Foraco International Q3 Earnings Call Highlights

Key Points

• Revenue grew 21.4% year over year to $86.2 million, driven by stronger drilling activity and higher fleet utilization in the Americas and EMEA. Mining revenue rose 25%, while Asia Pacific was the only region to report a decline.
• Profitability lagged the top-line growth: EBITDA increased 8.2% to $15.4 million, but the margin fell to 17.8% from 20%, and net profit declined to $4.4 million due to labor, maintenance and consumables inflation.
• Foraco reduced net debt by roughly $8 million during the quarter and plans to prioritize cash conversion, working-capital discipline and further debt reduction after completing much of its recent rig investment program.

Foraco International TSE: FAR reported third-quarter revenue growth of 21.4% as higher drilling activity in the Americas and EMEA lifted fleet utilization, though profitability margins remained below year-earlier levels amid inflation in labor, maintenance and consumables.

Revenue for the quarter ended September reached $86.2 million, compared with $71 million in the third quarter of 2025. Chief Executive Officer Tim Bremner said it was the company’s third consecutive quarter of year-over-year revenue growth above 20%.

“The underlying demand environment remains supportive, with gold continuing to be the strongest near-term driver of drilling activity,” Bremner said. He cited exploration, resource-definition and mine-life-extension activity in North America, West Africa and South America, while describing copper as a longer-term opportunity supported by electrification and the energy transition.

Americas Lead Revenue Growth

North America was the largest regional contributor to the quarter’s growth, with revenue rising 39% to $35.6 million from $25.6 million a year earlier. South American revenue increased 29% to $21.2 million.

• North America: Revenue rose 39% to $35.6 million.
• South America: Revenue increased 29% to $21.2 million.
• Asia Pacific: Revenue declined 10% to $21.4 million.
• EMEA: Revenue increased 51% to $8.1 million.

Mining revenue climbed 25% to $76 million, compared with $60.8 million in the prior-year quarter. Water revenue was essentially unchanged at $10.3 million, versus $10.2 million a year earlier.

Bremner said recurring demand for near-mine drilling remains favorable as miners invest in reserve replacement and brownfield exploration. He added that the company is targeting technically demanding projects where it believes pricing better reflects the level of service and equipment required, rather than pursuing more commodity-oriented greenfield work.

Fleet utilization reached 53%, up from 35% in the third quarter of 2025 and 51% in the second quarter. Bremner said the increase reflected a higher level of activity across operations and successful recruitment and training efforts, although labor markets remain competitive for experienced drillers and supervisors.

Margins Lag Revenue Growth

Third-quarter EBITDA increased 8.2% to $15.4 million from $14.2 million, but EBITDA margin declined to 17.8% of revenue from 20% a year earlier. Gross margin was 16.7%, compared with 19.7% in the prior-year quarter, while net profit fell to $4.4 million from $5.5 million.

Management said increased activity has not yet fully translated into the profitability it expects. Bremner cited cost inflation in labor, maintenance and consumables, along with contract-specific and productivity challenges in parts of the mining business.

The water segment has benefited from its technical nature, particularly mine dewatering work in Canada and Australia, according to Bremner. He said proprietary equipment has contributed to the segment’s performance through greater productivity, a smaller operating footprint and lower capital intensity.

For the first nine months of 2026, revenue rose to $237 million from $195 million in the corresponding period of 2025. EBITDA increased to $37.8 million from $35.2 million, while year-to-date EBITDA margin declined to 16% from 18%. Nine-month net profit was $8.5 million, compared with $12.5 million a year earlier.

Cash Conversion and Debt Reduction Remain Priorities

Chief Financial Officer Fabien Sevestre said net debt stood at $78.1 million at the end of September, improving by about $8 million during the quarter. Bremner separately described the quarterly reduction as $7.6 million.

Working capital absorbed approximately $15.7 million during the first nine months, compared with $6.8 million a year earlier, as activity rose and the company mobilized new contracts. Bremner said the company expects some normalization as contracts progress and receivables are collected, but did not provide a specific fourth-quarter target.

Capital expenditures totaled $21 million during the first nine months, compared with $14.5 million in the prior-year period. Bremner said $11 million of the 2026 total related to seven new rigs and associated support equipment for new contracts. With its major investment program substantially complete, management said it intends to place greater emphasis on working-capital discipline, cash conversion, free cash flow and further debt reduction.

Looking ahead, Bremner said the company has a strong order book and sees opportunities to increase utilization further in 2027. He said 60% utilization is achievable from an operating-capacity standpoint, but stressed that this was not formal guidance. Management also declined to provide specific margin guidance for the fourth quarter or 2027, while reiterating that pricing, field performance, margins and cash generation are central priorities.

About Foraco International (TSE:FAR)

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 16 countries across five continents.

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