Foraco International Reports Q1 2010; Marked by Acquisitions

/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES NOR FOR DISSEMINATION IN THE UNITED STATES/

TORONTO and MARSEILLE, France, May 11 /CNW/ - Foraco International SA (the "Company" or "Foraco"), a leading global provider of diversified drilling services, today reported unaudited financial results for its first quarter of 2010. All figures are reported in Euros (EUR), unless otherwise indicated.

Q1 2010 Highlights:

    
    -   Revenue for the three-month period ended March 31, 2010, decreased to
        EUR 17.8 million from EUR 22.4 million over the corresponding period
        last year. This decrease is due to the combination of:

        (i)   phasing of projects both in the Water segment (decrease of
              EUR 2.6 million) and in the Mining segment (decrease of
              EUR 2.0 million), most of these projects having been resumed by
              the end of the quarter, and

        (ii)  the relocation of equipment to mobilize new contracts in the
              Mining segment in West and Central Africa, with corresponding
              revenue generated at the end of the quarter only.

        These factors impacted the very end of 2009, as disclosed last
        quarter, and the first half of the three-month period ended March 31,
        2010. The equipment utilization rate in March 2010 has returned to a
        level comparable to that of the first quarter of 2009.

    -   Gross profit including depreciation expense for the three-month
        period ended March 31, 2010, amounted to EUR 3.9 million (or 22% of
        revenue) compared to EUR 6.5 million (or 29% of revenue) a year ago.
        The Company was able to maintain a constant high level of contract
        gross margins but was impacted on the one hand by the reduced
        activity which resulted in a lower absorption of fixed operational
        costs, and on the other by a higher level of depreciation expense.

    -   Despite the lower level of activity during this quarter, the Company
        managed to generate a net profit after tax amounting to
        EUR 0.8 million and a positive cash flow from operations of
        EUR 0.9 million.

    -   During the quarter, the Company announced it has entered into binding
        agreements to acquire a 50% controlling interest in LLC Eastern
        Drilling Company ("EDC"), a Russian company; and a 100% interest in
        Adviser Drilling SA ("Adviser"), a Chilean company.

    -   On March 8, 2010, the Board of Directors proposed a dividend payment
        of EUR 0,028 per share to be approved by the shareholders at
        the Company's General Meeting to be held on May 18, 2010.
    

"The very end of 2009 and the beginning of the first quarter of 2010 were affected by a combination of adverse factors including the scheduled termination of certain significant contracts, the delays in the commencement of new projects, and the mobilization of equipment for new contracts. Since mid-February, the level of activity has returned, back in line with our expectations," said Daniel Simoncini Chairman and Chief Executive Officer of Foraco. "During the quarter we also negotiated the acquisition of LLC Eastern Drilling Company in Russia and Adviser Drilling SA in Chile, which represents a strategic milestone in the Company's transformation towards becoming a major global provider of drilling services."

"We would like to emphasize that despite the adverse effect of this temporary slowdown, we managed to generate a net profit and a positive cash flow from operations during the quarter. The individual projects we performed during this period continued to deliver a strong level of gross margin, which partially offset the under-absorption of our fixed costs resulting from the slow start during the quarter," said Jean-Pierre Charmensat, Vice-CEO and Chief Financial Officer of Foraco. "We are also confident that the integration of Adviser Drilling SA will be financially accretive, and will generate significant synergies on both short and long term."

Financial Results

Foraco's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"), rather than Canadian Generally Accepted Accounting Principles ("Canadian GAAP"), and as such may not be directly comparable to the financial statements of other Canadian issuers.

    
    (In thousands of Euros)            Three-month  % chance     Three-month
                                       -----------  --------     -----------
                                      period ended              period ended
                                      ------------              ------------
             (unaudited)            March 31, 2010            March 31, 2009
                                    --------------            --------------

    Reporting segment
    -----------------

    Mining.......................           13,664      -13%          15,665

    Water........................            4,151      -38%           6,710
                                             -----      ----           -----

    Total revenue................           17,815      -20%          22,375
                                            ------      ----          ------
                                            ------      ----          ------

    Geographical region
    -------------------

    Africa.......................            8,236      -31%          11,902

    Europe.......................              434      -83%           2,589

    Asia Pacific.................            4,069      164%           1,539

    Americas.....................            5,076      -20%           6,345
                                             -----      ----           -----

    Total revenue................           17,815      -20%          22,375
                                            ------      ----          ------
                                            ------      ----          ------
    

For the three-month period ended March 31, 2010, revenue totaled EUR 17.8 million compared to EUR 22.4 million for the three-month period ended March 31, 2009.

The decrease in revenue in the Mining segment amounted to EUR 2.0 million or 13%. This trend was observed at the very end of the last quarter of 2009 and during the first half of the three-month period ended March 31, 2010. This decrease can be explained by (i) a EUR 2.2 million decrease in Europe explained by the completion as scheduled of a significant contract in northwestern Russia in November 2009 and (ii) the slow start for mining activity in Canada (decrease of EUR 1.3 million) and in Africa (decrease of (EUR 1.3 million) where the Company relocated equipment to mobilize new contracts. This decrease was only partially offset by EUR 2.5 million of revenue in Asia Pacific generated during the first quarter of 2010.

The new contracts which required mobilization in the Mining segment started generating revenue at the end of the quarter.

In the Water segment, revenue decreased by 38%, from EUR 6.7 million during the first quarter of 2009 to EUR 4.2 million in 2010. This decrease is attributed to the postponement of the starting date of some important water projects in the Sub-Saharan region of Africa. These projects had resumed by the end of the quarter.

After this period of lower activity from the end of 2009 to February 2010, the utilization rate in March 2010 returned to a level comparable to that of the first quarter of 2009.

    
    -------------------------------------------------------------------------
    Gross Profit                                       Q1
    -------------------------------------------------------------------------
    (In thousands of Euros)            Three-month   % Chg       Three-month
    (unaudited)                       period ended              period ended
                                    March 31, 2010            March 31, 2009
    -------------------------------------------------------------------------
    Reporting segment
    Mining                                   2,805      -38%           4,531
    Water,                                   1,120      -43%           1,959
                                             -----      ----           -----
    Total gross profit                       3,925      -40%           6,490
                                             -----      ----           -----
                                             -----      ----           -----
    -------------------------------------------------------------------------

    

For the three-month period ended March 31, 2010, gross profit decreased by EUR 2.6 million (from EUR 6.5 million to EUR 3.9 million). This decrease in gross profit results from the impact of the reduced activity which generated (i) a lower level of gross profit (EUR 1.3 million) although most of the contracts have experienced an operational performance comparable to that of the same quarter last year, and (ii) an under-absorption of fixed operational costs (EUR 0.9 million). In addition, depreciation expenses increased by EUR 0.3 million. Depreciation expenses represented 12.3% of revenue during the first quarter of 2010 compared to 8.0% in the same quarter last year.

    
    -------------------------------------------------------------------------
    Operating Expenses                                 Q1
    (excluding cost of sales)
    -------------------------------------------------------------------------
    (In thousands of Euros)            Three-month      %        Three-month
    (unaudited)                       period ended     Chg      period ended
                                    March 31, 2010            March 31, 2009
    -------------------------------------------------------------------------

    Selling, general and
     administrative                          2,790       10%           2,530
    Other (income) and expense, net            (23)      N/S            (120)
    Total operating expenses                 2,767       15%           2,412
                                             -----       ---           -----
                                             -----       ---           -----
    -------------------------------------------------------------------------
    

For the three-month period ended March 31, 2010, the increase in operating expenses (excluding cost of sales) could be limited to EUR 0.4 million in spite of the inclusion of the SG&A costs of Mosslake (EUR 0.3 million) and of certain transaction costs related to the acquisition of Adviser (EUR 0.2 million).

    
    -------------------------------------------------------------------------
    (In thousands of Euros)            Three-month      %        Three-month
    (unaudited)                       period ended              period ended
                                    March 31, 2010     Chg    March 31, 2009
    -------------------------------------------------------------------------
    Reporting Segment
      Mining & Energy                          683      -76%           2,844
      Water, Environmental &
       Infrastructure                          475      -62%           1,236
                                               ---      ----           -----
    Total Operating Profit                   1,158      -72%           4,080
                                             -----      ----           -----
                                             -----      ----           -----
    -------------------------------------------------------------------------
    

Operating profit decreased to EUR 1.2 million for the three months ended March 31, 2010, compared to EUR 4.1 million for the three months ended March 31, 2009. This variation is primarily due, on the one hand, to the lower level of activity and its impact on gross profit and on the other, to the aforementioned increase in Selling, General and Administrative expenses.

    
    -------------------------------------------------------------------------
    Income                                             Q1
    -------------------------------------------------------------------------
    (In thousands of Euros)            Three-month      %        Three-month
    (unaudited)                       period ended     Chg      period ended
                                    March 31, 2010            March 31, 2009
    -------------------------------------------------------------------------

    Revenue                                 17,815      -20%          22,375
    Gross Profit(1)                          3,925      -40%           6,490
    Operating Expenses(2)                    2,767        2%           2,410
    Operating Profit                         1,158      -72%           4,080
    Net Earnings                               767      -71%           2,715
    EPS before minority interests
     in Euros
    (basic and diluted)                   EUR 0.01                  EUR 0.05

    -------------------------------------------------------------------------
    (1) Includes amortization and depreciation expenses
    (2) Excludes cost of sales
    

Net financial expenses totaled EUR 0.1 million for the three-month period ended March 31, 2010, compared to nil for last year's corresponding period.

Balance Sheet

As at March 31, 2010, the positive cash position net of debt amounted to EUR 5.5 million compared to EUR 9.4 million as at December 31, 2009. Cash and cash equivalents are mainly comprised of EUR 10.1 million of short-term deposits held at top-tier European financial institutions. The Company had drawn EUR 1.1 million from a total of EUR 22.6 million in available short-term credit facilities.

Currency and Exchange Rate

The average exchange rate between EUR and C$ in Q1 2010 was C$1.44 to EUR 1.00. The closing rate at the end of March 31, 2010, was C$1.37 to EUR 1.00.

Outlook

The Company's business strategy is to continue to grow through the development and optimization of its service offering across geographical regions and industry segments, as well through the expansion of its customer base. Foraco expects it will continue to execute its strategy through a combination of organic growth and development, and acquisitions of complementary businesses in the drilling services industry.

Foraco's unaudited Financial Statements and Management's Discussion & Analysis ("MD&A"), for the three month periods ended March 31, 2010, are available via Foraco's website at www.foraco.com and will be available on www.sedar.com.

Conference Call and Webcast

On Tuesday, May 11th 2010 at 10:00 am EDT, Management of the Company will host a conference call to review these financial results. The call will be hosted by Daniel Simoncini, Chairman and CEO, and Jean-Pierre Charmensat, Vice-CEO and CFO. You can join the call by dialing 1 - 888 231 - 8191 or 647-427-7450. Please call in 15 minutes prior to the call to secure a line. You will be put on hold until the conference call begins. A live audio webcast of the conference call will also be available through http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3064820 or at www.foraco.com.

Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be needed to hear the webcast. An archived replay of the webcast will be available for 90 days.

About Foraco International SA

Foraco International SA (TSX: FAR) is a global leading drilling services company that provides turnkey solutions for mining, energy, water and infrastructure projects. Supported by its founding values of integrity, innovation and involvement, Foraco has grown into a global enterprise with operations in 20 countries across five continents. For more information about Foraco, visit www.foraco.com.

To receive Company press releases, please email jennie@chfir.com and mention "Foraco News" on the subject line.

"Neither TSX Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Exchange) accepts responsibility for the adequacy or accuracy of this release."

Caution concerning forward-looking statements This document may contain "forward-looking statements" and "forward-looking information" within the meaning of applicable securities laws. These statements and information include estimates, forecasts, information and statements as to Management's expectations with respect to, among other things, the future financial or operating performance of the Company and capital and operating expenditures. Often, but not always, forward-looking statements and information can be identified by the use of words such as "may", "will", "should", "plans", "expects", "intends", "anticipates", "believes", "budget", and "scheduled" or the negative thereof or variations thereon or similar terminology. Forward-looking statements and information are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Readers are cautioned that any such forward-looking statements and information are not guarantees and there can be no assurance that such statements and information will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed under the heading "Risk Factors" in the Company's Annual Information Form dated March 31, 2010, which is filed with Canadian regulators on SEDAR (www.sedar.com). The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements and information whether as a result of new information, future events or otherwise. All written and oral forward-looking statements and information attributable to Foraco or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements.

%SEDAR: 00025480E

SOURCE Foraco International SA

For further information: For further information: please contact CHF Investor Relations at: Jeanny So, Director of Operations, Email: jeanny@chfir.com, Tel: (416) 868-1079 x 225


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890