Mr. Tim Bremner reports

FORACO INTERNATIONAL REPORTS RECORD QUARTER AND FULL YEAR 2023 RESULTS AND PROPOSES DIVIDEND DISTRIBUTION

Foraco International SA has released its results for the fourth quarter and full year ended Dec. 31, 2023. All amounts are denominated in U.S. dollars unless otherwise stated.

Q4 2023 financial metrics (in-million):

• Revenue: $86.6-million (up 2 per cent year-over-year (YoY));
• earnings before interest, taxes, depreciation and amortization: $18.7-million (up 9 per cent YoY from Q4 2022);
• EBITDA as percentage of revenue: 21.6 per cent (up from 20.2 per cent in Q4 2022);
• Net debt reduction: $65.2-million at year-end 2023 compared with $76.2 m at year-end 2022.

Full-year 2023 financial metrics (in-million):

• Revenue: $370.1-million (up 12 per cent YoY);
• EBITDA: $86.7-million (up 30 per cent YoY);
• Net profit: $33.9-million (9.2 per cent of revenue, up 32 per cent YoY);
• Order backlog at year-end to be executed in 2024: $236.1-million compared with $217.4-million last year (up 9 per cent);
• Proposed dividend of six Canadian cents per share.

Tim Bremner, chief executive officer of Foraco, reflected on the year, stating: "In 2023, Foraco achieved record revenue, profitability and cash flow generation both quarterly and annually. We are now clearly recognized as one of the few companies firmly established as a market leader in the industry. Our strategy remains focused on operating within geopolitically stable regions and expanding our service portfolio within the critical sectors of battery metals, gold and water management. Our strong position, the robustness of our business model, and our clients' satisfaction and trust have resulted in an increased backlog to be delivered in FY 2024, which stood at $236.1-million on Dec. 31, 2023, compared to $217.4-million on Dec. 31, 2022 (up 9 per cent). To conclude this record year, I am pleased to announce that the board of directors, reflecting its confidence in the company's strength and outlook, has decided to propose a dividend of six Canadian cents per share at the next shareholders' meeting. On behalf of the board and management team, I extend our deepest thanks to each member of the Foraco family for their invaluable contribution to our success."

Fabien Sevestre, chief financial officer of Foraco, shared insights into the financial achievements: "Our trustworthy and close relationship with our clients, along with our discipline in controlling risks, operations, working capital needs, capex, and SG&A costs, contributed to this consistently remarkable performance. During the quarter, we also managed to finalize the early redemption of our previous debt and refinance it, postponing the maturity and cutting the interest charge by 50 per cent. Our net debt was reduced to $65.2-million at year-end, and our leverage ratio to 0.75. This financial strength, along with the notable improvement in our EPS, expands our options for capital allocation. The appreciation in our share price over the past year represents a strong vote of confidence from the market. We are pleased that this appreciation, along with the proposed dividend distribution, rewards our shareholders for their long-term support."

Highlights -- Q4 2023

Revenue:

• In Q4 2023, Foraco's revenue was $86.6-million compared with $84.9-million generated in Q4 2022, a 2-per-cent increase.

Profitability:

• Q4 2023 gross margin, including depreciation within cost of sales, was $19.9-million (representing 23 per cent of revenue), compared with $18.5-million (or 21.8 per cent of revenue) recorded in Q4 2022. The uplift was driven by the satisfactory performance of contracts.
• For the quarter, EBITDA totalled $18.7-million (or 21.6 per cent of revenue) from the $17.1-million (or 20.2 per cent of revenue) for the corresponding quarter of the previous year.

Balance sheet:

• On Nov. 8, 2023, the company undertook an early redemption of its U.S.-dollar-denominated senior bonds. They were originally issued in 2021 with a maturity date set for December, 2025. In line with this redemption, the company entered into two separate financing agreements: Desjardins in Canada, providing $76-million (Canadian) with a 10-per-cent annual repayment and a maturity of 3.5 years reschedulable over six further years. Caisse d'Epargne (Natixis Group) in France, offering 30 million euros with 22.5 million euros to be amortized over the next four years and a final payment of 7.5 million euros in 2028. This refinancing reduces the company's interest expense, modifies the debt maturity profile and implements a back-ended amortization schedule. Concurrently, an additional liquidity line of $15-million (Canadian) has been secured with Desjardins.

Highlights -- fiscal year 2023

Revenue:

• For the year ending Dec. 31, 2023, the revenue amounted to $370.1-million, representing a 12-per-cent increase over the $330.6-million recorded in FY 2022. This rise in revenue is due to the solid performance of main contracts and the delivery of more added drilling services.

Profitability:

• In FY 2023, the gross margin, inclusive of depreciation within cost of sales, was $93.9-million (or 25.4 per cent of revenue), a significant 32-per-cent increase from $71.3-million (or 21.6 per cent of revenue) in FY 2022. This increase resulted from good contract performance, improved selling prices and the delivery of more value-added drilling services.
• During FY 2023, EBITDA amounted to $86.7-million (or 23.4 per cent of revenue), a 30-per-cent increase from $66.5-million (or 20.1 per cent of revenue) for FY 2022.
• The free cash flow of the year was $29.1-million compared with $17.4-million in FY 2022.

Net debt:

• As of Dec. 31, 2023, the net debt, accounting for the impact of international financial reporting standard 16, stood at $65.2-million, reflecting a notable reduction from $76.2-million as of Dec. 31, 2022.
• The net debt to EBITDA ratio at year-end 2023 is 0.75 versus 1.15 at year-end 2022.

Financial results

Revenue

Q4 2023

The solid revenue was driven by the continued performance of main contracts and the provision of value-added drilling services which more than compensated for the decline in activity in certain regions. The rig utilization rate for Q4 2023 held steady at 55 per cent, marginally up from 54 per cent in Q4 2022, with underlying disparities across regions, CIS (Commonwealth of Independent States) reporting lower rates and other regions witnessing higher utilization.

North American operations reported a $2.2-million revenue decrease, at $26.1-million in Q4 2023 from $28.3-million in Q4 2022. This decrease was mainly due to the delayed start on two significant projects now scheduled for 2024 and the preparation and relocation of rigs for new United States-based contracts which will start in Q1 2024.

South American revenue increased to $31.8-million in Q4 2023 compared with $29.5-million in Q4 2022. New contracts were mobilized during the quarter and will continue through 2024.

In the Asia Pacific region, revenue for Q4 2023 was $16.3-million, a 17-per-cent increase that reflects a quarter-over-quarter increase in demand and the acquisition and commissioning of new rigs.

Revenue for the EMEA (Europe, Middle East, Africa) region saw a 6-per-cent decrease, moving down to $12.4-million in Q4 2023 from $13.1-million in Q4 2022. Revenues in Southern Europe and Africa remained stable compared with Q4 2022, while activity in the CIS decreased by 15 per cent due to political and economic uncertainties in the region.

FY 2023

The uptick in revenue for the mining and water segments can be attributed to favourable market dynamics, with the company having renegotiated and extended its long-term rolling contracts since the previous year. Coupled with the company's proven capacity to deliver, this has generated significant growth.

North American operations saw a 14-per-cent surge in activity, with revenues climbing to $119.2-million in FY 2023, up from $104.3-million in FY 2022. This increase primarily resulted from the early remobilization of long-term contracts with senior clients, renewed in the previous year.

In South America, revenues spiked by 26 per cent to reach $131.9-million in FY 2023, a notable increase from $104.6-million in FY 2022. This was driven by all countries ramping up their activity levels, supported by new long-term contracts with senior companies.

In the Asia Pacific region, FY 2023 revenues rose to $68.4-million, a 28-per-cent increase, reflecting the period-over-period market growth and the capacity of the company to meet demand.

In the EMEA region, revenue for FY 2023 amounted to $50.6-million, representing a 26-per-cent decrease compared with the $68.3-million recorded in FY 2022. Although revenues in Southern Europe and Africa experienced a slight increase compared with FY 2022, operations in the CIS countries witnessed a 42-per-cent decline, primarily attributable to the unstable situation in the region.

Gross profit

Q4 2023

For Q4 2023, the gross margin, inclusive of depreciation within cost of sales, reached $19.9-million (or 23 per cent of the revenue) compared with Q4 2022 $18.5-million (or 21.9 per cent of the revenue). This reflects the solid operating performance of contracts.

FY 2023

In FY 2023, the gross margin, inclusive of depreciation within the cost of sales, rose to $93.9-million (or 25.4 per cent of the total revenue). This marked a significant surge compared with the $71.3-million (or 21.6 per cent of revenue) in FY 2022. The substantial increase underscores the robust performance and efficiency of contracts.

Selling, general and administrative expenses

Q4 2023

SG&A was stable compared with the same quarter last year. As a percentage of revenue, SG&A remained stable at 7.4 per cent of the revenue.

FY 2023

SG&A increased compared with the same period last year mainly due to the level of activity. As a percentage of revenue, SG&A decreased from 7.5 per cent in FY 2022 to 7.3 per cent in FY 2023.

Operating result

Q4 2023

The operating profit was $13.5-million, resulting in a $1.5-million increase driven by activity levels and enhanced profit margins.

FY 2023

The operating profit reached $66.7-million, resulting in a $20.3-million increase driven by heightened activity levels and enhanced operational margins.

Financial position

In FY 2023, the cash generated from operations before working capital requirements amounted to $86.7-million compared with $66.5-million in FY 2022, a 30-per-cent increase.

During the same period, the working capital requirements was $5-million, down from $9.7-million in the previous year.

During the period, capital expenditure (capex) totalled $26.1-million in cash compared with $20-million in FY 2022. Capex relates essentially to the acquisition of rigs, major rig overhauls, ancillary equipment and rods. Seven rigs were added to the fleet during the period.

As at Dec. 31, 2023, cash and cash equivalents totalled $34.3-million compared with $29.4-million as at Dec. 31, 2022. Cash and cash equivalents are mainly held at or invested within top-tier financial institutions.

As at Dec. 31, 2023, the net debt, including operational lease obligations (IFRS 16), amounted to $65.2-million ($76.2-million as at Dec. 31, 2022).

The net debt to EBITDA ratio as at Dec. 31, 2023, was 0.75 (1.15 at year-end 2022), reflecting enhanced financial position in a quarter generally affected by increased activity and associated working capital requirements.

Bank guarantees as at Dec. 31, 2023, totalled $7.4-million compared with $9.4-million as at Dec. 31, 2022.

Strategy

The company's strategy is to assist its customers in exploring or managing their deposits throughout the entire cycle, with a special focus on the life of mines extension activity. The company intends to continue developing and growing its services across the world with a focus on stable jurisdictions, high-tech drilling services, optimal commodities mix, including battery metals and gold -- with a significant presence in water-related drilling services -- and a gradual implementation of advanced digital applications. The company expects to execute its strategy primarily through organic growth and targeted acquisitions.

The company addressed the environmental, social and governance (ESG) requirements, and implements a pragmatic and measurable approach to ESG with quantitative key performance indicators to maximize improvement and efficiencies.

Currency exchange rates.

The exchange rates for the periods under review are provided in the management's discussion and analysis of Q4 2023.

Conference call and webcast

On Feb. 16, 2024, company management will conduct a conference call at 11 a.m. ET to review the financial results. The call will be hosted by Mr. Bremner, CEO, and Mr. Sevestre, CFO.

You can join the call by dialling 1-888-664-6392 or 1-416-764-8659. You will be put on hold until the conference call begins. A live audio webcast of the conference call will also be available.

An archived replay of the webcast will be available for 90 days.

About Foraco International SA

Foraco International is a leading global mineral drilling services company that provides a comprehensive and reliable service offering in mining and water projects. Supported by its founding values of integrity, innovation and involvement, Foraco has grown into the third-largest global drilling enterprise with a presence in 22 countries across five continents.

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