Odyssey Marine Exploration, Inc. press release
Foraco International Reports Q3 2013
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Return to profitability
Improved financial indicators quarter over quarter
TORONTOAND MARSEILLE, FR, Nov. 5, 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 third quarter 2013. All figures are reported in US Dollars (US$), unless otherwise indicated.
Three months Q3 2013 Highlights
Revenue
Q3 2013 revenue amounted to US$ 66.2 millioncompared to US$ 103.2 millionin Q3 2012, a decrease of 36%. Excluding the impact of the JND acquisition, revenue decreased by 51%.
Profitability
Q3 2013 gross profit including depreciation within cost of sales was US$ 9.9 million(15% of revenue) compared to US$ 20.6 millionin Q3 2012 (20% of revenue). The Company has adapted its structure to the contraction of the market with significant reduction of operating and SG&A costs. The financial indicators have improved quarter over quarter:
| | | | | | | | | | in millions of US$ - unaudited | | Q3 2013 | | Q2 2013 | | Q1 2013 | | | Operations | | | | | | | | | | Revenue | | 66.2 | | 74.6 | | 59.8 | | | Cost of sales | | (56.3) | | (75.5) | | (68.5) | | | Gross profit | | 9.9 | | (0.9) | | (8.7) | | | Gross profit after depreciation as a % of revenue | | 15% | | (1%) | | (15%) | | | Gross profit before depreciation as a % of revenue | | 30% | | 13% | | 3% | | | One-off costs in cost of sales | | (1.8) | | (7.0) | | (9.9) | | | Gross profit before depreciation and one-off costs | | 21.6 | | 16.7 | | 11.7 | | | Gross profit before depreciation and one-off costs as a % of revenue | | 33% | | 22% | | 20% | | SG&A | | | | | | | | | | SG&A | | (7.4) | | (8.3) | | (9.0) | | | One-off costs in SG&A | | (0.7) | | (0.4) | | (0.4) | | | SG&A excluding one-off costs | | (6.7) | | (7.9) | | (8.6) | | | | | | | | | | | Total headcount | | 1,880 | | 2,219 | | 3,349 | | | Utilization rate | | 35% | | 46% | | 37% | | | Under absorption of fixed operational costs | | (5.7) | | (7.2) | | (10.8) | | | | | | | | | | |
The improvement in gross profit is mainly explained by: Capital expenditures were strictly controlled: Q3 2013: US$ 2.3 million, Q2 2013: US$ 2.9 million, Q1 2013: US$ 3.6 million. Net Debt at each quarter end was: Q3 2013: US$ 134.6 million, Q2 2013: US$ 137.3 million, Q1 2013: US$ 139.6 million, Q4 2012: US$ 137.5 million.
Nine months Q3 2013 Highlights
Revenue
YTD Q3 2013 revenue amounted to US$ 200.6 millioncompared to US$ 298.0 millionin YTD Q3 2012, a decrease of 33% due to the low level of exploration activities of mining companies in all regions which significantly impacted the activity since Q4 2012.
Profitability
YTD 2013 gross profit including depreciation within cost of sales was nil compared to US$ 67.8 millionin YTD Q3 2012. In accordance with IFRS an operating profit of US$ 18.8 millionwas recorded in H1 2013 to reflect the reassessed value of the second tranche payable to Servitec minority shareholders. YTD Q3 2013 EBIT amounted to US$ (5.5) millioncompared to US$ 41.4 millionin YTD Q3 2012.
"We posted a profit for this quarter, with financial indicators improving quarter over quarter since the beginning of the year. This return to profitability is the result of the positive contribution of the vast majority of our contracts, the ending of the two loss making contracts in Chileand the continued effect of the cost cutting action plan implemented since Q4 2012. This performance has been achieved in spite of an economic environment which continues to be challenging and a utilization rate which has remained low at 35% in Q3", said Daniel Simoncini, Chairman and co-CEO of Foraco. "The reduction in operational and support headcount included 339 employees during the quarter to reach a total of 1,469 since the beginning of the year. This impacted all categories of personnel, from senior managers to operational staff. However, particular emphasis was placed on retaining technical expertise and know-how, which will allow the Company to benefit from a future upturn in the market."
"Quarter over quarter, our gross profit as a percentage of revenue has dramatically improved from -15% in Q1 to -1% in Q2 and to +15% in Q3.This Q3 gross profit of US$ 9.9 millionincludes one-off costs of US$ 1.8 millionand under-absorption of US$ 5.7 million. Additionally, SG&A costs excluding one-off costs have decreased by 21% since Q4 2012. In spite of one-off costs and low utilization rate, EBITDA for the quarter reached US$ 12.4 millionor 19% of revenue" commented Jean-Pierre Charmensat, co- CEO and Chief Financial Officer. "Capex and working capital remain strictly controlled, and our net debt amounts to US$ 134.5 millionas at September 30, 2013, slightly down from the US$ 137.5 millionas at December 31, 2012. This includes US$58.9 millionof drawn credit lines rolled over on a yearly basis, some having already been confirmed for more than 12 months. Credit lines are granted individually by several banks and are mostly unsecured with no covenants. At September 30, 2013, we have cash available amounting to US$ 37.5 millionand unused available credit lines of US$ 57.7 million. Discussions with banks related to amendments to the long term financing debt covenant and to securing further long term financing are progressing positively and should be concluded in the coming months."
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, the Company revised this estimate and adjusted the amount payable to US$25.3 millionas at September 30, 2013. In accordance with IFRS 3, an adjustment amounting to US$ 18.8 millionwas accounted for within other operating income in the six-month period ended June 30, 2013. As at September 30, 2013, the Company considers that the situation does not require a further adjustment to be recorded.
Servitec has been consolidated into the Foraco International financial statements since April 20, 2012. The financial statements for the nine-month period ended September 30, 2012did not include the full contribution of Servitec.
John Nitschke Drilling
On November 19, 2012, the Company acquired a 100% shareholding in John Nitschke Drilling, ("JND"), an Australian drilling service provider, through a combination of AU$ 30 million (US$ 31.2 million) in cash, an earn out amount and the issuance of 7,000,000 shares 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 nine-month periods ended September 30, 2012did not include the contribution of JND.
| Selected financial data | | | | | | | | | | | | | | | | | | | | (In thousands of US$) (unaudited) | | Three-month period ended September 30, | | Nine-month period ended September 30, | | | | | | | | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | | | Revenue | | 66,212 | | 103,240 | | 200,635 | | 298,008 | | | | | | | | | | | | Gross profit (1) | | 9,872 | | 20,638 | | 276 | | 67,755 | | As a percentage of sales | | 14.9% | | 20.0% | | 0.1% | | 22.7% | | | | | | | | | | | | EBITDA | | 12,395 | | 21,260 | | 25,593 | | 69,052 | | As a percentage of sales | | 18.7% | | 20.6% | | 12.8% | | 23.2% | | | | | | | | | | | | Operating profit / (loss) | | 2,444 | | 11,363 | | (5,548) | | 41,413 | | As a percentage of sales | | 3.7% | | 11.0% | | -2.8% | | 13.9% | | | | | | | | | | | | Profit / (loss) for the period | | 887 | | 6,992 | | (4,422) | | 27,458 | | | | | | | | | | | | Attributable to: | | | | | | | | | | Equity holders of the Company | | (949) | | 3,061 | | (7,080) | | 21,748 | | Non-controlling interests | | 1,836 | | 3,931 | | 2,658 | | 5,710 |
| | | | (1) | includes amortization and depreciation expenses related to operations | | | |
| Financial results | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands of US$) (unaudited) | Q3 2013 | | % change | | Q3 2012 | | YTD 2013 | | % change | | YTD 2012 | | Reporting segment | | | | | | | | | | | | | Mining......................................... | 64,416 | | -37% | | 101,575 | | 193,837 | | -33% | | 289,143 | | Water.......................................... | 1,796 | | 8% | | 1,665 | | 6,798 | | -23% | | 8,865 | | _Total revenue__.............................._ | 66,212 | | -36% | | 103,240 | | 200,635 | | -33% | | 298,008 | | | | | | | | | | | | | | | Geographic region | | | | | | | | | | | | | South America............................ | 17,466 | | -67% | | 52,250 | | 67,331 | | -53% | | 142,572 | | Europe, Middle East and Africa.... | 18,442 | | -24% | | 24,200 | | 56,016 | | -29% | | 79,338 | | North America............................. | 13,278 | | -34% | | 20,103 | | 32,870 | | -37% | | 52,327 | | Asia Pacific................................. | 17,026 | | 155% | | 6,687 | | 44,418 | | 87% | | 23,770 | | Total revenue............................ | 66,212 | | -36% | | 103,240 | | 200,635 | | -33% | | 298,008 | | | | | | | | | | | | | |
Since Q3 2012, Europe, Africaand Middle Easthave been grouped into one geographic region for management and reporting purposes (EMEA). Previously, Africaand Europewere presented separately.
Q3 2013
Q3 2013 revenue amounted to US$ 66.2 millioncompared to US$ 103.2 millionin Q3 2012, a decrease of 36%. Excluding the impact of the acquisition of JND, revenue decreased by 51% due to the continued low level of exploration activity of mining companies recorded in all regions.
Revenue in South Americaamounted to US$ 17.5 millionin Q3 2013 (US$ 52.3 millionin Q3 2012), a decrease of 67%. Excluding Brazil, revenue decreased by 85% due to reduced activities in ongoing contracts and the end of certain contracts in Chileand Argentina.
In EMEA, revenue decreased by 24%, from US$ 24.2 millionin Q3 2012 to US$ 18.4 millionin Q3 2013. This is mainly due to reduced activity levels across West Africa(-44%).
Revenue in North Americadecreased by 34%, from US$ 20.1 millionin Q3 2012 to US$ 13.3 millionin Q3 2013. This decrease was mainly due to reduced activity levels in Eastern and Western Canada.
In Asia Pacific, Q3 2013 revenue amounted to US$ 17.0 million, an increase of 155% compared to Q3 2012 as a result of the integration of JND since November 19, 2012. Excluding this acquisition, revenue decreased by 43% compared to Q3 2012.
YTD 2013
YTD 2013 revenue amounted to US$ 200.6 millioncompared to US$ 298.0 millionin YTD Q3 2012, a decrease of 33%. Excluding the impact of acquisitions made during fiscal year 2012, revenue decreased by 51% due to the continued low level of exploration activity of mining companies recorded in all regions.
Revenue in South Americaamounted to US$ 67.3 millionin YTD Q3 2013 (US$ 142.6 millionin YTD Q3 2012), a decrease of 53%. Excluding the acquisition of Servitec in Brazilduring Q2 2012, revenue decreased by 73% due to reduced activities in ongoing contracts and the end of some contracts in Chileand Argentina.
In EMEA, revenue decreased by 29%, from US$ 79.3 millionin YTD Q3 2012 to US$ 56.0 millionin YTD Q3 2013. This is mainly due to reduced activity levels across West Africa(-51%) partially compensated by a 22% increase activity in Europein both Franceand Russia.
Revenue in North Americadecreased by 37%, from US$ 52.3 millionin YTD Q3 2012 to US$ 32.9 millionin YTD Q3 2013. This decrease was mainly due to reduced activity levels in Eastern Canadaand weather related delays in Western Canada.
In Asia Pacific, YTD Q3 2013 revenue amounted to US$ 44.4 million, an increase of 87% compared to YTD Q3 2012 as a result of the integration of JND since November 19, 2012. Excluding this acquisition, revenue decreased by 43% compared to YTD Q3 2012.
| Gross profit | | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands of US$) (unaudited) | Q3 2013 | | % change | | Q3 2012 | | YTD 2013 | | % change | | YTD 2012 | | Reporting segment | | | | | | | | | | | | | Mining........................ | 9,560 | | -53% | | 20,255 | | (460) | | -101% | | 65,281 | | Water......................... | 312 | | -19% | | 383 | | 736 | | -70% | | 2,474 | | _Total gross profit__........_ | 9,872 | | -52% | | 20,638 | | 276 | | -100% | | 67,755 | | | | | | | | | | | | | |
Q3 2013
Q3 2013 gross profit including depreciation within cost of sales was US$ 9.9 million(or 15% of revenue) compared to US$ 20.6 millionin Q3 2012 (or 20% of revenue).
Significant actions have been taken to reduce the cost base and adapt the organization to the lower activity levels.
YTD 2013
YTD Q3 2013 gross profit including depreciation within cost of sales was nil compared to US$ 67.8 millionin YTD Q3 2012.
This reduction in Gross profit 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.
| Selling, General and Administrative Expenses | | | | | | | | | | | | | | | | | | (In thousands of US$) (unaudited) | Q3 2013 | % change | Q3 2012 | | YTD 2013 | % change | YTD 2012 | | | | | | | | | | | Selling, general and administrative expenses | 7,428 | -20% | 9,275 | | 24,649 | -6% | 26,342 | | | | | | | | | |
Q3 2013
SG&A decreased by US$ 1.8 millioncompared to Q3 2012. These savings are the result of the continued implementation of the company-wide cost cutting action plan. Non-recurring redundancy costs of US$ 0.8 millionduring the period mainly relate to the departure of two senior managers.
YTD 2013
YTD Q3 2012 SG&A expenses do not include the full impact of the 2012 acquisitions (JND was purchased in November 2012and Servitec in April 2012).
The continued implementation of the company-wide cost cutting action plan resulted in a reduction of 29% of SG&A headcount since December 31, 2012, a year on year saving of US$ 4 million. The related non-recurring redundancy cost of US$ 1.5 millionis included in the period.
| Operating profit | | | | | | | | | | | | | | | | | | (In thousands of US$) (unaudited) | Q3 2013 | % change | Q3 2012 | | YTD 2013 | % change | YTD 2012 | | Reporting segment | | | | | | | | | Mining............................. | 2,333 | -79% | 11,130 | | (5,386) | -114% | 39,717 | | Water.............................. | 111 | -52% | 233 | | (162) | -110% | 1,696 | | _Total operating profit__...... _ | 2,444 | -78% | 11,363 | | (5,548) | -113% | 41,413 | | | | | | | | | |
The YoY difference is the result of the changes in gross profit and SG&A described above.
In addition, during H1 2013, the Company reestimated at US$ 24.9 millionthe present value of the amount payable related to the second phase of the Servitec acquisition, compared to US$ 43.7 millionas at December 31, 2012. The adjustment amounting to US$ 18.8 millionwas recorded in other operating income and expense within operating profit in accordance with IFRS 3. No adjustment was deemed necessary during the third quarter.
Financial position
The following table provides a summary of the Company's cash flows for YTD 2013 and YTD 2012:
| | | | | (In thousands of US$) | YTD Q3 2013 | YTD Q2 2012 | | | | | | Cash generated from operations before working capital requirements | 6,860 | 69,367 | | Working capital requirements, interest and tax | (3,677) | (32,536) | | Net cash flow from operating activities | 3,183 | 36,831 | | | | | | Purchase of equipment in cash | (8,361) | (32,284) | | Consideration payable related to acquisitions | - | (17,223) | | Net cash used in investing activities | (8,361) | (49,507) | | | | | | Drawing from credit lines, net | 16,700 | 28,711 | | Acquisition of treasury shares | (1,556) | (1,945) | | Dividends paid | (5,983) | (7,068) | | Net cash from financing activities | 9,161 | 19,698 | | | | | | Exchange differences | (2,348) | 426 | | Variation in cash and cash equivalents | 1,635 | 7,448 | | | | |
For the nine-month period ended September 30, 2013, cash used in operations before changes in operating assets and liabilities amounted to US$ 6.9 millioncompared to US$ 69.4 millionof 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$ 3.2 millionin YTD Q3 2013 compared to US$ 36.8 millionof cash generated during the same period a year ago.
During the period, the Company acquired operating equipment for US$ 8.4 millionin cash. This compares to a total of US$ 32.3 millionin cash purchases during YTD Q3 2012.
As at September 30, 2013, cash and cash equivalents totaled US$ 37.5 millioncompared to US$ 35.9 millionas at December 31, 2012. Cash and cash equivalents are held at or invested within top tier financial institutions.
As at September 30, 2013, the net debt amounted to US$ 134.6 million(US$ 137.5 millionas at December 31, 2012). The ratio of debt (net of cash) to shareholders' equity increased to 0.73 from 0.62 as at December 31, 2012mainly as a result of the cash used in the period.
On September 30, 2013, financial debts and equivalents amounted to US$ 172.1 million(US$ 175 millionas 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$ 25.3 million.
As at September 30, 2013, the financial debt is as follows (in thousands of US$):
| Maturity | Roll-over | October 1, 2013 to September 30, 2014 | October 1, 2014 to September 30, 2015 | October 1, 2015 to September 30, 2016 | October 1, 2016 to September 30, 2017 | October 1, 2017 to September 30, 2018 | Total | | Drawn credit lines rolled over on a yearly basis | 50,893 | - | - | - | - | - | 50,893 | | Long term financing related to: | | | | | | | | | - Drawn credit lines rolled over confirmed for at least 12 months | 8,000 | - | - | - | - | - | 8,000 | | - Brazil acquisition | - | 4,326 | 4,326 | 4,326 | 4,326 | - | 17,305 | | - Australia acquisition | - | 6,760 | 6,760 | 6,760 | 6,760 | 6,760 | 33,800 | | - Acquisition of fixed assets | - | 8,525 | 7,861 | 6,615 | 4,736 | 1,818 | 29,556 | | - Acquisition of fixed assets through capital leases | - | 5,369 | 1,579 | 203 | 26 | - | 7,177 | | | | | | | | | | | Total | 58,893 | 24,980 | 20,526 | 17,905 | 15,848 | 8,578 | 146,731 | | | | | | | | | |
The Company has used and unused short-term credit facilities amounting to US$ 116.6 millionout of which US$ 58.9 millionwas drawn as of September 30, 2013. These facilities are granted individually by several banks, mainly in France, Canadaand Chile. They are generally granted on a yearly basis and are subject to review at various dates. They are not subject to any covenant obligations. A relatively small portion of the credit facilities, in Canada, is secured by short term receivables and inventories.
The Company is subject to certain covenants linked to two long term debt financings related to the 2012 acquisitions of Servitec and JND. These covenants are mainly related to a net debt / EBITDA ratio which is measured as at December 31of each year. A breach of these covenants as of this date requires the initiation of discussions with the representative of the lenders, but would not result in an automatic acceleration of debt repayment. Negotiations with the representatives of the lenders are being carried out and should be concluded in the coming months.
Bank guarantees as at September 30, 2013, totaled US$ 24.3 millioncompared to US$ 22.8 millionas at December 31, 2012.