Foraco International Reports Q4 2015

Continuing to generate positive Free Cash Flow

TORONTO and MARSEILLE, France, March 1, 2016 /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 fourth quarter 2015. All figures are reported in US Dollars (US$), unless otherwise indicated.

"As previously anticipated, market conditions in Q4 2015 continue to be depressed. In this context, we are pleased to report that, despite a 9% decrease in revenue (excluding the foreign exchange impact) compared to the same quarter last year, we were able to achieve solid operating performance on our contracts. Our EBITDA margin reached 21% of revenue, a level which has not been seen since the beginning of the industry crisis" said Daniel Simoncini, Chairman and co-CEO of Foraco. "In addition, our strategy to develop niche markets offering new technically complex services with higher added value is starting to pay off. Most of our capex is dedicated to these niche markets."

"During the quarter, we generated cash flows from operations of US$ 7.0 million to reach US$ 18.3 million for the full year. In spite of the market downturn, our free cash flows for the year amount to US$ 3.7 million, confirming the Company's unbroken track record of positive free cash flows year on year" commented Jean-Pierre Charmensat, co-CEO and Chief Financial Officer. "Our net debt reduced to US$ 89.3 million from US$ 96.7 million last year and all our financial covenants were met as at December 31, 2015. We have proven our ability to reorganize the company and generate cash despite a low utilization rate, this being achieved without any compromise to the quality of our services."

Three months Q4 2015 Highlights

Revenue

• Q4 2015 revenue amounted to US$ 29.5 million compared to US$ 40.1 million in Q4 2014, a decrease of 26%. Using Q4 2014 exchanges rates, Q4 2015 revenue decreased by 9%.
• The utilization rate was 30% in Q4 2015 compared to 33% in Q4 2014.

Profitability

• The Q4 2015 gross margin including depreciation within cost of sales was US$ 5.0 million (or 17% of revenue) compared to US$ 0.3 million (or 1% of revenue) in Q4 2014. The reduction in revenue 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 million between Q4 2014 and Q4 2015 as a result of foreign exchange variances and the full effect of the cost cutting action plans.
• EBIT amounted to US$ 0.9 million in Q4 2015 compared to US$ (5.2) million in Q4 2014.
• During the quarter, EBITDA amounted to US$ 6.2 million (or 21% of revenue) compared to US$ 1.7 million (or 4% of revenue) for the same quarter last year.
• Capital expenditure was US$ 2.7 million in Q4 2015 compared to US$ 3.2 million in Q4 2014. This Capex is mainly linked to new contracts.

FY 2015 Highlights

Revenue

• FY 2015 revenue amounted to US$ 137.7 million compared to US$ 185.5 million for the same period last year, a decrease of 26% or 7% excluding the impact of exchange rates.

Profitability

• FY 2015 gross margin including depreciation within cost of sales was US$ 11.6 million compared to US$ 7.1 million in FY 2014. The Company encountered some operational difficulties on certain contracts in Q1 but subsequently the majority of contracts delivered their expected gross margin. The Company also benefited from the continuous effect of the cost cutting plans.
• SG&A costs reduced from US$ 25.1 million in FY 2014 to US$ 17.8 million in FY 2015, a decrease of US$ 7.4 million (or 29%).

Cash flow and net debt

• Capital expenditures were US$ 9.1 million in FY 2015 compared to US$ 10.1 million in FY 2014.
• Free cash flow was US$ 3.7 million in FY 2015 compared to US$ 4.5 million in FY 2014.
• The net debt reduced from US$ 96.7 million as at December 31, 2014 to US$ 89.3 million as at December 31, 2015.
• The Company complied with its financial covenants as at December 31, 2015.

Selected financial data

(In thousands of US$) - (unaudited)		Three month period ended December 31,				Year ended December 31,
		2015		2014		2015		2014
Revenue		29,528		40,094		137,684		185,525
Gross profit (1)		4,990		285		11,601		7,093
As a percentage of sales		16.9%		0.7%		8.4%		3.8%
EBITDA		6,245		1,688		18,067		14,408
As a percentage of sales		21.1%		4.2%		13.1%		7.8%
Operating profit / (loss)		876		(5,209)		(6,675)		(17,516)
As a percentage of sales		3.0%		-13.0%		-4.8%		-9.4%
Profit / (loss) for the period		(332)		(5,895)		(9,916)		(19,412)
Attributable to:
Equity holders of the Company		(234)		(2,653)		(9,686)		(16,155)
Non-controlling interests		(98)		(3,242)		(230)		(3,257)
EPS (in US cents)
Basic		(0.26)		(3.00)		(10.76)		(18.28)
Diluted		(0.26)		(3.00)		(10.76)		(18.28)
(1) includes amortization and depreciation expenses related to operations

Financial results

Revenue

(In thousands of US$) - (unaudited)	Q4 2015	% change	Q4 2014	FY 2015	% change	FY 2014
Reporting segment
Mining................................................	23,708	-34%	35,704	119,358	-27%	163,660
Water................................................	5,820	33%	4,390	18,326	-16%	21,865
Total revenue.................................	29,528	-26%	40,094	137,684	-26%	185,525
Geographic region
Europe, Middle East and Africa........	11,232	17%	9,611	44,943	-4%	46,989
South America..................................	4,821	-51%	9,894	31,376	-42%	54,074
North America...................................	5,757	-29%	8,070	29,619	-19%	36,440
Asia Pacific.......................................	7,718	-38%	12,519	31,746	-34%	48,022
Total revenue.................................	29,528	-26%	40,094	137,684	-26%	185,525

Q4 2015

Q4 2015 revenue amounted to US$ 29.5 million compared to US$ 40.1 million in Q4 2014, a decrease of 26%. Using Q4 2014 exchanges rates, Q4 2015 revenue decreased by 9%.

In EMEA, revenue increased by 17% (42% increase excluding the foreign exchange impact mainly linked to the Russian Ruble variance), from US$ 9.6 million in Q4 2014 to US$ 11.2 million in Q4 2015. Both Russia and Africa contributed to this increase.

Revenue in South America amounted to US$ 4.8 million in Q4 2015 (US$ 9.9 million in Q4 2014), a decrease of 51% or 30% excluding the foreign exchange impact, mainly due to reduced activity in Chile and Argentina.

Revenue in North America decreased by 29% or 16% excluding the impact of exchange rates, due to the early termination and postponement of certain contracts.

In Asia Pacific, Q4 2015 revenue amounted to US$ 7.7 million, a decrease of 38%, or 27% excluding the impact of exchange rates, mainly due to the termination of one contract in Australia.

FY 2015

FY 2015 revenue amounted to US$ 137.7 million compared to US$ 185.5 million in FY 2014, a decrease of 26% or 7% excluding the impact of exchange rates.

In EMEA, revenue decreased from US$ 47.0 million in FY 2014 to US$ 44.9 million in FY 2015. Excluding the foreign exchange impact mainly linked to the Russian Ruble variance, revenue increased by 23% compared to last year.

Revenue in South America amounted to US$ 31.4 million in FY 2015 (US$ 54.1 million in FY 2014), a decrease of 42%. The activity in Chile reduced by 72% compared to FY 2014 due to contracts being halted and adverse climate conditions. This was partially offset by 8% increased activity in Brazil (excluding the impact of exchange rates) compared to last year and an increased activity in Argentina by US$ 1.4 million.

Revenue in North America decreased by 19%. Excluding the foreign exchange impact mainly linked to the Canadian Dollar variance, revenue decreased by 6% compared to last year.

In Asia Pacific, FY 2015 revenue amounted to US$ 31.7 million, a decrease of 34% or 20% excluding the impact of exchange rates, mainly due to pressure on selling prices, a lower utilization rate and the early termination of a contract.

Gross profit

	(In thousands of US$) - (unaudited)	Q4 2015	% change	Q4 2014	FY 2015	% change	FY 2014
	Reporting segment
	Mining................................................	4,033	n/a	104	10,792	113%	5,059
	Water................................................	957	n/a	181	809	-60%	2,034
	Total gross profit / (loss) ............	4,990	n/a	285	11,601	64%	7,093

Q4 2015

Q4 2015 gross margin including depreciation within cost of sales was US$ 5.0 million compared to US$ 0.3 million in Q4 2014. The reduction in revenue was compensated by the effect of the cost cutting actions and the performance on contracts, as most projects have delivered their expected gross margin.

FY 2015

FY 2015 gross margin including depreciation within cost of sales was US$ 11.6 million compared to US$ 7.1 million in FY 2014. The Company encountered some operational difficulties on certain contracts in Q1, but subsequently the majority of contracts delivered their expected gross margin. The Company also benefited from the continuous effect of the cost cutting plans.

Selling, General and Administrative Expenses

(In thousands of US$) - (unaudited)	Q4 2015	% change	Q4 2014	FY 2015	% change	FY 2014
Selling, general and administrative expenses	4,078	-32%	6,033	17,754	-29%	25,148

Q4 2015

SG&A costs reduced by US$ 2.0 million between Q4 2015 and Q4 2014 as a result of the foreign exchange variance (US$ 0.8 million) and the continued cost cutting action plans (US$ 1.2 million).

FY 2015

SG&A costs reduced by US$ 7.4 million (or 29%) between FY 2014 and FY 2015. Excluding the impact of exchange rates amounting to US$ 3.2 million, SG&A reduced by US$ 3.7 million as a result of the cost cutting action plans and US$ 0.5 million related to the payment of a receivable made during the period and provided for in Q4 2014.

Operating result

(In thousands of US$) - (unaudited)	Q4 2015	% change	Q4 2014	FY 2015	% change	FY 2014
Reporting segment
Mining .................................................	723	n/a	(4,805)	(5,036)	-70%	(16,635)
Water..................................................	153	n/a	(404)	(1,639)	86%	(881)
Total operating profit / (loss) ......	876	n/a	(5,209)	(6,675)	-62%	(17,516)

Q4 2015

Operating profit was US$ 0.9 million, a US$ 6.1 million increase compared to Q4 2014.

FY 2015

The operating loss decreased by US$ 10.8 million as a result of the developments mentioned previously.

Financial position

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

(In thousands of US$)	FY 2015	FY 2014
Cash generated by/(used in) operations before working capital requirements	17,982	15,047
Working capital requirements	322	5,910
Interest and tax	(5,535)	(5,932)
Net cash flow generated from operating activities	12,769	15,025
Purchase of equipment in cash	(9,097)	(10,121)
Free cash flow	3,671	4,504
Consideration payable related to acquisitions	(1,111)	(500)
Debt variance	(5,786)	(16,008)
Dividends paid	-	(1,086)
Acquisition of treasury shares	(12)	-
Net cash used in financing activities	(6,909)	(17,594)
Net cash variation	(3,237)	(12,690)
Foreign exchange differences	(3,417)	(1,611)
Variation in cash and cash equivalents	(6,654)	(14,301)

In FY 2015, the net cash flow generated from operating activities amounted to US$ 12.8 million compared to US$ 15.0 million during FY 2014.

Free cash flow was US$ 3.7 million in FY 2015 compared to US$ 4.5 million in FY 2014.

During the year, Capex amounted to US$ 9.1 million in cash and US$ 0.4 million through capital leases, compared to US$ 10.1 million in cash and US$ 0.5 million through capital leases in FY 2014. Seven 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 unchanged at 302.

As at December 31, 2015, cash and cash equivalents totaled US$ 16.6 million compared to US$ 23.2 million as at December 31, 2014. Cash and cash equivalents are held at or invested within top tier financial institutions.

As at December 31, 2015, net debt amounted to US$ 89.3 million (US$ 96.7 million as at December 31, 2014). The ratio of debt (net of cash) to shareholders' equity increased from 0.67 as at December 31, 2014 to 0.90 as at December 31, 2015. The equity is mainly denominated in Euros and therefore has been significantly affected by exchange rate fluctuations.

As at December 31, 2015, the financial covenants were met. 

On December 31, 2015, financial debts and equivalents amounted to US$ 105.8 million (US$ 119.9 million as at December 31, 2014):

Maturity	Credit lines	January 1, 2016 and December 31, 2016	January 1, 2017 and December 31, 2017	January 1, 2018 and December 31, 2018	January 1, 2019 and December 31, 2019	January 1, 2020 and December 31, 2020	Total
Drawn credit lines rolled over on a yearly basis	49,239	-	-	-	-	-	49,239
Long term financing related to:							-
- Drawn credit lines rolled over confirmed for at least 12 months		-	-	-	-	-	-
- Brazil acquisition		-	3,496	3,496	3,496	-	10,488
- Australia acquisition		5,463	5,463	5,463	5,463	-	21,850
- Acquisition of fixed assets		4,683	7,848	5,480	4,185	1,448	23,644
- Acquisition of fixed assets through capital leases		278	228	95	8	-	609
Total	49,239	10,424	17,034	14,533	13,151	1,448	105,830	(*)

(*)	The non-current portion of long term debt, i.e. from January 1, 2017 onwards, is US$46,167 thousand

The Company currently has used and unused short-term credit facilities amounting to US$ 58.5 million, of which US$ 49.2 million was drawn down as of December 31, 2015. Other facilities are granted individually by various banks, mainly in Chile, Brazil, Australia and 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. As at December 31, 2015, the Company complied with its financial covenants.

Currency exchange rates

The exchange rates for the periods under review are provided in the Management's Discussion and Analysis of Q4 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$) (unaudited)	Q4 2015	Q4 2014	FY 2015	FY 2014
	Operating profit / (loss)...............................................	876	(5,209)	(6,676)	(17,516)
	Depreciation expense ................................................	5,297	6,712	24,158	30,810
	Non-cash employee share-based compensation.......	72	185	585	1,114
	EBITDA .....................................................................	6,245	1,688	18,067	14,408

Net debt:

						Q4 2015	Q4 2014
					Cash and cash equivalents...................................	16,571	23,225
					Borrowings - Non-current portion.........................	(46,167)	(109,312)
					Borrowings - Current portion................................	(59,663)	(10,053)
					Consideration payable related to acquisitions.......	-	(528)
					Total Net Debt....................................................	(89,259)	(96,667)

Outlook

The Company's business strategy is to actively prepare 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.

As at December 31, 2015 the Company's order backlog for continuing operations was US$ 106.3 million of which US$ 71.5 million is expected to be executed during the FY 2016. The Company's order backlog consists of sales orders. Sales orders are subject to modification by mutual consent and in certain instances orders may be revised by customers. As a result the order backlog of any particular date may not be indicative of actual operating results for any subsequent period.

Conference call and webcast

On March 1st, 2016, Company Management will conduct a conference call at 10:00 am ET to review the financial results. The call will be hosted by Daniel Simoncini, Chairman and co-CEO, and Jean-Pierre Charmensat, co-CEO and CFO.

You can join the call by dialing 1-888-231-8191 or 1-647-427-7450. 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://event.on24.com/r.htm?e=1142793&s=1&k=20F2C048946842BE67776013121CCD00.

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

About Foraco International SA

Foraco International SA (TSX: FAR) 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 23 countries across five continents. For more information about Foraco, visit www.foraco.com.

"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, 2015, 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

SOURCE Foraco International SA

Brenda Patterson-Mack ([email protected]), Tel: [phone]