SG&A as a percentage of revenue decreased as a result of the profitable growth strategy implemented by the Company.Operating profit(In thousands of US$)(unaudited)Q3 2011 % change Q3 2010 YTD Q3 2011 % change YTD Q3 2010Operating profit           Reporting segment           Mining  12,602 102% 6,248 31,690 208% 10,293Water 336 26% 267 1,649 - 1,640Total operating profit  12,938 99% 6,515 33,339 179% 11,933Q3 2011Operating profit increased to US$ 12.9 million (or 15.7% of revenue) in Q3 2011 compared to US$ 6.5 million (or 12.5% of revenue) in Q3 2010. This variation is primarily due to the satisfying level of gross margin, together with the reduction of SG&A as a percentage of revenue.9 months YTD Q3 2011Operating profit increased to US$ 33.3 million in YTD Q3 2011 compared to US$ 11.9 million in YTD Q3 2010. This variation is primarily due to the satisfying level of gross margin, together with the reduction of SG&A as a percentage of revenue.Currency and Exchange RatesThe exchange rates for the periods under review are provided in the Management's Discussion and Analysis of Q3 2011.OutlookThe Company's business strategy is to continue to deliver profitable growth through the development and optimization of the services it offers across geographical regions and industry segments, as well through the expansion of its customer base. Foraco expects to 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 period ended March 31, 2011 are available via Foraco's website at www.foraco.com and will be available on www.sedar.com.Conference Call and WebcastOn November 8, 2011, 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 CEO, and Jean-Pierre Charmensat, Vice-CEO and CFO.You can join the call by dialing 1-888-231-8191 or 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://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3715800 or on our website.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 SA Foraco 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 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 31, 2011, 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. For further information: Sonia Tercas, Manager, Investor Relations Email:tercas@foraco.com Tel: (647) 351-5483