Odyssey Marine Exploration, Inc. press release
Foraco International Reports Q4 2013
NASDAQ - Nasdaq Stock Market · Phosphate · Gold · Copper · Silver · Zinc · Cobalt · Manganese · Nickel · Rare Earth Elements · United States
##
Quarter and Full Year profitable despite low market level
TORONTOAND MARSEILLE, FR, March 4, 2014/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 fourth quarter 2013. All figures are reported in US Dollars (US$), unless otherwise indicated.
Three months Q4 2013 Highlights
Revenue
Q4 2013 revenue amounted to US$ 47.1 millioncompared to US$ 69.5 millionin Q4 2012, a decrease of 32%. Our drill utilization rate was 26% in Q4 2013 compared to 43% in Q4 2012.
Profitability
Q4 2013 gross profit including depreciation within cost of sales was US$ 1.7 million(4% of revenue) compared to US$ 0.2 millionin Q4 2012. Excluding under absorption of fixed operational costs (US$ 7.4 millionin Q4 2013 and US$ 6.6 millionin Q4 2012) gross profit amounted to US$ 9.3 millionin Q4 2013 (20% of revenue) compared to US$ 6.6 millionin Q4 2012 (9% of revenue). Quarterly SG&A costs decreased by 33% between Q4 2012 and Q4 2013. Net profit is US$ 4.9 millioncompared to US$5.2 millionin Q4 2012.
Financing
Capital expenditures were US$ 2.7 millionin Q4 2013 compared to US$ 7.2 millionin Q4 2012. Net Debt decreased from US$ 137.5 millionas at December 31, 2012to US$ 121.9 millionas at December 31, 2013. A new net debt/EBITDA ratio at December 31, 2013was agreed at 5.0. Actual ratio was 3.2.
FY 2013 Highlights
Revenue
FY 2013 revenue amounted to US$ 247.8 millioncompared to US$ 367.5 millionin FY 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
FY 2013 gross profit including depreciation within cost of sales was US$ 2.0 millioncompared to US$ 67.9 millionin FY 2012. In accordance with IFRS an operating profit of US$ 27.0 millionwas recorded in 2013 to reflect the reassessed value of the second tranche payable to Servitec minority shareholders. FY 2013 resulted in a net profit of US$ 0.5 millioncompared to US$ 32.6 millionin 2012.
"Q4 is traditionally negatively impacted by seasonality and the utilization rate was low as expected, at 26%. In spite of this, we achieved a reasonable level of profitability with a positive gross profit after depreciation of US$ 1.7 millioncompared to US$ 0.2 millionlast year. This confirms the positive profitability trend seen in the second half of 2013, despite the continuing challenging market conditions. The streamlining of our organization and the cost-cutting action plans have started to bear fruit," said Daniel Simoncini, Chairman and co-CEO of Foraco. "Our order book at year-end stands at US$ 261 million, of which US$ 149 millionis expected to be executed during fiscal year 2014. This is in line with our expectations, as the bidding season has dragged well beyond year end, as most of our customers are still in tight costs control mode, despite the surprising resilience of some major commodities prices over the quarter"
"Cash flow from operating activities rose to US$10.1 millionin the fourth quarter of 2013, compared to US$ 3.2 millionfor the first nine months of the year. This can be attributed to a solid operational performance, the near absence of one-off costs and the continued strict control over working capital," commented Jean-Pierre Charmensat, co- CEO and Chief Financial Officer. "As anticipated and prior to year-end, we finalized our discussions with French banks and renegotiated our Net Debt/ EBITDA covenant ratio related to the financing of our 2012 acquisitions. The new ratios stand at 5.0 at December 31, 2013and 3.5 at June 30, 2014. The actual ratio achieved as at December 31, 2013was 3.2. Applicable interest rate margin has increased by 40 bp to 235 bp until the Company returns to its previous covenant ratio. Overall, the average effective interest rate for the full year 2013 remained below a reasonable 3%. At year-end, the Debt/Equity ratio is 0.69, the cash available amounts to US$ 37.5 millionand undrawn credit lines represent an amount of US$ 59 million. "
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 recorded as a financial debt 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. In FY 2013, a reduction of the estimated purchase consideration amounting to US$ 27.0 millionwas recorded, of which US $8.2 millionduring the last quarter. In accordance with IFRS 3, the adjustments were accounted for within other operating income. The best estimate of the present value of the amount payable is US$ 16.7 millionas at December 31, 2013.
Servitec has been consolidated into the Foraco International financial statements since April 20, 2012.
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.
Selected financial data
| (In thousands of US$) (unaudited) | | Three-month period ended December 31, | | Year ended December 31, | | | | | | | | | | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | | | | | | | Revenue | | | 47,122 | | 69,511 | | | 247,757 | | 367,519 | | | | | | | | | | | | | | Gross profit (1) | | | 1,729 | | 178 | | | 2,005 | | 67,933 | | As a percentage of sales | | | 3.7% | | 0.3% | | | 0.8% | | 18.5% | | | | | | | | | | | | | | EBITDA | | | 12,200 | | 14,043 | | | 37,791 | | 83,095 | | As a percentage of sales | | | 25.9% | | 20.2% | | | 15.3% | | 22.6% | | | | | | | | | | | | | | Operating profit / (loss) | | | 3,333 | | 3,576 | | | (2,215) | | 44,989 | | As a percentage of sales | | | 7.1% | | 5.1% | | | -0.9% | | 12.2% | | | | | | | | | | | | | | Profit / (loss) for the period | | | 4,910 | | 5,159 | | | 488 | | 32,617 | | | | | | | | | | | | | | Attributable to: | | | | | | | | | | | | Equity holders of the Company | | | 5,573 | | 5,382 | | | (1,508) | | 27,130 | | Non-controlling interests | | | (663) | | (223) | | | 1,996 | | 5,487 | | | | | | | | | | | | | | EPS (in US cents) | | | | | | | | | | | | Basic | | | 6.31 | | 6.31 | | | (1.71) | | 33.15 | | Diluted | | | 6.32 | | 6.23 | | | (1.71) | | 32.69 | | | | | | | | | | | | | | EPS (in US cents) including the impact of the considered acquisition of the non-controlling interest of Servitec | | | | | | | | | | | | Basic | | | 5.78 | | 6.31 | | | (2.82) | | 35.67 | | Diluted | | | 5.79 | | 6.23 | | | (2.82) | | 35.18 |
| | | | | (1)includes amortization and depreciation expenses related to operations |
Financial results
Revenue
| (In thousands of US$) (unaudited) | Q4 2013 | % change | Q4 2012 | | FY 2013 | % change | FY 2012 | | Reporting segment...................... | | | | | | | | | Mining.......................................... | 43,883 | -36% | 66,232 | | 237,720 | -33% | 357,375 | | Water........................................... | 3,239 | 153% | 1,279 | | 10,037 | -1% | 10,144 | | Total revenue............................ | 47,122 | -32% | 69,511 | | 247,757 | -33% | 367,519 | | | | | | | | | | | Geographic region | | | | | | | | | South America ............................ | 13,067 | -65% | 37,462 | | 80,397 | -55% | 180,034 | | Europe, Middle East and Africa... | 10,401 | -19% | 12,890 | | 66,417 | -28% | 92,228 | | North America ............................. | 8,884 | -4% | 9,241 | | 41,754 | -32% | 61,568 | | Asia Pacific.................................. | 14,770 | 49% | 9,918 | | 59,189 | 76% | 33,688 | | Total revenue ............................ | 47,122 | -32% | 69,511 | | 247,757 | -33% | 367,519 | | | | | | | | | |
Q4 2013
Q4 2013 revenue amounted to US$ 47.1 millioncompared to US$ 69.5 millionin Q4 2012, a decrease of 32%.
Revenue in South Americaamounted to US$ 13.1 millionin Q4 2013 (US$ 37.5 millionin Q4 2012), a decrease of 65%. In Chileand Argentina, the decrease was 87%, and 33% in Brazil. During the quarter the Company mobilized several new contracts in both Chileand Brazil.
In EMEA, revenue decreased by 19%, from US$ 12.9 millionin Q4 2012 to US$ 10.4 millionin Q4 2013. This is mainly due to reduced activity levels across West Africa(-56%) partially compensated by Europeand Russia.
Revenue in North Americaslightly decreased by 4%, from US$ 9.2 millionin Q4 2012 to US$ 8.9 millionin Q4 2013. During the last quarter, the Company renewed a significant long term contract.
In Asia Pacific, Q4 2013 revenue amounted to US$ 14.8 million, an increase of 49% compared to Q4 2012 as a result of the integration of JND since November 19, 2012.
FY 2013
FY 2013 revenue amounted to US$ 247.8 millioncompared to US$ 367.5 millionin FY 2012, a decrease of 33%. Excluding the impact of acquisitions made 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$ 80.4 millionin FY 2013 (US$ 180.0 millionin FY 2012), a decrease of 55%. Excluding the acquisition of Servitec in Brazilduring Q2 2012, revenue decreased by 75% due to reduced activities in ongoing contracts and the end of some contracts in Chileand Argentina.
In EMEA, revenue decreased by 28%, from US$ 92.2 millionin FY 2012 to US$ 66.4 millionin FY 2013. This is mainly due to reduced activity levels across West Africa(-52%) partially compensated by a 35% increase activity in Europein both Franceand Russia.
Revenue in North Americadecreased by 32%, from US$ 61.6 millionin FY 2012 to US$ 41.8 millionin FY 2013. This decrease was mainly due to reduced activity levels in Eastern Canadato Q3 2013. During the last quarter, the Company renewed a significant long term contract.
In Asia Pacific, FY 2013 revenue amounted to US$ 59.2 million, an increase of 76% compared to FY 2012 as a result of the integration of JND since November 19, 2012. Excluding this acquisition, revenue decreased by 45% compared to FY 2012.
Gross profit
| (In thousands of US$) (unaudited) | Q4 2013 | % change | Q4 2012 | | FY 2013 | % change | FY 2012 | | Reporting segment | | | | | | | | | Mining ....................... | 2,147 | NS | (136) | | 1,697 | -96% | 65,145 | | Water......................... | (428) | NS | 314 | | 308 | -89% | 2,788 | | Total gross profit .... | 1,729 | NS | 178 | | 2,005 | -97% | 67,933 |
Q4 2013
Q4 2013 gross profit including depreciation within cost of sales was US$ 1.7 million(or 4% of revenue) compared to US$ 0.2 millionin Q4 2012 (or 0% of revenue).
FY 2013
FY 2013 gross profit including depreciation within cost of sales was US$ 2.0 millioncompared to US$ 67.9 millionin FY 2012.
This reduction in Gross profit amounted to US$ 65.9 millioncan be analyzed as follows:
| | (i) | reduced activity : | US$ 25.1 million | | | (ii) | under absorption of depreciation and other fixed operational costs : | US$ 13.0 million | | | (iii) | contract losses in troubled contracts (South America) : | US$ 9.9 million | | | (iv) | redundancy costs : | US$ 9.7 million | | | (v) | net impact of pricing, savings and productivity variations : | US$ 8.3 million |
The contract losses and redundancy costs presented above are non-recurring elements. Significant actions have been taken to reduce the cost base and adapt the organization to the lower activity levels and the pressure on pricing.
Selling, General and Administrative Expenses
| (In thousands of US$) (unaudited) | Q4 2013 | % change | Q4 2012 | | FY 2013 | % change | FY 2012 | | | | | | | | | | | Selling, general and administrative expenses | 6,591 | -33% | 9,905 | | 31,240 | -14% | 36,247 |
Q4 2013
SG&A decreased by 33% compared to Q4 2012. These savings are the result of the continued implementation of the company-wide cost cutting action plans. The SG&A expenses recorded during the quarter are not affected by non-recurring one-off costs and can therefore be considered as being in line with the current market conditions.
FY 2013
FY 2012 SG&A expenses do not include the full impact of the 2012 acquisitions (JND was purchased in November 2012and Servitec in April 2012).
The continued implementation of the company-wide cost cutting action plan resulted in a 28% SG&A cost reduction and 35% headcount reduction since December 31, 2012. As commented above, SG&A expenses recorded during the last quarter of the year are not affected by non-recurring one-off costs and can therefore be considered as being in line with the current market conditions.
Operating profit
| (In thousands of US$) (unaudited) | Q4 2013 | % change | Q4 2012 | | FY 2013 | % change | FY 2012 | | Reporting segment | | | | | | | | | Mining ............................. | 4,214 | 51% | 3,444 | | (1,172) | NS | 43,161 | | Water .............................. | (881) | NS | 132 | | (1,043) | NS | 1,828 | | Total operating profit .... | 3,333 | -7% | 3,576 | | (2,215) | NS | 44,989 |
The YoY difference is the result of the changes in gross profit and SG&A described above.
In addition, during 2013, the Company re-estimated at US$ 16.7 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$ 27.0 million(US$ 13.3 millionduring FY 2012) was 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 FY 2013 and FY 2012:
| (In thousands of US$) | FY 2013 | FY 2012 | | | | | | Cash generated from operations before working capital requirements | 10,898 | 70,119 | | Working capital requirements, interest and tax | 2,383 | (28,146) | | Net cash flow from operating activities | 13,281 | 41,973 | | | | | | Purchase of equipment in cash | (11,063) | (39,512) | | Consideration payable related to acquisitions | - | (49,435) | | Net cash used in investing activities | (11,063) | (88,947) | | | | | | Net financing | 11,118 | 68,835 | | Acquisition of treasury shares | (1,556) | (3,667) | | Dividends paid | (5,983) | (7,068) | | Net cash from financing activities | 3,579 | 58,100 | | | | | | Net cash variation for the year | 5,797 | 11,126 | | | | | | Exchange differences | (4,168) | 458 | | | | | | Variation in cash and cash equivalents | 1,629 | 11,584 |
For the year ended December 31, 2013, cash generated from operations before changes in operating assets and liabilities amounted to US$ 10.9 millioncompared to US$ 70.1 millionof cash generated during the same period a year ago.
After working capital requirements, interest and income tax paid, the net cash generated from operations was US$ 13.3 millionin FY 2013 compared to US$ 42.0 millionof cash generated during the same period a year ago. During the period, the Company acquired operating equipment for US$ 11.1 millionin cash. This compares to a total of US$ 39.5 millionin cash purchases during FY 2012.
As at December 31, 2013, cash and cash equivalents totaled US$ 37.7 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 December 31, 2013, the net debt amounted to US$ 121.9 million(US$ 137.5 millionas at December 31, 2012). The ratio of debt (net of cash) to shareholders' equity increased to 0.69 from 0.62 as at December 31, 2012.
On December 31, 2013, financial debts and equivalents amounted to US$ 159.4 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$ 16.7 million.
In December 2013, the Company signed an addendum to the loan agreements linked to the 2012 acquisitions in Braziland Australia. Under the terms of these agreements, the covenant ratio Net Debt / EBITDA was revised from 2.0 to 5.0 as at December 31, 2013, and to 3.5 as at June 30, 2014to reflect the changes in the economic conditions. The margin on the financing subject to renegotiation was temporarily increased to 235 Bp (from 195 Bp) until the Company returns to its previous covenant ratio. The actual December 31, 2013ratio was 3.2. The Company is not in breach of any covenant.
During FY 2013, the Company raised new long term loans amounting to US$ 26.7 million:
€ 10.6 million (US$14.0 million) in Francethrough three new long term credits without covenant, CAD 8 million(US$ 7.5 million) in Canadathrough a lease back arrangement guaranteed by a general security on Canadian assets and subject to covenants related to the activity of the Canadian subsidiary, US$ 4 millionin Chilethrough a new long term credit without covenant, BRL 2.8 millionin Brazil(US$1.2 million) through a new long term credit without covenant.
As at Decembrer31, 2013, the financial debt is as follows (in thousands of US$):
| Maturity | Roll-over | January 1, 2014 to December 31, 2014 | January 1, 2015 to December 31, 2015 | January 1, 2016 to December 31, 2016 | January 1, 2017 to December 31, 2017 | January 1, 2018 to December 31, 2018 | Total | | Drawn credit lines rolled over on a yearly basis | 48,865 | - | - | - | - | - | 48,865 | | Long term financing related to: | | | | | | | | | - Drawn credit lines rolled over confirmed for at least 12 months | 4,000 | - | - | - | - | - | 4,000 | | - Brazil acquisition | - | 4,672 | 4,672 | 4,672 | 4,672 | - | 18,687 | | - Australia acquisition | - | 6,883 | 6,883 | 6,883 | 6,883 | | 27,532 | | - Acquisition of fixed assets | - | 10,119 | 9,859 | 8,443 | 6,583 | 3,524 | 38,530 | | - Acquisition of fixed assets through capital leases | - | 3,655 | 1,207 | 268 | 6 | - | 5,137 | | | | | | | | | | | Total | 52,865 | 25,330 | 22,622 | 20,266 | 18,144 | 3,524 | 142,751 |
The Company has used and unused short-term credit facilities amounting to US$ 112.1 millionout of which US$ 52.9 millionwas drawn as of December 31, 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.
Bank guarantees as at December 31, 2013totaled US$ 28.5 millioncompared to US$ 22.8 millionas at December 31, 2012.
Going concern and impairment testing
Based on internal forecasts and projections which are regularly updated in order to take into account foreseeable changes in the Company's operating performance, the Company believes that it has adequate financial resources to continue in operation and meet its financial commitments (mainly related to debt service obligations) for a period of at least twelve months. In addition, impairment tests based on expected discounted cash flows were performed at the level of each business segment and geographic area as at December 31, 2013and indicated that no impairment was required on the carrying values of the long lived assets for each business segment and geographic area.
Currency exchange rates
The exchange rates for the periods under review are provided in the Management's Discussion and Analysis of Q4 2013.
Outlook
As at December 31, 2013the Company's order backlog for continuing operations was US$ 261.2 million, of which US$ 149.1 millionis expected to be executed during the 2014 fiscal year.
The Company's order backlog consists of sales orders. Sales orders are subject to modification by mutual consent and in certain instances orders may be revised by customers. As a result the order backlog of any particular date may not be indicative of actual operating results for any subsequent period.