Aecon reports third quarter 2011 results

Revenues and earnings up, strong outlook reaffirmed

TORONTO, Nov. 7, 2011 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported its results for the third quarter of 2011.


  • Third quarter revenues reached $835 million (vs. $803 million in same quarter of 2010), driven by gains in both the Infrastructure and Industrial segments.

  • EBITDA increased to $74.5 million in the quarter ($51.8 million in 2010), including an $11.5 million gain on the sale of Aecon's interest in its highway operating company in Israel this quarter. Excluding this gain and the $14 million gain recorded last year following the purchase of Cow Harbour's assets, EBITDA in the quarter was $63.0 million vs. $37.8 million in the third quarter of 2010.

  • Adjusted earnings per share (basic) increased to $0.74 in the quarter ($0.45 in 2010) and adjusted earnings per share (diluted) increased to $0.49 ($0.37 in 2010).

  • Positive outlook through 2012 and into 2013 is reaffirmed.
    Three Months Ended
September 30 (1)
        Nine Months Ended
      September 30 (1)
($ millions, except per share amounts)   2011   2010       2011   2010
Revenues $ 835 $ 803     $ 2,106 $ 1.909
Gross profit     96.3   66.6       161.4   138.5
EBITDA (2)   74.5   51.8       89.5   71.3
Depreciation and  amortization   (16.0)   (12.6)       (45.8)   (34.0)
Operating profit (3)   58.5   39.2       43.7   37.3
Financing charges, net   (8.1)   (3.6)       (21.4)   (10.0)
Fair value gain on convertible
  1.7   0.9       4.5   11.2
Income tax (expense)   (8.9)   (10.3)       (1.6)   (8.5)
Profit attributable to shareholders   41.7   24.9       20.9   26.8
Adjusted profit attributable to 
     shareholders (4)

40.5   24.3       17.6   18.6
Adjusted earnings per share
    (diluted) (5)
  0.49   0.37       0.32   0.33
Backlog - September 30 $ 2,215 $ 2,525            

(1)  Prior period results have been restated to an IFRS basis and therefore are comparable with the current period.
(2)  EBITDA represents earnings or losses before net financing expense, income taxes, depreciation and amortization, and non-controlling interests.
(3)  Operating profit (loss) represents the profit (loss) from operations before net financing expense, income taxes and non-controlling interests.
(4)    Adjusted profit (loss) attributable to shareholders represents the profit (loss) attributable to shareholders adjusted to exclude the after-tax fair value gain (loss) on the embedded derivative portion of Aecon's convertible debentures.
(5)    Adjusted earnings (loss) per share (diluted) represents earnings (loss) per share calculated using adjusted profit (loss) attributable to shareholders.

Outlook, Backlog and New Business Awards

"The strong quarter reported today, along with the significant new business awards announced recently and our ongoing focus on project execution, give us a solid base from which to build sustainable, consistent earnings," said John M. Beck, Aecon's Chairman and CEO. "I believe these factors will result in the continued strengthening of Aecon's financial performance as we move through 2012 and beyond."

"I'm pleased with our progress on the operational front," said Teri McKibbon, Aecon's Chief Operating Officer.  "I believe the additional focus we've placed on operations this year is having an impact that will be increasingly reflected in our results going forward."

New contract awards increased to $869 million in the quarter from $579 million in the same quarter last year, with particularly strong growth in the resources sector in Western Canada.  Backlog at September 30, 2011 was $2.21 billion, compared to $2.52 billion at the same time last year, reflecting the fact that two of Aecon's largest-ever project awards were received in the second quarter of 2010.

Not included in backlog, but important to Aecon's prospects due to the significant volumes involved, are the expected revenues from Aecon's growing alliances and supplier-of-choice arrangements, including for example most of Aecon's mining and utilities businesses, where the value and/or timing of work to be carried out is not specified.

Third Quarter Business Highlights

  • Aecon received a number of significant new project awards in the quarter, particularly in the resources sector in Western Canada, including:
    • Two contracts awarded to Lockerbie and Hole Eastern by the Thompson Creek Metals Company and the Potash Corporation of Saskatchewan Inc., which are expected to generate over $250 million in revenues;

    • Two contracts awarded to Aecon's Industrial West Division totalling $132 million for fabrication and module assembly work for a large SAGD (steam assisted gravity drainage) oilsands project near Fort McMurray, Alberta;

    • A contract awarded to Aecon Mining for site preparation and early works at a new potash mine in Saskatchewan, valued at approximately $80 million.
  • Aecon and partner Dufferin Construction were selected by Infrastructure Ontario and Metrolinx as the preferred proponent to design, build and finance an Air Rail Link (ARL) to the Toronto Pearson International Airport and an ARL passenger station at the Airport.

  • In September, Aecon sold its interest in Derech Eretz Highways Management Corporation Limited, the operator of the Cross Israel Highway, along with its interests in several affiliates of the operator that operate other transportation infrastructure assets in Israel. Total proceeds from this transaction were $14 million and the resulting gain on sale was $11.5 million.

  • In September, the Aecon West Headquarters was opened in Calgary to anchor Aecon's presence in Western Canada.  Having a core office in Calgary enables Aecon to further strengthen key customer relationships in the region and cement its ties to Western Canada's business community.

  • Throughout the quarter, Aecon continued to purchase shares under a normal course issuer bid, launched in March of this year that enables it to purchase up to 5,527,277 common shares of Aecon over a 12-month period. At September 30, 2011, Aecon had acquired an aggregate of 1,424,900 common shares, all of which were subsequently cancelled.

Segmented Results

Aecon reports its results in three operating segments: Infrastructure, Industrial and Concessions.  The Buildings division, previously a segment reported separately, now forms part of Aecon's Infrastructure segment.

  • Infrastructure

The Infrastructure segment includes all aspects of civil construction from highways, bridges and tunnels to airports, marine facilities, transit and power projects as well as utilities construction, buildings construction and mining operations.

Financial Highlights (1)(2)
($ millions)
Three Months
Ended Sept. 30
  Nine Months
Ended Sept. 30
    2011   2010         2011   2010    
Revenues $ 538 $ 512       $ 1,196 $ 1,112    
EBITDA   51.1   52.8         39.0   34.1    
Segment operating profit   41.2   46.2         11.4   16.7    
Operating profit margin   7.7%   9.0%         1.0%   1.5%    
Backlog - September 30 $ 1,560 $ 1,654                  

(1)  Segment operating profit or loss represents the profit or loss from operations, before net interest expense, income taxes, non-controlling interests and corporate allocations of overhead costs and capital charges.
(2)  Operating profit margin is calculated as segment operating profit (loss) as a percentage of revenues.

Third quarter revenues of $538 million in the Infrastructure segment were $27 million higher than in the same period last year, with increases from mining and utilities operations offsetting decreases in civil and materials operations and buildings.

For the three and nine months ended September 30, 2011, the operating results in the Infrastructure segment increased/(decreased) from the same period last year as follows:

($ millions)  Three months ended  Nine months ended
         Sept. 30  Sept. 30
Civil and Materials    
  Ongoing operations    0.6    0.5
  Gain on sale of land in 2010       -    (7.0)
Utilities    1.1   17.3
  Ongoing operations    6.7  (11.9)
  Gain on sale of equipment    2.5     2.5
  Gain on acquisition of assets in 2010  (14.0)  (14.0)
Buildings    (1.9)     7.3 
(Decrease) in segment operating profit  (5.0)   (5.3)

Aecon Mining's operating results from ongoing operations improved by $6.7 million in the quarter and the business realized a gain of $2.5 million from the sale of surplus equipment. The significant third quarter improvement in operating profit is due primarily to higher current period revenues and reduced maintenance expense in the quarter.  In buildings, there was an operating loss of $5 million in the third quarter of 2011 compared to a loss of $3 million in 2010.

New contract awards increased to $341 million in the quarter from $289 million in the same quarter last year. Backlog at September 30, 2011 was $1.56 billion, compared to $1.65 billion a year earlier.

  • Industrial

Industrial operations include all of Aecon's industrial manufacturing and construction activities including in-plant construction, fabrication of specialty pipe, assembly of custom module units and the design and manufacture of once-through heat recovery steam generators.

Financial Highlights
($ millions)
Three Months
Ended Sept. 30
  Nine Months
Ended Sept. 30
    2011   2010         2011   2010
Revenues $ 275 $ 266       $ 844 $ 734
EBITDA   8.4   (2.9)         34.0   33.5
Segment operating profit (loss)   4.6   (6.1)         22.3   24.3
Operating profit margin   1.7%   (2.3%)         2.6%   3.3%
Backlog - September 30 $ 655 $ 871              

Third quarter revenues of $275 million in the Industrial segment were $9 million higher than in 2010.  Most of the increase in revenues came from IST, primarily reflecting the impact of a higher order backlog this year.

For the three and nine months ended September 30, 2011, operating profit in the Industrial segment increased/(decreased) over the same period last year as follows:

($ millions)   Three months ended  Nine months ended
  Sept. 30  Sept. 30
Heavy Industrial (construction and fabrication)  7.5   (7.0)
Mechanical   3.5    3.4
IST    (0.3) 1.6
Increase (decrease) in segment operating profit  10.7   (2.0)

Most of the operating profit increase in the Industrial segment this quarter resulted from higher volumes in the commodity mining sector and from higher margins from construction operations in Ontario.  The improvement in mechanical operating profit reflects generally higher margins earned this year compared to 2010.

Backlog of $655 million at September 30, 2011 compares to $871 million at the same time last year.  New contract awards of $506 million in the quarter represent an increase of $241 million over the same period in 2010.  Most of the increase in new awards occurred in heavy industrial operations, primarily in the commodities mining sector.

  • Concessions

The Concessions segment includes the development, operation and financing of infrastructure projects by way of public-private partnership, build-own-operate-transfer or other alternative financing contract structures.

Financial Highlights
($ millions)
  Three Months
   Ended Sept. 30
   Nine Months
Ended Sept. 30
    2011   2010         2011   2010  
Revenues $ 22 $ 25       $ 71 $ 67  
EBITDA   20.6   7.8         34.3   21.0  
Segment operating profit   19.7   5.9         31.7   16.1  
Operating profit margin   89.8%   24.1%         44.9%   24.3%  

For the three and nine months ended September 30, 2011, operating profit in the Concessions segment increased/(decreased) over the same period last year as follows:

($ millions)  Three months ended  Nine months ended
  Sept. 30  Sept. 30
Quito Airport Concessionnaire  1.0   1.9
Operation and Maintenance Services - Israel    
  Gain on sale of O&M operations  11.5  11.5
  O&M services   0.6    2.2
Other    0.7  
Increase in segment operating profit  13.8   15.6

The increase in operating profits in the Concessions segment this quarter is primarily the result of the sale of Derech Eretz Highways Management Corporation, the operator of the Cross Israel Highway.  The increase in profits from the Quito airport concessionaire is primarily due to lower amortization charges following the extended opening date for the new airport, which at September 30 was approximately 85% complete.

Consolidated Results

The Consolidated Results for the three and nine months ended September 30, 2011 and 2010 are available at the end of this News Release.

Balance Sheet Highlights

(thousands of dollars) (unaudited)   September 30, 2011   Dec. 31, 2010
Cash and cash equivalents and restricted cash $                    189,347 $ 308,653
Other current assets                       867,705   1,010,417
Property, plant and equipment                      469,224   444,276
Other long-term assets                      433,007   358,059
Total Assets $                  1,959,283 $             2,121,405
Current liabilities $ 818,425 $ 1,075,038
Non-recourse project debt   141,280   27,333
Other long-term debt   109,594   129,435
Convertible debentures   249,669   249,751
Other long-term liabilities                       181,599   180,250
Equity   458,716   459,598
Total Liabilities and Equity $ 1,959,283 $ 2,121,405

Conference Call

A conference call has been scheduled for Tuesday, November 8, 2011 at 11:00 a.m. ET to discuss Aecon's 2011 third quarter financial results.  Participants should dial 416-981-9030 or 1-800-381-7839 at least 10 minutes prior to the conference time of 11:00 a.m.  A replay will be available after 1:00 p.m. at 1-800-558-5253 or 416-626-4100 until midnight on November 15, 2011.  The pass code is 21543193.

About Aecon

Aecon Group Inc. is one of Canada's largest and most diverse construction and infrastructure development companies. Aecon and its subsidiaries provide services to private and public sector clients throughout Canada and on a selected basis internationally. Aecon is pleased to be recognized as one of the Best Employers in Canada.

The information in this press release includes certain forward-looking statements. These forward-looking statements are based on currently available competitive, financial and economic data and operating plans but are subject to risks and uncertainties.  In addition to general global events outside Aecon's control, there are factors which could cause actual results, performance or achievements to vary from those expressed or inferred herein including risks associated with an investment in the common shares of Aecon and the risks related to Aecon's business, including Large Project Risk and Contractual Factors. Risk factors are discussed in greater detail in the section on "Risk Factors" in the Annual Information Form filed on March 30, 2011 and available at  Forward-looking statements include information concerning possible or assumed future results of operations or financial position of Aecon, as well as statements preceded by, followed by, or that include the words "believes," "expects," "anticipates," "estimates," "projects," "intends," "should" or similar expressions.  Important factors, in addition to those discussed in this document, could affect the future results of Aecon and could cause those results to differ materially from those expressed in any forward-looking statements.

Caution Regarding Non-GAAP Earnings Measures

This press release is based on reported earnings in accordance with International Financial Reporting Standards ("IFRS").  It is also based on EBITDA, Operating Profit, Adjusted Profit (Loss) Attributable to Shareholders and Adjusted Earnings (Loss) Per Share.  These non-GAAP measures are derived from the Consolidated Financial Statements but do not have a standardized meaning prescribed by IFRS.  Management believes that a significant number of the users of its Management's Discussion and Analysis ("MD&A") analyze the Corporation's results based on these performance measures and that this presentation is consistent with industry practice.  Backlog is not a recognized performance measure under GAAP and does not have any standardized meaning prescribed by GAAP.  Aecon believes that backlog is a useful complementary measure, commonly used by management and the investment community, to evaluate the Company's projected activity in future periods.  There is no direct comparable measure to backlog in GAAP.  Additional information on Non-GAAP Measures is included in the Company's MD&A.

(in thousands of Canadian dollars, except per share amounts) (unaudited)
      For the three months ended For the nine months ended
        September 30   September 30 September 30   September 30
      2011    2010  2011    2010 
Revenue   $ 835,371    $ 802,971  $ 2,105,827    $ 1,908,983 
Direct costs and expenses     (739,076)     (736,417)   (1,944,438)     (1,770,448)
Gross profit     96,295      66,554    161,389      138,535 
Marketing, general and administrative expenses     (36,986)     (29,935)   (97,214)     (86,975)
Depreciation and amortization     (16,044)     (12,574)   (45,776)     (34,043)
Income (loss) from construction projects   accounted for using the equity method     2,406      599    10,316      (1,113)
Other income (loss)     12,811      14,583    14,970      20,886 
Operating profit     58,482      39,227    43,685      37,290 
Finance income     838      2,889    5,144      8,148 
Finance costs     (8,964)     (6,486)   (26,565)     (18,123)
Fair value gain on convertible debentures     1,665      912    4,544      11,178 
Profit before income taxes     52,021      36,542    26,808      38,493 
Income tax expense     (8,869)     (10,269)   (1,620)     (8,469)
Profit for the period   $ 43,152    $ 26,273  $ 25,188    $ 30,024 
Attributable to:                      
  Shareholders   $ 41,659    $ 24,928  $ 20,854    $ 26,772 
  Non-controlling interests     1,493      1,345    4,334      3,252 
      $ 43,152    $ 26,273  $ 25,188    $ 30,024 
Basic earnings per share   $ 0.76    $ 0.46  $ 0.38    $ 0.49 
Diluted earnings per share   $ 0.49    $ 0.37  $ 0.36    $ 0.38 



SOURCE Aecon Group Inc.

For further information:

Mitch Patten
Senior Vice President,
Corporate Affairs
Aecon Group Inc.

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