North American Construction Group Ltd. Announces Results for the Second Quarter Ended June 30, 2024
Press Release
ACHESON, Alberta, July 31, 2024 — North American Construction Group Ltd. (“NACG”) (TSX:NOA.TO/NYSE:NOA) today announced results for the second quarter ended June 30, 2024. Unless otherwise indicated, financial figures are expressed in Canadian dollars, and comparisons are to the prior period ended June 30, 2023.
Second Quarter 2024 Highlights:
- Combined revenue of $329.7 million compared favorably to $278.6 million in the same period last year, is a second quarter record and reflected best operational quarter to date from the Australian fleet of the MacKellar Group which was acquired on October 1, 2023.
- Reported revenue of $276.3 million, compared to $195.2 million in the same period last year, was primarily generated by strong equipment utilization of 82% in Australia but was offset by lower equipment operating hours in the oil sands region due to adverse weather conditions in May and June.
- Our net share of revenue from equity consolidated joint ventures was $53.4 million in Q2 2024 and compared to $83.4 million in the same period last year as the increases at Fargo project in the current quarter were offset by gold mine project scopes in Northern Ontario completed in the prior quarter.
- Adjusted EBITDA of $86.9 million and margin of 26.3% compared favorably to the prior period operating metrics of $51.8 million and 18.6%, respectively, as revenue increases drove higher gross EBITDA with margin improvements driven by effective operations in Australia and Canada.
- Combined gross profit of $60.4 million and margin of 18.3% was impacted by a one-time charge for equipment disposal. This margin compares favorably to the 13.0% posted in the same period last year as diversification efforts and effective operations contributed to improved margins in the quarter.
- Cash flows generated from operating activities of $59.0 million was higher than the $40.2 million generated in the prior period as higher cash generation from the strong EBITDA was offset by the temporary impact of changes to working capital in the quarter.
- Free cash flow used in the quarter was $1.5 million. Free cash flow prior to working capital changes and increases in capital work in progress was over $30 million resulting from strong revenues and margins offset by our routine capital maintenance program.
- Net debt was $832.7 million at June 30, 2024, an increase of $109.3 million from December 31, 2023, as year-to-date free cash flow usage and growth asset purchases required debt financing. The cash-related interest rate was 7.0% primarily driven by Bank of Canada posted rates and correlated equipment financing rates.
- Additional highlights: i) transport and delivery of approximately twenty haul trucks from Canada to Australia remains on schedule with commissioning expected in late Q3; ii) ERP implementation in Australia targeting a go-live date in Q3; and iii) equipment telematics progressed with the introduction of Hitachi functionality in Canada and establishment of mobile data infrastructure at mine sites in Australia.
In response to a challenging first half of 2024, the Company has updated its full year expectations with the outlook for the second half of 2024 remaining in line with original expectations set in October 2023. The updated full year adjusted earnings range is $3.95 to $4.15 per share and, with $1.56 generated in the first half of the year, implies a second half range of approximately $2.40 to $2.60 per share.
Joe Lambert, President and CEO, stated, “I am encouraged by the underlying fundamentals of our business. Our drive for operational excellence day-in day-out remains strong as ever and I am proud of the operating culture we have here at NACG. In reviewing our medium and long-term outlooks with our operational and estimating teams in Australia and Canada, we have much to be excited about in the second half of 2024, full year 2025 and beyond.”
Consolidated Financial Highlights
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (dollars in thousands, except per share amounts) | 2024 | 2023 | (iv) | 2024 | 2023 | (iv) | ||||||||||
| Revenue | $ | 276,314 | $ | 195,188 | $ | 573,340 | $ | 439,517 | ||||||||
| Total combined revenue(i) | 329,723 | 278,568 | 675,436 | 600,909 | ||||||||||||
| Gross profit | 49,669 | 21,595 | 102,959 | 62,695 | ||||||||||||
| Gross profit margin(i) | 18.0 | % | 11.1 | % | 18.0 | % | 14.3 | % | ||||||||
| Combined gross profit(i) | 60,350 | 36,258 | 122,575 | 92,177 | ||||||||||||
| Combined gross profit margin(i)(ii) | 18.3 | % | 13.0 | % | 18.1 | % | 15.3 | % | ||||||||
| Operating income | 38,705 | 10,334 | 76,981 | 36,042 | ||||||||||||
| Adjusted EBITDA(i)(iii) | 86,881 | 51,833 | 180,132 | 136,456 | ||||||||||||
| Adjusted EBITDA margin(i)(iii) | 26.3 | % | 18.6 | % | 26.7 | % | 22.7 | % | ||||||||
| Net income | 14,007 | 12,262 | 25,376 | 34,108 | ||||||||||||
| Adjusted net earnings(i) | 20,822 | 12,489 | 41,710 | 37,766 | ||||||||||||
| Cash provided by operating activities | 59,013 | 40,185 | 70,879 | 72,009 | ||||||||||||
| Cash provided by operating activities prior to change in working capital(i) | 68,911 | 27,145 | 142,803 | 92,980 | ||||||||||||
| Free cash flow(i) | (1,518 | ) | (4,699 | ) | (43,303 | ) | (30,757 | ) | ||||||||
| Purchase of PPE | 75,307 | 38,419 | 141,960 | 74,915 | ||||||||||||
| Sustaining capital additions(i) | 37,313 | 38,311 | 97,190 | 85,502 | ||||||||||||
| Growth capital additions(i) | 19,943 | 2,748 | 39,550 | 2,748 | ||||||||||||
| Basic net income per share | $ | 0.52 | $ | 0.46 | $ | 0.95 | $ | 1.29 | ||||||||
| Adjusted EPS(i) | $ | 0.78 | $ | 0.47 | $ | 1.56 | $ | 1.43 | ||||||||
(i)See “Non-GAAP Financial Measures”.
(ii)Combined gross profit margin is calculated using combined gross profit over total combined revenue.
(iii)Adjusted EBITDA margin is calculated using adjusted EBITDA over total combined revenue.
(iv)The prior year amounts are adjusted to reflect a change in accounting policy. See “Change in significant accounting policy – Basis of presentation”.
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (dollars in thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Consolidated Statements of Cash Flows | ||||||||||||||||
| Cash provided by operating activities | $ | 59,013 | $ | 40,185 | $ | 70,879 | $ | 72,009 | ||||||||
| Cash used in investing activities | (81,965 | ) | (39,236 | ) | (138,698 | ) | (80,153 | ) | ||||||||
| Effect of exchange rate on changes in cash | 1,491 | (417 | ) | (877 | ) | (362 | ) | |||||||||
| Add back of growth and non-cash items included in the above figures: | ||||||||||||||||
| Growth capital additions(i)(ii) | 19,943 | 2,748 | 39,550 | 2,748 | ||||||||||||
| Capital additions financed by leases(i) | — | (7,979 | ) | (14,157 | ) | (24,999 | ) | |||||||||
| Free cash flow(i) | $ | (1,518 | ) | $ | (4,699 | ) | $ | (43,303 | ) | $ | (30,757 | ) | ||||
(i)See “Non-GAAP Financial Measures”.
(ii)Included above in Cash used in investing activities.
Declaration of Quarterly Dividend
On July 31, 2024, the NACG Board of Directors declared a regular quarterly dividend (the “Dividend”) of ten Canadian cents ($0.10) per common share, payable to common shareholders of record at the close of business on August 30, 2024. The Dividend will be paid on October 4, 2024, and is an eligible dividend for Canadian income tax purposes.
Financial Results for the Three Months Ended June 30, 2024
IBF4
