Odyssey Marine Exploration, Inc. press release

Foraco International Reports Q3 2015

2015-11-02

NASDAQ - Nasdaq Stock Market · Phosphate · Gold · Copper · Silver · Zinc · Cobalt · Manganese · Nickel · Rare Earth Elements · United States

Canada NewsWire

TORONTO and MARSEILLE, France, Nov. 2, 2015

Positive EBIT; 20% EBITDA Margin

TORONTOand MARSEILLE, France, Nov. 2, 2015/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 2015. All figures are reported in US Dollars (US$), unless otherwise indicated.

"Q3 2015 continued to be affected by the prolonged slowdown in the industry. Excluding the effect of the exchange rate variations, our revenue decreased by 17% compared to the same quarter last year. Our utilization rate hit a low of 30%. This was more than offset by the good operating performance of our contracts and the positive effects of our cost reduction plan" said Daniel Simoncini, Chairman and co-CEO of Foraco. "The necessary resizing of the Company which enabled us to post improved operating results, was achieved without detriment to our quality of services, our flexibility or our capacity to innovate."

"During the quarter, the Company's revenue was affected by significant variations in foreign exchange rates, mainly in Canada, Brazil, Australiaand Russia, where most of the Company's activity is based. In spite of this, EBITDA for the quarter continues to be satisfactory at US$6.2m, or 20% of revenue. In addition, we are pleased to report $7.2mof free cash flow for the period, also reflecting the good monitoring of our working capital" commented Jean-Pierre Charmensat, co-CEO and Chief Financial Officer. "At the end of Q3 2015, our net debt amounts to US$ 93.4m, compared to US$ 96.7mat year-end 2014 and US$ 97.7mat the end of Q2 2015. We continue to work hard to further improve results."

Three months Q3 2015 Highlights

Revenue

Q3 2015 revenue amounted to US$ 31.1 millioncompared to US$ 51.6 millionin Q3 2014, a decrease of 40%. Using Q3 2014 exchanges rates, Q3 2015 revenue decreased by 17%. The utilization rate was 30% in Q3 2015 compared to 37% in Q3 2014.

Profitability

The Q3 2015 gross margin including depreciation within cost of sales was US$ 4.4 millioncompared to US$ 3.3 millionin Q3 2014. The reduction in revenues was compensated by the effect of the cost cutting actions and the performance on contracts, as most projects have delivered their expected gross margin. SG&A costs reduced by US$ 2.0 millionbetween Q3 2014 and Q3 2015 as a result of foreign exchange variances and the cost cutting action plans. EBIT amounted to US$ 0.2 millionin Q3 2015 compared to US$ (2.8) millionin Q3 2014. During the quarter, EBITDA amounted to US$ 6.2 million(or 20% of revenue) compared to US$ 5.4 million(or 11% of revenue) for the same quarter last year. Capital expenditure was US$ 3.0 millionin Q3 2015 compared to US$ 3.9 millionin Q3 2014. This Capex is mainly linked to new contracts.

Nine-months Q3 2015 (YTD Q3 2015) Highlights

Revenue

YTD Q3 2015 revenue amounted to US$ 108.2 millioncompared to US$ 145.4 millionfor the same period last year, a decrease of 26% or 4% excluding the impact of exchange rates.

Profitability

YTD Q3 2015 gross margin including depreciation within cost of sales was US$ 6.6 millioncompared to US$ 6.8 millionin YTD Q3 2014. The Company encountered a certain number of operational difficulties in Q1. In Q2 and Q3, most contracts delivered their expected gross margin and the company continues to benefit from the cost cutting action plan. SG&A costs reduced by US$ 5.4 million(or 28%) between YTD Q3 2014 and YTD Q3 2015. Excluding the impact of exchange rates amounting to US$ 1.3 million, SG&A reduced by US$ 1.7 millionas a result of the cost cutting action plans and US$ 0.5 millionrelated to the payment of a receivable provided for in Q4 2014. Capital expenditures were US$ 7.1 millionin YTD Q3 2015 compared to US$ 7.4 millionin YTD Q3 2014.

Selected financial data

| (In thousands of US$) | | Three-month period ended | | Nine-month period ended | | | | | | | | (unaudited) | | September 30, | | September 30, | | | | | | | | | | | 2015 | | 2014 | | | 2015 | | 2014 | | | | | | | | | | | | | | Revenue | | | 31,051 | | 51,580 | | | 108,156 | | 145,432 | | | | | | | | | | | | | | | | | | | | | | | | | | Gross profit (1) | | | 4,412 | | 3,287 | | | 6,611 | | 6,808 | | As a percentage of sales | | | 14.2% | | 6.4% | | | 6.1% | | 4.7% | | | | | | | | | | | | | | EBITDA | | | 6,162 | | 5,447 | | | 11,823 | | 12,735 | | As a percentage of sales | | | 19.8% | | 10.6% | | | 10.9% | | 8.8% | | | | | | | | | | | | | | | | | | | | | | | | | | Operating profit / (loss) | | | 210 | | (2,784) | | | (7,551) | | (12,307) | | As a percentage of sales | | | 0.7% | | -5.4% | | | -7.0% | | -8.5% | | | | | | | | | | | | | | | | | | | | | | | | | | Profit / (loss) for the period | | | (973) | | (3,509) | | | (9,584) | | (13,517) | | | | | | | | | | | | | | | | | | | | | | | | | | Attributable to: | | | | | | | | | | | | Equity holders of the Company | | | (1,286) | | (3,564) | | | (9,452) | | (13,502) | | Non-controlling interests | | | 313 | | 55 | | | (132) | | (15) | | | | | | | | | | | | | | EPS (in US cents) | | | | | | | | | | | | Basic | | | (1.45) | | (4.01) | | | (10.70) | | (15.21) | | Diluted | | | (1.45) | | (4.01) | | | (10.70) | | (15.21) | | | | | | | | | | | | | | | | | | | | | | | | | | (1) includes amortization and depreciation expenses related to operations | | | | | | | | | | |

Financial results

Revenue

| (In thousands of US$) - (unaudited) | Q3 2015 | % change | Q3 2014 | YTD Q3 | % change | YTD Q3 | | | | | | 2015 | | 2014 | | Reporting segment | | | | | | | | Mining......................................................... | 28,535 | -40% | 47,197 | 95,650 | -25% | 127,958 | | Water......................................................... | 2,516 | -43% | 4,383 | 12,506 | -28% | 17,474 | | Total revenue............................................. | 31,051 | -40% | 51,580 | 108,156 | -26% | 145,432 | | | | | | | | | | Geographic region | | | | | | | | Europe, Middle East and Africa....................... | 8,302 | -30% | 11,897 | 33,710 | -10% | 37,378 | | South America.............................................. | 7,572 | -44% | 13,402 | 26,555 | -40% | 44,180 | | North America.............................................. | 6,874 | -39% | 11,236 | 23,863 | -16% | 28,370 | | Asia Pacific.................................................. | 8,303 | -45% | 15,045 | 24,028 | -32% | 35,503 | | Total revenue............................................. | 31,051 | -40% | 51,580 | 108,156 | -26% | 145,432 |

Q3 2015

Q2 2015 revenue amounted to US$ 43.8 millioncompared to US$ 48.4 millionin Q2 2014, a decrease Q3 2015 revenue amounted to US$ 31.1 millioncompared to US$ 51.6 millionin Q3 2014, a decrease of 40%. Using Q3 2014 exchanges rates, Q3 2015 revenue decreased by 17%.

In EMEA, revenue decreased by 30% (5% increase excluding the foreign exchange impact mainly linked to the Russian Ruble variance), from US$ 11.9 millionin Q3 2014 to US$ 8.3 millionin Q3 2015. In Africasome water contracts were postponed from Q3 to Q4 and 2016.

Revenue in South Americaamounted to US$ 7.6 millionin Q3 2015 (US$ 13.4 millionin Q3 2014), a decrease of 44% or 15% excluding the foreign exchange impact, mainly due to reduced activity in Chilepartially offset by increased operations in Brazil.

Revenue in North Americadecreased by 39% or 27% excluding the impact of exchange rates, due to pressure on prices and the non-renewal of contract.

In Asia Pacific, Q3 2015 revenue amounted to US$ 8.3 million, a decrease of 45%, or 30% excluding the impact of exchange rates, due to the early termination of contract.

YTD Q3 2015

YTD Q3 2015 revenue amounted to US$ 108.2 millioncompared to US$ 145.4 millionin YTD Q3 2014, a decrease of 26% or 7% excluding the impact of exchange rates.

In EMEA, revenue decreased from US$ 37.4 millionin YTD Q3 2014 to US$ 33.7 millionin YTD Q3 2015. Excluding the foreign exchange impact mainly linked to the Russian Ruble variance, revenue increased by 18% compared to the same period last year.

Revenue in South Americaamounted to US$ 26.6 millionin YTD Q3 2015 (US$ 44.2 millionin YTD Q3 2014), a decrease of 40%. In Brazil, revenue increased by 12% excluding the impact of exchange rates compared to the same period last year. In YTD Q3 2015, the activity in Chilereduced by 74% compared to YTD Q3 2014 due to contracts being halted and adverse climate conditions.

Revenue in North Americadecreased by 16% but was stable when excluding the impact of exchange rates.

In Asia Pacific, YTD Q3 2015 revenue amounted to US$ 24.0 million, a decrease of 32% or 18% excluding the impact of exchange rates, mainly due to pressure on selling prices, a lower utilization rate and the early termination of contract.

Gross profit

Q3 2015

Q3 2015 gross margin including depreciation within cost of sales was US$ 4.4 millioncompared to US$ 3.3 millionin Q3 2014. The reduction in revenues was compensated by the effect of the cost cutting actions and the performance on contracts, as most projects have delivered their expected gross margin.

YTD Q3 2015

Selling, General and Administrative Expenses

| (In thousands of US$) - (unaudited) | Q3 2015 | % change | Q3 2014 | YTD Q3 2015 | % change | YTD Q3 2014 | | | | | | | | | | Selling, general and administrative expenses | 4,115 | -32% | 6,071 | 13,676 | -28% | 19,115 |

Q3 2015

SG&A costs reduced by US$ 2.0 millionbetween Q3 2014 and Q3 2015 as a result of the foreign exchange variance and the continued cost cutting action plans.

YTD Q3 2015

SG&A costs reduced by US$ 5.4 million(or 28%) between YTD Q3 2014 and YTD Q3 2015. Excluding the impact of exchange rates amounting to US$ 2.8 million, SG&A reduced by US$ 2.1 millionas a result of the cost cutting action plans and US$ 0.5 millionrelated to the payment of a receivable provided for in Q4 2014.

Operating result

Q3 2015

Operating profit was US$ 0.2 million, a US$ 3.0 millionincrease compared to Q3 2014.

YTD Q3 2015

The operating loss decreased by US$ 4.8 millionas a result of the developments mentioned previously.

Financial position

The following table provides a summary of the Company's cash flows for YTD Q3 2015 and YTD Q3 2014:

| (In thousands of US$) | YTD Q3 2015 | YTD Q3 2014 | | | | | | Cash generated by/(used in) operations before working capital requirements............................. | 11,764 | 13,271 | | Working capital requirements......................................................................................................... | (480) | (961) | | Interest and tax............................................................................................................................... | (3,982) | (4,146) | | Net cash flow generated from operating activities............................................................. | 7,302 | 8,164 | | | | | | Purchase of equipment in cash...................................................................................................... | (6,679) | (6,888) | | Consideration payable related to acquisitions................................................................................ | (1,111) | (500) | | Net cash used in investing activities...................................................................................... | (7,790) | (7,388) | | | | | | Free cash flow............................................................................................................................. | (488) | 776 | | | | | | Debt variance................................................................................................................................. | (4,013) | (10,273) | | Dividends paid................................................................................................................................ | - | (1,086) | | Net cash used in financing activities...................................................................................... | (4,013) | (11,359) | | | | | | Net cash variation ...................................................................................................................... | (4,501) | (10,583) | | | | | | Foreign exchange differences ...................................................................................................... | (2,824) | (780) | | | | | | Variation in cash and cash equivalents.................................................................................. | (7,325) | (11,363) |

In YTD Q3 2015, the net cash flow generated from operating activities amounted to US$ 7.3 millioncompared to US$ 8.2 millionduring YTD Q3 2014.

During the period, Capex amounted to US$ 6.7 millionin cash and US$ 0.4 millionthrough capital leases, compared to US$ 6.9 millionin cash and US$ 0.5 millionthrough capital leases in YTD Q3 2014. Five second hand rigs were acquired in connection with new contracts and to replace obsolete equipment which was retired from service. The total rig count remains at 302.

As at September 30, 2015, cash and cash equivalents totaled US$ 15.9 millioncompared to US$ 23.2 millionas at December 31, 2014. Cash and cash equivalents are held at or invested within top tier financial institutions.

As at September 30, 2015, net debt amounted to US$ 93.4 million(US$ 96.7 millionas at December 31, 2014). The ratio of debt (net of cash) to shareholders' equity increased from 0.67 as at December 31, 2014to 0.96 as at September 30, 2015.

On September 30, 2015, financial debts and equivalents amounted to US$ 109.3 million(US$ 119.9 millionas at December 31, 2014):

| Maturity | Credit lines | 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 | October 1, 2019 and September 30, 2020 | Total | | Drawn credit lines rolled over on a yearly basis | 2,054 | - | - | - | - | - | 2,054 | | Long term financing related to: | | | | | | | | | - Drawn credit lines rolled over confirmed for at least 12 months | 47,890 | - | - | - | - | - | 47,890 | | - Brazil acquisition | - | - | 3,560 | 3,560 | 3,560 | | 10,681 | | - Australia acquisition | - | - | 5,563 | 5,563 | 5,563 | 5,563 | 22,252 | | - Acquisition of fixed assets | - | 4,257 | 8,550 | 6,905 | 4,146 | 1,520 | 25,378 | | - Acquisition of fixed assets through capital leases | - | 618 | 230 | 135 | 14 | - | 998 | | | | | | | | | | | Total | 49,944 | 4,876 | 17,903 | 16,164 | 13,284 | 7,083 | 109,253 | | | | | | | | | | | | | | | | | | | | (*) The non-current portion of long term debt, i.e. from October 1, 2016 onwards, is US$54,434 thousand | | | | | | | |

Presently the Company has used and unused short-term credit facilities amounting to US$ 60.3 million, of which US$ 49.9 millionwas drawn down as of September 30, 2015. Other facilities are granted individually by various banks, mainly in Chile, Brazil, Australiaand Canada. They are generally granted on a yearly basis and are subject to review at certain 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 main bank covenant is December 31, 2015. At this stage, the Company does not anticipate any breach of covenants. Please note that significant further negative variations in exchange rates, which are not under the Company's control, may impact the calculation of the net debt to EBITDA ratio.

As previously discussed, during the quarter, the Company's performance improved compared to previous quarters. On this basis, there is no indication that impairment testing is necessary as at September 30, 2015.

Currency exchange rates

The exchange rates for the periods under review are provided in the Management's Discussion and Analysis of Q3 2015.

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.

Net debt corresponds to the current and non-current portions of borrowings and the consideration payable related to acquisitions, net of cash and cash equivalents.

Reconciliations of the various non IFRS measures are as follows:

EBITDA

| (In thousands of US$) | Q3 | Q3 | YTD Q3 | YTD Q3 | | (unaudited) | 2015 | 2014 | 2015 | 2014 | | Operating profit / (loss)................................................. | 210 | (2,784) | (7,551) | (12,307) | | Depreciation expense .................................................. | 5,781 | 7,917 | 18,861 | 24,098 | | Non-cash employee share-based compensation.......... | 171 | 314 | 514 | 944 | | EBITDA ........................................................................ | 6,162 | 5,447 | 11,823 | 12,735 |

Net debt:

| | | | Q3 2015 | Q4 2014 | | | | Cash and cash equivalents................................... | 15,900 | 23,225 | | | | Borrowings - Non-current portion......................... | (102,324) | (109,312) | | | | Borrowings - Current portion................................ | (6,930) | (10,053) | | | | Consideration payable related to acquisitions....... | - | (528) | | | | | | | | | | Total Net Debt.................................................... | (93,354) | (96,667) |

Outlook

The Company's business strategy is to wait for the next growth phase of the metallic commodities cycle in the best possible conditions through the development and optimization of its services offered across its range of geographical regions, industry sectors, commodities and customers. The Company expects it will execute on its strategy primarily through organic growth in the near future.

Conference call and webcast

On November 2, 2015, Company Management will conduct a conference call at 10:00 am ETto review the financial results. The call will be hosted by Daniel Simoncini, Chairman and co-CEO, and Jean-Pierre Charmensat, co-CEO and CFO.

Earlier from Odyssey Marine Exploration, Inc.

Foraco Announces 2015 Q3 Results and Conference Call 2015-10-28
Foraco International Reports Q2 2015 2015-08-04
Foraco announces 2015 Q2 results and conference call 2015-07-28