Foraco International Q2 Earnings Call Highlights

Foraco International Q2 revenue rose 22% to $84.5 million , driven by increased drilling activity in North and South America; EBITDA grew 7% to $15 million, but margins declined due to inflation, higher labor and consumable costs, and contract startup expenses. Management expects margin recovery in the second half of 2026 as new projects mature and pricing adjustments begin reflecting higher costs. Mining and water revenue both advanced, while rig utilization improved to 51% from 35% a year earlier. Foraco said its order book remains at record levels , providing visibility beyond 2026, although first-half free cash flow was negative $13 million and net debt rose to $85.7 million due to capital spending and working-capital needs. Foraco International reported second-quarter revenue growth as drilling activity increased across North America and South America, while management said pricing actions and maturing contract startups should support margin recovery in the second half of 2026. Revenue for the quarter ended June 30 rose 22% year over year to $84.5 million, compared with $69.1 million in the prior-year period. Chief Executive Officer Tim Bremner said higher activity in Canada, the United States and South America drove the increase. The company said the result marked its strongest quarterly revenue since the second quarter of 2023. EBITDA increased 7% to $15 million, though EBITDA margin declined to 17.8% of revenue from 20.3% a year earlier. Gross margin fell to 15.5% from 20.5% in the second quarter of 2025. Chief Financial Officer Fabien Sevestre said the margin decline primarily reflected higher labor and consumable costs, mobilization expenses, and lower operating efficiency during the early stages of several large contract startups. During the question-and-answer session, Bremner said the year-over-year margin gap was about 5 percentage points and resulted from a combination of project ramp-up costs and inflation. Growth in Australia, which he described as traditionally one of the company’s higher-margin regions, was relatively flat year over year. Bremner said labor costs were up more than 10% to 15% in some regions, while drilling consumables, including cutting tools and drill bits, have faced significant price increases. He cited silver and tungsten as major cost drivers for those tools. Management said it is negotiating pricing adjustments on certain existing projects and pricing new work to account for higher costs. Bremner said the anticipated cost-related price increases had not been reflected in first-half results and would be double-digit in some cases, depending on the project, region and geology. “Our immediate priority is margin improvement,” Bremner said. He added that recently mobilized projects should become more efficient as they mature, while pricing changes are progressively catching up with higher labor, consumable, fuel and transportation costs. Mining revenue increased 23% year over year to $70.5 million, while water revenue rose 21% to $14 million. Mining represented 83% of quarterly revenue and water accounted for 17%. North American revenue increased 28% to $32 million, supported by activity and new-contract ramp-ups in Canada and the U.S. South American revenue rose 94% to $22 million, reflecting the mobilization of several projects. North America represented 38% of revenue, followed by Asia-Pacific at 27%, South America at 26% and EMEA at 9%. Precious metals accounted for 34% of revenue, followed by copper at 18%, iron ore at 12%, nickel at 9%, coking coal at 8%, other commodities at 2%, and water at 17%. The company said 82% of revenue came from Tier 1 customers.