Foraco International SA (TSX: FAR), a leading global provider of diversified drilling services, today announced its financial results for the three and nine-month periods ended September 30, 2008.
Foraco's financial statements are prepared in accordance with International Financial Reporting Standards, rather than Canadian Generally Accepted Accounting Principles, and as such may not be directly comparable to the financial statements of other Canadian issuers. All figures are reported in Euros (euro), unless otherwise indicated.
Q3 2008 Highlights
- Revenue was stable at (euro)20.5 million compared to (euro)20.4 million in Q3 2007
- Gross profit increased 5% to (euro)6.2 million from (euro)5.9 million in Q3 2007
- Net earnings were stable at (euro)2.4 million, or (euro)0.04 per share (basic and diluted), comparable to Q3 2007
"Despite slowing business activity in certain areas during the quarter, we maintained our revenues at a steady level, led by our Mining & Energy segment which grew by 8%. We did experience postponement or cancellation of certain projects by some of our junior mining clients in western Canada and the United States during the quarter, but we were able to achieve this segment growth due to our predominant exposure to large mining companies," said Daniel Simoncini, Chairman and Chief Executive Officer of Foraco. "We currently generate approximately 80% of our consolidated revenue from major mining clients, and multinational institutions such as the European Development Fund. We believe our unique capability to combine in one package different types of drilling techniques, such as core drilling, large diameter bulk sampling holes and water wells is becoming more and more attractive to the mining majors. Looking ahead, we are confident that our strategy of focusing on the development of long-term relationships with the mining majors, maintaining a diversified revenue split between various geographical areas and different commodities, together with a significant portion of our revenue generated in our Water & Infrastructure segment, will help mitigate the impact of the current economic conditions on our business."
"Our gross margin, which includes depreciation expense in cost of goods sold, increased to 30.0% in the quarter, up from 28.7% in the third quarter a year ago, reflecting a greater contribution to consolidated revenue from our higher margin Mining & Energy segment." said Jean-Pierre Charmensat, Vice-CEO and Chief Financial Officer of Foraco. "We continue to carefully monitor our operations and remain attentive to evolving market conditions and to potential opportunities to strategically allocate our resources where the greatest value opportunities exist. Our recent acquisition of Northwest Sequoia Drilling strengthens our large diameter and rotary drilling service offering and further enhances our competitive position in our Mining & Energy segment. Given current market conditions, we are pleased to confirm that we are generating solid operating cash flow and have a strong financial position with (euro)16.4 million in cash and equivalents, after our recent Northwest Sequoia Drilling Ltd. acquisition, and a cash (net of debt) to equity ratio of 0.19 which provides us flexibility going forward."
Three-month period ended September 30, 2008
Revenue for the three-month period ended September 30, 2008 was stable at (euro)20.5 million, compared to (euro)20.4 million in the third quarter of 2007. The Company's 8.0% revenue growth in the Mining & Energy segment was achieved primarily through increased project activity in Africa and Asia Pacific (New Caledonia). Revenue from Foraco's Water, Environmental & Infrastructure segment decreased by (euro) 1.4 million in the quarter, mainly due to the phasing out of certain water drilling projects in Europe. For the third quarter of 2008, revenue derived from Foraco's operations in Africa and Asia Pacific increased to (euro)8.5 million and (euro)2.1 million respectively, up from (euro)7.6 million and (euro)1.8 million respectively in the third quarter a year ago. In North America, Foraco's revenue decreased to (euro)8.6 million in the third quarter of 2008 compared to (euro)8.9 million in the same period a year ago, primarily due to the cancellation or postponement of certain projects in the Mining & Energy segment both in western Canada and the United States.
Gross profit (including depreciation) for the three-month period ended September 30, 2008 increased 4.8% to (euro)6.2 million, or 30.0% of revenue, compared to gross profit (including depreciation) of (euro)5.9 million, or 28.7% of revenue, in the third quarter a year ago. Increased gross profit and margin for the third quarter of 2008 reflects Foraco's performance in the Mining & Energy segment during the period.
Selling and marketing expenses, and general and administrative expenses, for the third quarter of 2008 totaled (euro)2.4 million, or 11.5% of revenue, compared to (euro)2.1 million, or 10.2% of revenue, in the third quarter of 2007. This increase in expenses reflects the Company's increased business development activity, ongoing costs related to the public listing of the Company, and initiatives to further strengthen corporate organization and controls.
Operating profit totaled (euro)3.8 million (or 18.5% of revenue) for the third quarter of 2008 compared to (euro)3.6 million (or 17.9% of revenue) a year ago.
Net earnings for the third quarter of 2008 were stable at (euro)2.4 million, or (euro)0.04 per share (basic and diluted), compared to net earnings of (euro)2.4 million, or (euro)0.04 per share (basic and diluted) in the third quarter a year ago.
Nine-month period ended September 30, 2008
Revenue for the nine-month period ended September 30, 2008 increased 23% to (euro)67.7 million, compared to (euro)55.0 million in the corresponding period a year ago. The Company achieved 33% revenue growth in its Mining & Energy segment, while its Water, Environmental & Infrastructure segment revenue decreased 3.0% mainly due to the phasing out of certain water drilling projects in Europe. At the end of September 2008, Foraco's revenue derived from its operations in North America, Europe and Africa increased to (euro)23.8 million, (euro)5.8 million and (euro)33.0 million respectively, up from (euro)18.9 million, (euro)4.4 million and (euro)26.5 million respectively in the same period of 2007.
Gross profit (including depreciation) for the nine-month period ended September 30, 2008 increased 35.4% to (euro)20.6 million, or 30.3% of revenue, compared to gross profit (including depreciation) of (euro)15.2 million, or 27.6% of revenue, in the first nine months of 2007. Increased gross profit reflects Foraco's strong revenue growth and the improvement in profitability in both its business segments during the period.
Selling and marketing expenses, and general and administrative expenses, for the first nine months of 2008 totaled (euro)7.2 million, or 10.7% of revenue, compared to operating expenses of (euro)5.8 million, or 10.5% of revenue, in the same period of 2007. This increase in expenses reflects the Company's increased business development activity, ongoing costs related to the public listing of the Company, and initiatives to strengthen corporate organization and controls.
Operating profit for the first nine months of 2008 totaled (euro)13.2 million (or 19.4% of revenue) compared to (euro)8.6 million (or 15.6% of revenue) in the same period a year ago.
Net earnings for the first nine months of 2008 increased 58.5% to (euro)8.4 million, or (euro)0.15 per share (basic) and (euro)0.14 per share (diluted), compared to (euro)5.3 million, or (euro)0.11 per share (basic and diluted) in the same period of 2007.
For the nine-month period ended September 30, 2008, cash flow from operations before changes in working capital increased 30.8% to (euro)17.4 million compared to (euro)13.3 million in the first nine months of 2007.
As at September 30, 2008, Foraco had cash and cash equivalents of (euro)16.4 million compared to (euro)23.3 million as at December 31, 2007. This decrease in cash and cash equivalents was primarily attributable to: cash consideration paid in the Company's acquisition of Northwest Sequoia Drilling; increased working capital requirements; and the purchase of 1.5 million common shares from a single non-resident shareholder, a portion of which were used to fund the Northwest Sequoia Drilling acquisition. -- www.cnxmarketlink.com
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