01-08-2025
Foraco International SA (FRACF) Q2 2025 Earnings Call Highlights: Navigating Challenges and ...
Revenue: $69 million in Q2 2025, or $72 million excluding Forex variants, compared to $77 million in Q2 2024.
EBITDA: $15 million excluding one-off costs, representing 22% of revenue, compared to $17 million or 23% in Q2 2024.
Gross Margin: $14 million, 21% of revenue, or $15 million, 22% of revenue excluding one-off costs, compared to $18 million, 23% in Q2 2024.
SG&A Expenses: Decreased by 19% to $4.7 million compared to $5.8 million in Q2 2024.
Net Debt: $76.5 million as of June 30, 2025, compared to $61 million at December 31, 2024.
CapEx: $10 million, same as H1 2024, mainly for new rigs and equipment.
Geographical Revenue Split: North America 37%, Asia Pacific 36%, South America 16%, EMEA 11% in Q2 2025.
Commodity Exposure: Gold increased from 11% to 16%, water from 11% to 18%, copper from 22% to 23%.
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Release Date: July 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Foraco International SA (FRACF) reported a 26% increase in revenue for Q2 2025 compared to Q1, demonstrating strong operational performance.
The company successfully doubled its EBITDA compared to the previous quarter, highlighting effective cost control and operational efficiency.
Revenue in the Asia Pacific region increased by 11%, reflecting successful operations and the commissioning of new proprietary rigs.
Foraco secured a new 3-year, $34 million contract with Glencore at the Lomas Bayas copper mine in Chile, indicating strong demand for its services.
The company is expanding its high-quality customer base globally, with a focus on copper, gold, and water, positioning itself well for future growth.
Negative Points
Overall revenue for Q2 2025 decreased to $69 million compared to $77 million in the same period last year, indicating a decline in top-line performance.
Revenue in North America decreased by 21% due to the discontinuation of certain client programs and delays in starting new contracts.
South America saw a revenue decrease from $18 million to $12 million, impacted by the start of new contracts and associated mobilization costs.
The company's net debt increased to $76.5 million as of June 30, 2025, compared to $61 million at the end of 2024, reflecting higher financial obligations.
CapEx was higher than anticipated, impacting free cash flow for the quarter, partly due to the acceleration of the NGBF program and expansion into the US.
Q & A Highlights
Q: Can you provide details on the movement of rigs between regions and any regions showing more promise as we enter the second half of the year? A: The rigs are generally moving north to south, including from Canada to the US and into Latin America. Parts of our business in Latin America are ramping up nicely, with opportunities for deeper holes. We have excess capacity in some of our deeper rigs that meet customer requirements in Latin America, making it sensible to move them. This includes both surface and underground rigs. (Timothy Bremner, CEO)
Q: Can you explain the higher CapEx this quarter and its impact on free cash flow? A: The higher CapEx is partly due to the acceleration of our NGBF program, with opportunities in Latin America prompting us to bring forward plans. Additionally, a relatively quiet Q1 pushed some CapEx into Q2, and ongoing expansion into the US required specific CapEx. It's partially a timing issue reflecting increased demand. (Timothy Bremner, CEO)
Q: What is the revenue split this quarter between major and junior clients? A: Juniors accounted for about 10% of the revenue this quarter, and we anticipate this to increase. Much of the work picked up in the US is for junior customers, reflecting relief in equity markets and stronger gold prices. (Timothy Bremner, CEO)
Q: Can you comment on the market valuation of Foraco compared to peers and the company's strategy in the US? A: Foraco is undervalued compared to peers, and we are working to improve liquidity and shareholder profile. In the US, we are securing longer-term work with Tier one customers and have a significant tender pipeline for copper and gold projects. We are operational and gaining momentum, aiming for a significant win with a Tier one customer soon. (Timothy Bremner, CEO)
Q: What is the outlook for South America in the second half of the year, considering recent contract wins? A: The outlook for Latin America is improved, with projects in Chile and Brazil showing growth. The order book and tender pipeline are robust, and we expect growth in the region, especially with the Glencore contract coming into play. (Timothy Bremner, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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