Release Date: April 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Foraco International SA (FRACF, Financial) is experiencing strong growth in its water business, with plans to deploy two additional industry-leading NGBF rigs.
- Revenue in the Asia Pacific region increased by 39%, reflecting successful deployment of new proprietary rigs.
- The company has improved its working capital needs to USD7 million compared to USD27 million for the same period last year.
- Foraco's debt, including obligations, improved to USD69 million from USD85 million year-over-year.
- The company is seeing a robust tender pipeline in the US and is confident about securing significant projects soon.
Negative Points
- Q1 2025 revenue decreased to USD55 million from USD77 million in Q1 2024, primarily due to project delays and exits from certain regions.
- Gross margin decreased to 14% of revenue from 22% in the same period last year, impacted by the phasing and ramp-up of new contracts.
- EBITDA fell to USD3 million from USD13 million in Q1 2024, indicating a significant decline in profitability.
- The company faced a 33% revenue decrease in North America due to project delays with Tier 1 clients.
- Utilization rates were low, particularly in Latin America, due to project wrap-ups and staggered starts of new projects.
Q & A Highlights
Q: The year-over-year decline in North America was unexpected. Can you clarify if this is due to slow rollout of new contracts or lost contracts?
A: There are no lost contracts. The decline is due to some current contracts not restarting as expected and temporary suspensions by customers due to internal factors. No significant contracts were lost. - Tim Bremner, CEO
Q: How much of the revenue decline is related to junior financing versus other factors?
A: Very little, as the junior segment is not a significant part of our portfolio. The decline is not materially related to junior financing. - Tim Bremner, CEO
Q: What growth rate should we forecast for South America for the rest of the year?
A: We don't provide specific guidance, but we expect improvement after a difficult Q1. The decline is more weighted to the first quarter, and we anticipate better performance moving forward. - Tim Bremner, CEO
Q: Can you discuss the pipeline of activity in North and South America for Q2?
A: The pipeline remains strong, especially in the gold sector. The US and Latin America have good pipelines, but the junior sector remains quiet. We are not relying on improvements from the junior sector. - Tim Bremner, CEO
Q: Can you elaborate on the proactive measures to adapt the cost structure to preserve margins?
A: We align costs with project timelines, reducing labor and support costs when projects end. We manage costs prudently and proactively to match market changes. - Tim Bremner, CEO
Q: What was the revenue by commodity for the quarter?
A: Water was 21%, Gold 18%, Copper 24%, Nickel 17%, Iron 15%, Steelmaking 3%, Other 2%, and Lithium 1%. - Tim Bremner, CEO
Q: What are your capital allocation priorities for 2025, including CapEx and leverage reduction?
A: Our priorities remain unchanged, focusing on debt reduction of USD14 million, followed by CapEx. There will be no dividend for 2025. - Tim Bremner, CEO
Q: Are you confident in accessing qualified labor to meet increased drilling demand?
A: We are confident in our ability to attract qualified labor. Foraco is a desirable employer in the sector, and we are successfully rehiring as we ramp up operations. - Tim Bremner, CEO
Q: Are there opportunities to move rigs to regions with better drilling demand prospects?
A: Yes, we are actively relocating rigs. For example, a new rig is being shipped to Latin America, and two rigs have already moved from Canada to Latin America. - Tim Bremner, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
