Odyssey Marine Exploration, Inc. press release
Foraco International reports Q3 2014
NASDAQ - Nasdaq Stock Market · Phosphate · Gold · Copper · Silver · Zinc · Cobalt · Manganese · Nickel · Rare Earth Elements · United States
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TORONTO, ONand MARSEILLE, FRANCE, Nov. 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 third quarter 2014. All figures are reported in US Dollars (US$), unless otherwise indicated.
Three months Q3 2014 Highlights
Revenue
Q3 2014 revenue amounted to US$ 51.6 million. This is the third consecutive quarter with increased revenue (Q1 2014: US$ 45.4 million, Q2 2014: US$ 48.4 million) and an increased utilization rate (Q1 2014: 30%, Q2 2014: 34% and Q3 2014: 37%). Compared with Q3 2013 (US$ 66.2 million) activity decreased 22%.
Profitability
Q3 2014 gross profit including depreciation within cost of sales was US$ 3.3 million(or 6% of revenue) compared to US$ 9.9 millionin Q3 2013 (or 15% of revenue). This decrease resulted from a continued pressure on selling prices, extra costs on some projects and some mobilizations. On a positive side, the effect of the fixed operational costs savings resulted in a reduced under absorption of fixed cost compared to the same quarter last year. SG&A costs decreased by 18% between Q3 2013 and Q3 2014, mainly as a result of the continued implementation of the company-wide cost cutting action plans. EBIT was US$ (2.8) millionin Q3 2014 compared to US$ 2.4 millionin Q3 2013. Capital expenditure was US$ 3.9 millionin Q3 2014 compared to US$ 2.3 millionin Q3 2013. This Capex is mainly related to some new projects starting in Q4 2014 and to be continued into 2015.
Nine months Q3 2014 Highlights
Revenue
YTD Q3 2014 revenue amounted to US$ 145.4 millioncompared to US$ 200.6 millionin YTD Q3 2013, a decrease of 28% (23% excluding the effect of foreign exchange). The revenue decreased as a result of the continued market contraction and pressure on prices.
Profitability
YTD Q3 2014 gross profit including depreciation within cost of sales was US$ 6.8 million(or 5% of revenue) compared to US$ 0.3 millionin YTD Q3 2013. There were no one-off costs during the period and the Company fully benefited from the positive effect of the fixed operational costs reduction which compensated some under absorption of fixed costs. SG&A costs decreased by 22% between YTD Q3 2013 and YTD Q3 2014, mainly as a result of the continued implementation of the company-wide cost cutting action plans. EBIT was US$ (12.3) millionin YTD Q3 2014 compared to US$ (5.5) millionin YTD Q3 2013, or US$ (24.4) millionexcluding the positive impact of the remeasurement in H1 2013 of the contribution payable for Servitec, in accordance with IFRS. The YTD Q3 2014 EBITDA was US$ 12.7 million, a US$ 6.0 millionimprovement compared to US$ 6.8 millionadjusted EBITDA1in YTD Q3 2013. Capital expenditures were US$ 7.4 millionin YTD Q3 2014 compared to US$ 8.8 millionin YTD Q3 2013.
Cash flow and net debt
Net cash generated from operations was US$ 8.2 millionin YTD Q3 2014 vs. US$ 3.2 millionin YTD Q3 2013. Net debt as at September 30, 2014was US$ 105.1 millionvs. US$ 108.0 millionin Q2 2014 and vs US$ 121.9 millionas at December 31, 2013, a total reduction of US$ 16.8 millionsince 2013 year end.
_ 1The definition of the adjusted EBITDA, a non IFRS measure, is provided on page 8.
"Despite some recent budgeting activity in the junior space, the market continued to slightly contract as certain majors are continuing to adjust or delay their drilling budgets. Therefore, the Company has continued to be affected by the relatively low activity and the pressure on prices. In spite of this environment, this is the third consecutive quarter with increased revenue and an increased utilization rate. It is interesting to note that the utilization rate in certain significant areas reached very satisfactory levels, like in Australia. As reported in Q2, we have started some multi-year projects and are still in the ramp up phase," said Daniel Simoncini, Chairman and co-CEO of Foraco. "We also performed an extensive customer satisfaction survey with very encouraging results for our Company: 85% of our customers declared themselves ready to work again with us and recommend FORACO to third parties. We are entering the bidding season and are focused to get the best possible balance between activity and profitability, as some competitors continue to lower their unsustainable prices."
"Overall, the operational performance was in line with expectations given the current level of activity, with an EBITDA margin of 11% while we continue to decrease our fixed operation costs and SG&A" commented Jean-Pierre Charmensat, co-CEO and Chief Financial Officer. "Net cash generated from operations amounted to US$ 8.2 millionas at September 30, 2014. The net debt as of September 30, 2014was US$ 105.1 millionvs. US$ 121.9 millionas at December 31, 2013, a reduction of US$ 16.8 million. We are currently reassessing our debt structure and have entered into negotiations with our lenders in Francein order to adapt it so as to better match our future cash flow generation."
Selected financial data
Financial results
| (In thousands of US$) (unaudited) | | Three-month period ended
September 30, | | Nine-month period ended
September 30, | | | | | | | | | | 2014 | | 2013 | | 2014 | | 2013 | | | | | | | | | | | | | | | | Revenue | | | 51,580 | | 66,212 | | | 145,432 | | 200,635 | | | | | | | | | | | | | | Gross profit (1) | | | 3,287 | | 9,872 | | | 6,808 | | 276 | | As a percentage of sales | | | 6.4% | | 14.9% | | | 4.7% | | 0.1% | | | | | | | | | | | | | | EBITDA | | | 5,447 | | 12,395 | | | 12,735 | | 25,593 | | As a percentage of sales | | | 10.6% | | 18.7% | | | 8.8% | | 12.8% | | | | | | | | | | | | | | Adjusted EBITDA | | | 5,447 | | 12,395 | | | 12,735 | | 6,768 | | As a percentage of sales | | | 10.6% | | 18.7% | | | 8.8% | | 3.4% | | | | | | | | | | | | | | Operating profit / (loss) | | | (2,784) | | 2,444 | | | (12,307) | | (5,548) | | As a percentage of sales | | | -5.4% | | 3.7% | | | -8.5% | | -2.8% | | | | | | | | | | | | | | | | | | | | | | | | | | Profit / (loss) for the period | | | (3,509) | | 887 | | | (13,517) | | (4,422) | | | | | | | | | | | | | | | | | | | | | | | | | | Attributable to: | | | | | | | | | | | | Equity holders of the Company | | | (3,564) | | (949) | | | (13,502) | | (7,080) | | Non-controlling interests | | | 55 | | 1,836 | | | (15) | | 2,658 | | | | | | | | | | | | | | EPS (in US cents) | | | | | | | | | | | | Basic | | | (4.01) | | (1.08) | | | (15.21) | | (8.06) | | Diluted | | | (4.01) | | (1.08) | | | (15.21) | | (8.06) |
| | (1) includes amortization and depreciation expenses related to operations |
Revenue
| (In thousands of US$) - (unaudited) | Q3 2014 | % change | Q3 2013 | YTD Q3 2014 | % change | YTD Q3 2013 | | Reporting segment | | | | | | | | Mining | 47,197 | -27% | 64,416 | 127,958 | -34% | 193,837 | | Water | 4,383 | 144% | 1,796 | 17,474 | 157% | 6,798 | | Total revenue | 51,580 | -22% | 66,212 | 145,432 | -28% | 200,635 | | | | | | | | | | Geographic region | | | | | | | | South America | 13,402 | -23% | 17,466 | 44,180 | -34% | 67,331 | | Europe, Middle East and Africa | 11,897 | -35% | 18,442 | 37,378 | -33% | 56,016 | | North America | 11,236 | -15% | 13,278 | 28,370 | -14% | 32,870 | | Asia Pacific | 15,045 | -12% | 17,026 | 35,503 | -20% | 44,418 | | Total revenue | 51,580 | -22% | 66,212 | 145,432 | -28% | 200,635 | | | | | | | | |
Q3 2014
Q3 2014 revenue amounted to US$ 51.6 millioncompared to US$ 66.2 millionin Q3 2013, a decrease of 22% and a US$ 3.2 millionincrease compared to Q2 2014 and US$ 6.2 millioncompared to Q1 2014.
Revenue in South Americaamounted to US$ 13.4 millionin Q3 2014 (US$ 17.5 millionin Q3 2013), a decrease of 23%. In Brazil, the decrease was 43% mainly due to the evaporation of the Junior market. The activity in Chileincreased by 86%. No activity was recorded in Argentinain Q3 2014.
In EMEA, revenue decreased by 35%, from US$ 18.4 millionin Q3 2013 to US$ 11.9 millionin Q3 2014. This is mainly due to the reduced activity in the mining segment across West Africawhich was partly offset by the increased activity in the water segment. In Europeand Russia, many projects were postponed to Q4 2014 and 2015.
Revenue in North Americadecreased by 15% in US$ but only 10 % in Canadian dollars. Junior activity remains bleak.
In Asia Pacific, Q3 2014 revenue amounted to US$ 15.0 million, a decrease of 12% mainly due to pressure on selling prices and delays on some projects.
Nine months Q3 2014
YTD Q3 2014 revenue amounted to US$ 145.4 millioncompared to US$ 200.6 millionin YTD Q3 2013, a decrease of 28% (23% excluding the effect of foreign exchange). The revenue decreased as a result of the continued market contraction and pressure on prices.
Revenue in South Americaamounted to US$ 44.2 millionin YTD Q3 2014 (US$ 67.3 millionin YTD Q3 2013), a decrease of 34%. In Chile, the decrease of 18% was mainly linked to the termination of two troubled contracts. No activity was recorded in Argentinain YTD Q3 2014. In Brazil, revenue decreased by 36% due to the completion of some projects, and to the evaporation of the junior market.
In EMEA, revenue decreased by 33%, from US$ 56.0 millionin YTD Q3 2013 to US$ 37.4 millionin YTD Q3 2014. This is mainly due to the reduced activity in the mining segment across West Africawhich was partly offset by the increased activity in the water segment. In Europeand Russiamany customers postponed their projects to Q4 2014 and 2015.
Revenue in North Americadecreased by 14% in US$ but only 8% in Canadian dollars.
In Asia Pacific, YTD Q3 2014 revenue amounted to US$ 35.5 million, a decrease of 20%. In Australia, activity was impacted by pressure on selling prices. After a slow start the Company signed two large multi-year multi-rig contracts. In New Caledonia, the second quarter suffered from local disturbances including the temporary closure of a large nickel mine.
Gross profit
| (In thousands of US$) -
(unaudited) | Q3 2014 | % change | Q3 2013 | YTD Q3
2014 | % change | YTD Q3
2013 | | Reporting segment | | | | | | | | Mining | 2,568 | -73% | 9,560 | 4,955 | n/a | (460) | | Water | 719 | 130% | 312 | 1,853 | 152% | 736 | | _Total gross profit _88 | 3,287 | -67% | 9,872 | 6,808 | n/a | 276 |
Q3 2014
Q3 2014 gross profit including depreciation within cost of sales was US$ 3.3 million(or 6% of revenue) compared to US$ 9.9 millionin Q3 2013 (or 15% of revenue). This decrease resulted from continued pressure on selling prices, extra costs on some projects and some mobilizations. On a positive side, the effect of the fixed operational costs savings resulted in a reduced under absorption of fixed costs compared to the same quarter last year.
Nine months Q3 2014
YTD Q3 2014 gross profit including depreciation within cost of sales was US$ 6.8 million(or 5% of revenue) compared to US$ 0.3 millionin YTD Q3 2013. There were no one-off costs during the period and the Company fully benefited from the positive effect of the fixed operational costs reduction which compensated some under absorption of fixed costs.
Selling, General and Administrative Expenses
| (In thousands of US$) (unaudited) | Q3 2014 | % change | Q3 2013 | YTD Q3
2014 | % change | YTD Q3
2013 | | | | | | | | | | Selling, general and administrative expenses | 6,071 | -18% | 7,428 | 19,115 | -22% | 24,649 |
Q3 2014
SG&A costs decreased by US$ 1.4 millionbetween Q3 2013 and Q3 2014. These savings are mainly the result of the continued implementation of the company-wide cost cutting action plans.
Nine months Q3 2014
SG&A costs decreased by US$ 5.5 millionbetween YTD Q3 2013 and YTD Q3 2014. These savings are mainly the result of the continued implementation of the company-wide cost cutting action plans.
Operating profit
| (In thousands of US$) - (unaudited) | Q3 2014 | % change | Q3 2013 | YTD Q3
2014 | % change | YTD Q3
2013 | Adjusted (1)
YTD Q3 2013 | | Reporting segment | | | | | | | | | Mining | (2,986) | -228% | 2,333 | (11,830) | 120% | (5,386) | (24,211) | | Water | 202 | 82% | 111 | (477) | 194% | (162) | (162) | | Total operating profit / (loss) | (2,784) | -214% | 2,444 | (12,307) | 122% | (5,548) | (24,373) |
| | (1) In YTD Q3 2013, the Company recognized a gain amounting to US$ 18.8 million resulting from the remeasurement of the contribution payable related to Servitec in accordance with IFRS. Excluding this positive effect, the operating loss would have been US$ 24.4 million in YTD Q3 2013. |
Q3 2014
Operating profit / (loss) decreased by US$ (5.2) millionand can be explained as follows:
(i) Net impact of reduced activity and pricing: US$ (8.4) million
(ii) Fixed operational costs reduction: US$ 1.8 million
(iii) Reduction in SG&A costs: US$ 1.4 million
Total variance: US$ (5.2) million
Nine months Q3 2014
Operating loss decreased by US$ (12.0) million, going from an adjusted operating loss of US$ (24.4) millionin YTD Q3 2013 to US$ (12.3) millionin YTD Q3 2014. The reduced activity including the impact of exchange rate fluctuations was partially compensated for by the reduction in fixed operational and SG&A costs.
Financial position
The following table provides a summary of the Company's cash flows for YTD Q3 2014 and YTD Q3 2013:
| (In thousands of US$) | YTD Q3 2014 | YTD Q3 2013 | | | | | | Cash generated from operations before working capital requirements | 13,271 | 6,860 | | Working capital requirements, interest and tax | (5,107) | (3,677) | | Net cash flow generated by operating activities | 8,164 | 3,183 | | | | | | Purchase of equipment in cash | (6,888) | (8,361) | | Consideration payable related to acquisitions | (500) | - | | Net cash used in investing activities | (7,388) | (8,361) | | | | | | Debt variance | (10,273) | 16,700 | | Acquisition of treasury shares | - | (1,556) | | Dividends paid | (1,086) | (5,983) | | Net cash generated by / used in financing activities | (11,359) | 9,161 | | | | | | Net cash variation | (10,583) | 3,983 | | | | | | Foreign exchange differences | (780) | (2,348) | | | | | | Variation in cash and cash equivalents | (11,363) | 1,635 |
In YTD Q3 2014, the net cash flow generated by operating activities amounted to US$ 8.2 millioncompared to US$ 3.2 millionduring the same period last year.
During the period, the Company acquired maintenance Capex for US$ 6.9 millionin cash and US$ 0.5 millionthrough capital leases compared to a total of US$ 8.4 millionin cash purchases during YTD Q3 2013.
As at September 30, 2014, cash and cash equivalents totaled US$ 26.2 million compared to US$ 37.5 million as at December 31, 2013. Cash and cash equivalents are held at or invested within top tier financial institutions.
As at September 30, 2014, the net debt amounted to US$ 105.1 million(US$ 121.9 millionas at December 31, 2013). The ratio of debt (net of cash) to shareholders' equity decreased from 0.69 as at December 31, 2013to 0.65 as at September 30, 2014.
On September 30, 2014, financial debts and equivalents amounted to US$ 131.3 million(US$ 159 millionas at December 31, 2013). The financial debt also includes the present value of the consideration payable in 2015 for the acquisition of the remaining Servitec shares which were reduced to US$ 3.4 millionfollowing the agreement signed with the minority shareholder of Servitec to waive the call and put options previously due to be exercised before the end of 2014 and payable in March 2015.
As at September 30, 2014, the Company is not in breach of any covenant. The next testing date for the bank covenants is December 31, 2014. The Company is currently reassessing its debt structure and has entered into negotiations with its lenders in Francein order to adapt its debt structure so as to better match its future cash flow generation. The Company is confident that an agreement will be reached before year-end.
As at September 30, 2014, the financial debt is as follows (in thousands of US$):
| Maturity | Roll Over | October 1,
2014 and
September
30, 2015 | October 1,
2015 and
September
30, 2016 | October 1,
2016 and
September
30, 2017 | October 1,
2017 and
September
30, 2018 | October 1,
2018 and
September
30, 2019 | Total | | Drawn credit lines rolled over on a yearly basis | 50,994 | | - | - | - | - | 50,994 | | Long term financing related to: | | | | | | | | | - Drawn credit lines rolled over confirmed for at least 12 months | 6,777 | | - | - | - | - | 6,777 | | - Brazil acquisition | | 4,059 | 4,059 | 4,059 | | - | 12,178 | | - Australia acquisition | | 6,343 | 6,343 | 6,343 | 6,343 | | 25,370 | | - Acquisition of fixed assets | | 9,858 | 8,998 | 7,237 | 3,693 | 618 | 30,405 | | - Acquisition of fixed assets through capital leases | | 1,522 | 337 | 206 | 93 | (0) | 2,159 | | | | | | | | | | | Total | 57,771 | 21,781 | 19,737 | 17,845 | 10,129 | 618 | 127,882 |
(*) The non-current portion of long term debt, i.e. from October 1, 2015onwards, is $48,330 thousand
The Company has used and unused short-term credit facilities amounting to US$ 91.8 million out of which US$ 57.8 millionwas drawn as of September 30, 2014. These facilities are granted individually by several banks, mainly in France, Chile, Brazil, Australiaand Canada. They are generally granted on a yearly basis and are subject to review at various dates.
Going concern and impairment testing
Current economic conditions make forecasting difficult, and there is the possibility that the Company's actual operating performance during the coming year may be different from expectations. Based on internal forecasts and projections that take into account reasonably possible 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 for a period of at least twelve months provided it continues to benefit from the support of its lenders. The next testing date for the bank covenants is December 31, 2014. The Company is currently reassessing its debt structure and has entered into negotiations with its lenders in Francein order to adapt its debt structure so as to better match its future cash flow generation. The Company is confident that an agreement will be reached before year-end. Accordingly, the Company continues to adopt the going concern basis in preparing its financial statements.
The current economic conditions in mining services were seen as an indicator of potential impairment of the carrying value of the Company's long lived assets. Accordingly, an impairment test was performed at the level of each reporting segment and geographic region. The assumptions used involve a considerable degree of estimation on the part of management. The most significant assumptions include revenue per rig, EBITDA margin, discount rate and long term growth. The assumptions for 2015 and 2016 are based on management's estimates. For 2017 onwards, the Company used the 7-year actual historical performance in order to determine its revenue per rig and EBITDA margin. Management considers that this provides a reasonable factual basis for the purpose of impairment testing. On this basis, no impairment was deemed necessary.
Currency exchange rates
The exchange rates for the periods under review are provided in the Management's Discussion and Analysis of Q3 2014.
Non-IFRS measures
EBITDA represents Net income before interest expense, income taxes, depreciation, amortization and non-cash share based compensation expenses. EBITDA is a non-IFRS quantitative measure used to assist in the assessment of the Company's ability to generate cash from its operations. The Company believes that the presentation of EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the drilling industry. EBITDA is not defined in IFRS and should not be considered to be an alternative to Profit for the period or Operating profit or any other financial metric required by such accounting principles.
Adjusted EBITDA corresponds to the EBITDA excluding the impact resulting from the remeasurement of the contribution payable for Servitec.