Odyssey Marine Exploration, Inc. press release
Foraco International Reports Q2 2013
NASDAQ - Nasdaq Stock Market · Phosphate · Gold · Copper · Silver · Zinc · Cobalt · Manganese · Nickel · Rare Earth Elements · United States
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Better quarter. Adapting to the current market reality Q2 Revenue down 30% YoY at US$ 74.6 million with a net loss of US$ 1.1 million
TORONTOAND MARSEILLE, FR, Aug. 6, 2013/CNW/ - Foraco International SA (TSX:FAR) (the "Company" or "Foraco"), a leading global provider of mineral drilling services, today reported unaudited financial results for its second quarter 2013. All figures are reported in US Dollars (US$), unless otherwise indicated.
Three months Q2 2013 Highlights
Revenue
Q2 2013 revenue amounted to US$ 74.6 million compared to US$ 106.6 million in Q2 2012, a decrease of 30%. Excluding the impact of acquisitions performed during fiscal year 2012, revenue decreased by 48% due to the continued low level of exploration activities of mining companies in all regions which has significantly impacted activity since Q4 2012.
Profitability
Q2 2013 gross profit including depreciation within cost of sales was US$ (0.9) million compared to US$ 26.7 million in Q2 2012.
The contraction of activity recorded in all regions resulted in an under absorption of fixed operational cost of US$7.2 million.
The Company incurred US$ 7.4 million of non-recurring costs including redundancy costs amounting to US$ 4.1 with additional one-off costs of US$ 3.3 million, mainly in South America.
Total headcount was reduced by 22% from 2,835 employees as at end of Q1 2013 to 2,219 employees as at end of Q2 2013.
SG&A was reduced from US$ 9.0 million in Q1 to US$ 8.3 million in Q2 with a 15% reduction in Headcount.
In accordance with IFRS an additional operating profit of US$ 9.6 million was recorded in Q2 2013 to reflect the reassessed value of the second tranche payable to Servitec minority shareholders.
Q2 2013 EBIT amounted to US$ 0.5 million compared to US$17.2 million in Q2 2012.
Six months Q2 2013 Highlights
Revenue
H1 2013 revenue amounted to US$ 134.4 million compared to US$ 194.8 million in H1 2012, a decrease of 31% due to the low level of exploration activities of mining companies in all regions which significantly impacted the activity since Q4 2012.
Profitability
H1 2013 gross profit including depreciation within cost of sales was US$ (9.6) million compared to US$ 47.1 million in H1 2012.
The contraction of activity recorded in all regions resulted in an under absorption of fixed operational cost of US$18.0 million.
The Company incurred US$ 17.1 million of non-recurring costs related to redundancy costs and other one off costs.
Total headcount was reduced by 45% from 4,005 employees at the end of Q2 2012 to 2,219 employees at the end of Q2 2013.
In accordance with IFRS an additional operating profit of US$ 18.8 million was recorded in H1 2013 to reflect the reassessed value of the second tranche payable to Servitec minority shareholders.
H1 2013 EBIT amounted to US$ (8.0) million compared to US$ 30.1 million in H1 2012.
"Although the current economic environment still does not show any sign of improvement, positive effects of seasonality have been seen in the second quarter. This has been supplemented by ongoing business development activities and internal synergies that have enabled new technical drilling projects to be started in France, Australia, Brazil, Canadaand Russia. As a consequence and as anticipated last quarter, our utilization rate has improved from 37% in Q1 to 46% in Q2 and all regions except Latin America were profitable in the quarter. In line with the reduced level of industry activity, cost cutting measures continue to be implemented, including the reduction in operational and support headcount by 632 employees during the quarter, a 50% year-on-year decrease. With the two main loss-making contracts in Chileending in Q2, and all of our ongoing contracts performing satisfactorily, we are in a better position", said Daniel Simoncini, Chairman and co-CEO of Foraco, "But our visibility in the demand for services will only improve when the bidding season starts in Q4".
"Costs directly linked to redundancy, other restructuring activities and the ending of the loss-making Chilean contracts have impacted our Q2 result by US$ 7.4 million and our year-to-date result by US$ 17.6 million. With these one-off costs behind us and continued focus on cost control and productivity improvement, we believe that even in the current market conditions our ability to return to profitability has been reestablished," commented Jean-Pierre Charmensat, co- CEO and Chief Financial Officer. "Since the beginning of the year, we have used US$ 5.5 million cash from operations. We are monitoring our cash position through strict capex control and by minimizing working capital requirements. At June 30, 2013, we have cash available amounting to US$ 21.4 million and unused short term available credit lines of US$ 67 million. In addition, we have taken proactive steps to secure the continued support from our lenders regarding our financing needs. It is our intention to achieve a better balance between our short term and long term financing".
Acquisition of businesses
Servitec
On April 20, 2012, the Company completed the acquisition of a 51% shareholding in WFS Sondagem S.A. ("Servitec"), a Brazilian drilling service provider, for an amount of US$ 44.2 million. As part of this agreement, the Company has an option to acquire, and the current minority shareholders of Servitec have an option to sell, the remaining 49% after three years. The corresponding purchase consideration will depend upon a formula based on the average 2012, 2013 and 2014 EBITDA of Servitec and on the net cash as at December 31, 2014. A first estimate at transaction date of the present value of the amount payable was US$ 57.0 million. As a result of the change in market conditions in the last part of FY 2012, the Company has revised this estimate and adjusted the amount payable to US$43.7 million as at December 31, 2012. The further deterioration of these market conditions led the Company to reassess the present value of the amount payable. An adjustment amounting to US$ 9.6 million was accounted for in Q2 2013 (US$ 9.2 million in Q1 2013). The best estimate of the present value of the amount payable is US$ 24.9 million as at June 30, 2013.
Servitec has been consolidated into the Foraco International financial statements since April 20, 2012. The financial statements for the three-month period ended March 31, 2012did not include the contribution of Servitec.
John NitschkeDrilling
On November 19, 2012, the Company acquired a 100% shareholding in John NitschkeDrilling, ("JND"), an Australian drilling service provider, through a combination of AU$ 30 million (US$ 31.2 million) in cash, an earn out amount and up to 7,000,000 warrants giving the right to acquire, for no additional consideration, up to 7,000,000 Foraco International shares. The warrants will be automatically converted in August 2013.
JND has been consolidated into the Foraco International financial statements since November 19, 2012. The financial statements for the three month and six-month periods ended June 30, 2012did not include the contribution of JND.
| | | | | | | | | | | | | Selected financial data | | | | | | | | | | | | | | | | | | | | | | | | (In thousands of US$) (unaudited) | | Three-month period ended June 30, | | Six-month period ended June 30, | | | | | | | | | | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | | | | | | | Revenue | | | 74,628 | | 106,605 | | | 134,423 | | 194,768 | | | | | | | | | | | | | | Gross profit / (loss) (1) | | | (855) | | 26,735 | | | (9,596) | | 47,117 | | As a percentage of sales | | | -1.1% | | 25.1% | | | -7.1% | | 24.2% | | | | | | | | | | | | | | EBITDA | | | 11,062 | | 26,461 | | | 13,196 | | 47,792 | | As a percentage of sales | | | 14.8% | | 24.8% | | | 9.8% | | 24.5% | | | | | | | | | | | | | | Operating profit / (loss) | | | 491 | | 17,209 | | | (7,992) | | 30,050 | | As a percentage of sales | | | 0.7% | | 16.1% | | | -5.9% | | 15.4% | | Profit / (loss) for the period | | | (1,139) | | 11,365 | | | (5,309) | | 20,466 | | EPS (in US cents) | | | | | | | | | | | | Basic | | | (3.32) | | 11.50 | | | (6.98) | | 23.45 | | Diluted | | | (3.32) | | 11.34 | | | (6.98) | | 23.13 | | | | | | | | | | | | | | EPS (in US cents) including the impact of the considered acquisition of the non-controlling interest of Servitec | | | | | | | | | | | | Basic | | | (3.15) | | 11.50 | | | (7.84) | | 23.45 | | Diluted | | | (3.15) | | 11.34 | | | (7.84) | | 23.13 | | | | | | | | | | | | |
(1)includes amortization and depreciation expenses related to operations
| | | | | | | | | Financial results | | | | | | | | | | | | | | | | Revenue | | | | | | | | | | | | | | | | (In thousands of US$) (unaudited) | Q2 2013 | % change | Q2 2012 | H1 2013 | % change | H1 2012 | | Reporting segment | | | | | | | | Mining ............................................ | 71,862 | -31% | 104,540 | 129,421 | -31% | 187,568 | | Water ............................................ | 2,766 | 34% | 2,065 | 5,002 | -31% | 7,200 | | Total revenue............................. | 74,628 | -30% | 106,605 | 134,423 | -31% | 194,768 | | | | | | | | | | Geographic region | | | | | | | | South America.............................. | 25,413 | -52% | 53,025 | 49,864 | -45% | 90,322 | | Europe, Middle Eastand Africa .... | 24,295 | -18% | 29,803 | 37,574 | -32% | 55,138 | | North America .............................. | 8,457 | -46% | 15,775 | 19,592 | -39% | 32,225 | | Asia Pacific .................................. | 16,463 | 106% | 8,003 | 27,393 | 60% | 17,084 | | Total revenue............................ | 74,628 | -30% | 106,605 | 134,423 | -31% | 194,768 | | | | | | | | |
Since Q3 2012, Europe, Africaand Middle Easthave been grouped into one geographic region for management and reporting purposes (EMEA). Previously, Africaand Europewere presented separately.
Q2 2013
Q2 2013 revenue amounted to US$ 74.6 million compared to US$ 106.6 million in Q2 2012, a decrease of 30%. Excluding the impact of acquisitions performed during fiscal year 2012, revenue decreased by 48% due to the continued low level of exploration activity of mining companies recorded in all regions.
Revenue in South Americaamounted to US$ 25.4 million in Q2 2013 (US$ 53.0 million in Q2 2012), a decrease of 52%. Excluding the acquisition of Servitec in Brazilduring Q2 2012, revenue decreased by 72% due to reduced activities in ongoing contracts and the end of some contracts in Chileand Argentina.
In EMEA revenue decreased by 18% from US$ 29.8 million in Q2 2012 to US$ 24.3 million in Q2 2013. This is mainly due to reduced activity levels across West Africa(-44%) partially compensated by a 32% increase activity in Europein both Franceand Russia.
Revenue in North Americadecreased by 46%, from US$ 15.8 million in Q2 2012 to US$ 8.5 million in Q2 2013. This decrease was mainly due to reduced activity levels in Eastern Canadaand weather related delays in Western Canada.
In Asia-Pacific, Q2 2013 revenue amounted to US$ 16.5 million, an increase of 106% compared to Q2 2012 as a result of the integration of JND activity since November 19, 2012. Excluding this acquisition, revenue decreased by 44% compared to Q2 2012.
H1 2013
H1 2013 revenue amounted to US$ 134.4 million compared to US$ 194.8 million in H1 2012, a decrease of 31%. Excluding the impact of acquisitions performed during fiscal year 2012, revenue decreased by 50% due to the continued low level of exploration activity of mining companies recorded in all regions.
Revenue in South Americaamounted to US$ 49.9 million in H1 2013 (US$ 90.3 million in H1 2012), a decrease of 45%. Excluding the acquisition of Servitec in Brazilduring Q2 2012, revenue decreased by 68% due to reduced activities in ongoing contracts and the end of some contracts in Chileand Argentina.
In EMEA revenue decreased by 32% from US$ 55.1 million in H1 2012 to US$ 37.6 million in H1 2013. This is mainly due to reduced activity levels across West Africa(-53%) partially compensated by a 44% increase activity in Europein both Franceand Russia.
Revenue in North Americadecreased by 39%, from US$ 32.2 million in H1 2012 to US$ 19.6 million in H1 2013. This decrease was mainly due to reduced activity levels in Eastern Canadaand weather related delays in Western Canada.
In Asia-Pacific, H1 2013 revenue amounted to US$ 27.4 million, an increase of 60% compared to H1 2012 as a result of the integration of JND activity since November 19, 2012. Excluding this acquisition, revenue decreased by 49% compared to H1 2012.
| | | | | | | | | Gross profit | | | | | | | | | | | | | | | | (In thousands of US$) (unaudited) | Q2 2013 | % change | Q2 2012 | H1 2013 | % change | H1 2012 | | Reporting segment | | | | | | | | Mining ........................... | (1,352) | -105% | 26,218 | (10,020) | -122% | 45,026 | | Water ............................ | 497 | -4% | 517 | 424 | -80% | 2,091 | | _Total gross profit __....._ | (855) | -103% | 26,735 | (9,596) | -120% | 47,117 | | | | | | | | |
Q2 2013
Q2 2013 gross profit including depreciation within cost of sales was US$ (0.9) million compared to US$ 26.7 million in Q2 2012.
This drop in Gross profit, by order of magnitude, is the result of (i) reduced contract contributions, (ii) under absorption of fixed operational cost, (iii) contract losses in Chile, (iv) redundancy costs and (v) net impact of pricing and productivity.
The largest contributor to the reduction of Gross Profit is the fall through from the lower revenue level amounting to US$ 11.2 million.
The contraction of activity also resulted in an under absorption of fixed operational cost of US$7.1 million (an improvement from US$ 10.8 million in Q1 13) consisting of depreciation and field support costs.
The underperformance and closure of troubled contracts in Chilenegatively impacted the Gross Profit by US$ 4.0 million.
Included in the Q2 2013 Gross Profit are redundancy costs amounting to US$ 3.9 million (US$ 3.8 million in Q1 2013 with a reduction of field employees by 594 in Q2 2013 in addition to the 500 layoffs in Q1 2013.
The net impact of pricing reductions in new and selected existing contracts, offset by productivity gains, was US$ 1.4 million.
Significant actions have been taken to reduce the cost base and adapt the organization to the lower activity levels.
H1 2013
H1 2013 gross profit including depreciation within cost of sales was US$ (9.6) million compared to US$ 47.1 million in H1 2012.
This drop in Gross profit, by order of magnitude, is the result of (i) reduced contract contributions, (ii) under absorption of fixed operational cost, (iii) contract losses in Chile, (iv) redundancy costs, and (v) net impact of pricing and productivity.
The largest contributor to the reduction of Gross Profit is the fall through from the lower revenue level amounting to US$ 20.0 million.
The contraction of activity also resulted in an under absorption of fixed operational cost of US$17.1 million consisting of depreciation and field support costs.
The underperformance and closure of troubled contracts in Chilenegatively impacted the Gross Profit by US$ 10.0 million.
Included in the H1 2013 Gross Profit are redundancy costs amounting to US$ 7.7 million with a reduction of field employees by 1,094 in H1 2013.
The net impact of pricing reductions in new and selected existing contracts, offset by productivity gains, was US$ 1.9 million.
| | | | | | | | | | | | | | | Selling, General and Administrative Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands of US$) (unaudited) | | Q2 2013 | | % change | | Q2 2012 | | H1 2013 | | % change | | H1 2012 | | | | | | | | | | | | | | | | Selling, general and administrative expenses | | 8,261 | | -13% | | 9,526 | | 17,221 | | 1% | | 17,067 | | | | | | | | | | | | | | |
Q2 2013
SG&A decreased by US$ 1.3 million. On a comparable basis and excluding one off costs, the quarterly SG&A costs have been reduced by US$ 1.2 million a 15% reduction. These savings are the result of a continuing implementation of the companywide cost cutting action plan. The non-recurring redundancy cost of US$ 0.4 million is included in the period.
H1 2013
HI 2012 SG&A expenses do not include the full impact of the 2012 acquisitions (JND was purchased in November 2012and Servitec in April 2012). On a comparable basis and excluding one off costs, the SG&A costs have been reduced by US$ 1.2 million an 8% reduction.
These savings are the result of a continuing implementation of the companywide cost cutting action plan which has resulted in a reduction of 20% of SG&A headcount since December 31, 2012. The non-recurring redundancy cost of US$ 0.8 million is included in the period.
| | | | | | | | | | | | | | | Operating profit | | | | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands of US$) (unaudited) | | Q2 2013 | | % change | | Q2 2012 | | H1 2013 | | % change | | H1 2012 | | Reporting segment | | | | | | | | | | | | | | Mining .................................. | | 356 | | -98% | | 16,877 | | (7,719) | | -127% | | 28,787 | | Water .................................. | | 135 | | -59% | | 332 | | (273) | | -119% | | 1,463 | | _Total operating profit __...._ | | 491 | | -97% | | 17,209 | | (7,992) | | -127% | | 30,050 | | | | | | | | | | | | | | |
The YoY difference is the result of the changes in gross profit and SG&A described above.
Q2 2013
In addition, during the quarter, the Company reestimated at US$ 24.9 million the present value of the amount payable related to the second phase of the Servitec acquisition, compared to US$ 34.5 million as at March 31, 2013. The adjustment amounting to US$ 9.6 million has been recorded in other operating income and expense within operating profit in accordance with IFRS 3.
H1 2013
During the period, the Company reestimated at US$ 24.9 million the present value of the amount payable related to the second phase of the Servitec acquisition, compared to US$ 43.7 million as at December 31, 2012. The adjustment amounting to US$ 18.8 million has been recorded in other operating income and expense within operating profit in accordance with IFRS 3.
Financial position
The following table provides a summary of the Company's cash flows for H1 2013 and H1 2012:
| | | | | | (In thousands of US$) | H1 2013 | | H1 2012 | | | | | | | Cash generated from operations before working capital requirements | (5,498) | | 47,990 | | Working capital requirements, interest and tax | (1,677) | | (29,449) | | | | | | | Net cash flow from operating activities | (7,175) | | 18,541 | | | | | | | Purchase of equipment in cash | (6,089) | | (20,412) | | Consideration payable related to acquisitions | | | (17,223) | | | | | | | Net cash used in investing activities | (6,089) | | (37,635) | | | | | | | Proceeds from credit facilities, net | 2,783 | | 26,479 | | Acquisition of treasury shares | (1,535) | | (1,917) | | Dividends paid | (1,692) | | (6,391) | | | | | | | Net cash from financing activities | (444) | | 18,171 | | | | | | | Exchange differences | (781) | | 1,104 | | | | | | | Variation in cash and cash equivalents | (14,489) | | 181 | | | | | |
For the six-month period ended June 30, 2013, cash used in operations before changes in operating assets and liabilities amounted to US$ 5.5 million compared to US$ 48.0 million of cash generated during the same period a year ago.
After working capital requirements, interest and income tax paid, the net cash used in operations was US$ 7.2 million in H1 2013 compared to US$ 18.5 million of cash generated during the same period a year ago.
During the period, the Company acquired operating equipment for US$ 6.1 million in cash. This compares to a total of US$ 20.4 million in cash purchases during H1 2012.
As at June 30, 2013, cash and cash equivalents totaled US$ 21.4 million compared to US$ 35.9 million as at December 31, 2012. Cash and cash equivalents are held at or invested within top tier financial institutions.
On June 30, 2013, financial debts and equivalents amounted to US$ 158.7 million (US$ 175 million as at December 31, 2012). The financial debt also includes the present value of the consideration payable in 2015 for the acquisition of the remaining shares of Servitec totaling US$ 25.9 million.