Foraco International TSE: FAR reported higher first-quarter revenue as activity ramped up across most regions, while profitability held steady amid mobilization and start-up costs tied to new contracts.
Quarterly results show growth despite seasonal headwinds
Chief Executive Officer Tim Bremner reminded listeners that the first quarter is “traditionally one of our weaker periods due to seasonality and the restart after the holiday break,” which can affect activity across several regions. Even so, Foraco posted revenue of $66 million for the quarter ended March 31, 2026, up from $55 million in Q1 2025.
Bremner said the revenue increase reflected “strong growth in almost all countries, particularly in Canada, the U.S., and South America.” He added that the company is seeing “the continuation of the demand inflection that began in the second half of 2025,” supported by an order book he described as near record levels and providing “strong visibility going forward.”
Regional performance and profitability
Chief Financial Officer Fabien Sevestre said the year-over-year improvement was “driven by new contracts.” By geography, Sevestre highlighted:
- North America: Revenue of $25 million, up 39%, reflecting ramp-up of new contracts in Canada and the U.S.
- South America: Revenue nearly doubled, up 98% year-over-year, which Sevestre attributed to strong regional demand.
- Asia Pacific: Revenue of $14 million, which Sevestre said reflected “normal contract phasing.”
- EMEA: Revenue grew to $7 million, supported by ongoing contract ramp-ups.
On margins, Sevestre reported gross margin of $7.1 million, or 10.7% of revenue, compared with 14.1% in the prior-year quarter. He said some operations remain in ramp-up mode and “have not yet reached target margins.”
SG&A was $5 million, or 8% of revenue, which management characterized as well controlled. EBIT was $2 million compared to $3 million in Q1 2025, while EBITDA was stable at $7.4 million.
Margin outlook tied to contract maturity
During Q&A, Desjardins analyst Frédérick Tremblay asked when EBITDA margins could return to historical levels, citing an EBITDA margin of about 11% in Q1 and asking whether normalization could occur as early as Q2 or more likely in the second half.
Bremner responded that “EBITDA margins are improving,” particularly as the company transitions away from ramp-up phases that have affected “about 50% of our projects.” As contracts mature into more stable operating stages, he said the company is seeing improvement and expects “that improvement trend was going to continue over the next two quarters.”
Bremner reiterated that as activity ramps, management remains focused on “execution and margin improvement,” including “driving operational efficiencies that will support margin expansion as contracts mature.”
Cash, capital spending, and leverage
Sevestre said working capital increased by $15 million in the quarter as the company supported higher activity levels. Capital expenditures totaled $10 million, primarily for “the addition of five new rigs and supporting equipment.” Sevestre framed the spending as part of a “proactive approach” to support the company’s order book discussed on the prior quarter’s call.
Net debt rose to $91 million, which Sevestre said was expected given the working-capital build and the CapEx program. He added that the company maintained “solid liquidity” with approximately $18 million of undrawn credit facilities.
Asked whether the working-capital cash outflow would reverse in Q2, Sevestre said the working-capital increase “will be reversed in cash before year-end,” but added that as activity increases “month after month” until Q4, working capital “will be at high level until this date.”
In a separate exchange, Stephen Green of Ord Minnett asked if reducing debt is a priority by year-end. Bremner said the company’s capital allocation policy is unchanged and that “the top priority is debt reduction.”
Beacon Securities’ Donangelo Volpe also asked whether elevated CapEx should be expected for the remainder of the year. Bremner said Q1 CapEx was “pretty strong” and “in line with the increase in the top line that we expect.” He added that the company expects to “continue to invest in equipment” as the business grows, noting that some spending is maintenance-related, including “a complete and full robust overhaul” for certain rigs. He emphasized that Foraco evaluates investments based on returns, particularly on long-term projects, and stated, “We do not do any speculative investment on equipment.”
Utilization, hiring, and demand drivers
Tremblay asked about utilization, referencing an average of 40% in Q1 and seeking detail on how utilization progressed through the quarter. Bremner said the company ended the quarter “over 50%,” including the deployment of five new rigs, and said another four rigs are expected to be deployed over the next quarter. He added that utilization is expected to rise throughout the year, while noting that under the company’s definition, maximum utilization is “somewhere around the mid-70%.”
Volpe also asked about utilization early in Q2 and confidence in reaching 60% at some point during the year. Bremner said utilization was “over 50%” at the time of the call. He noted some operations are moving into winter season conditions for high-altitude projects, which he said would be offset by increased demand elsewhere. He again pointed to expectations for utilization to increase over the next two quarters.
On labor, Volpe referenced a roughly 16% year-over-year workforce increase and asked about recruiting conditions. Bremner said the company is continuing to recruit and acknowledged labor markets are “tighter than they were,” though conditions vary by region. He pointed to Latin America as an example where some high-altitude projects are ending, which could “free up some labor.” Bremner said Foraco is generally able to crew its projects but that it takes longer, and he stressed management’s intent “not to over-commit and field rigs that are only partially crewed.”
On the sources of growth, Bremner told Green that growth is “coming from everywhere,” including Latin America and a rebound in North America, and confirmed that includes the U.S. He also told Volpe that about “50%” of quarterly revenue was driven by new work.
Looking ahead, Bremner said the industry backdrop remains positive, citing near-record metal prices for gold and copper, broad commodity demand, and structural factors such as de-globalization, geopolitical uncertainty, and growing AI-related infrastructure needs. He said Foraco’s focus remains “disciplined growth,” prioritizing scalable long-term projects while staying selective, with preparations aimed at capturing opportunities “particularly in the second half of 2026.”
About Foraco International TSE: FAR
Foraco International SA is the business of providing mineral and water drilling services and hydraulic drilling. It specializes in drilling in harsh environments and isolated locations including desert, and mountainous regions. The principal sources of revenue consist of drilling contracts for companies involved in mining and water exploration. The group has its operations in Europe, the Middle East and Africa, North America, South America and the Asia Pacific.
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