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Edited Transcript of DRX.TO earnings conference call or presentation 12-Sep-19 2:00pm GMT

Q2 2019 Adf Group Inc Earnings Call

TERREBONNE Sep 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Adf Group Inc earnings conference call or presentation Thursday, September 12, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jean-François Boursier

ADF Group Inc. - CFO

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the ADF Group results for the period ending July 31, 2019. (Operator Instructions) Please note that this call is being recorded on September 12, 2019.

And I would like to turn the conference over to Mr. Jean-François Boursier, Chief Financial Officer. Please go ahead, sir.

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Jean-François Boursier, ADF Group Inc. - CFO [2]

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Thank you. Good morning, ladies and gentlemen. Welcome to ADF's conference call covering the second quarter and 6 months ended July 31, 2019. Jean Paschini, ADF's CEO, could not be with us this morning.

Please note that some of the issues discussed today may include forward-looking statements. These are documented in ADF Group's management report for the period ended July 31, 2019, which were filed with SEDAR this morning.

Revenues for the second quarter ended July 31, 2019, reached $54.1 million compared with $32.2 million for the same period last year. Year-to-date, revenues amounted to $91.3 million, which is $30.6 million higher than last year. The increase in revenues for both analyzed periods is coming from recently announced contracts that are now hitting our fabrication plant floors. Additionally, you will recall that the uncertainty created by the import tariffs introduced early last year had a negative impact on last year's year-to-date results.

Gross margin, respectively, at 10.6% and 12.6% for the 3 and 6 months ended July 31, 2019, were 4.2% and 7.9% better than for the same periods a year ago, respectively. Better absorption of fixed costs, in line with the higher volumes and the finalization of contractual changes explain most of these favorable variances.

At the close of the 3 months ended July 31, 2019, EBITDA stood at $3 million compared to $0.1 million a year ago. Whereas, year-to-date, EBITDA increased from a negative $1.1 million last year to $6 million this year.

Selling and administrative expenses are running somewhat higher than last year with increased level of activities and also some timing differences.

Income taxes are yet again impacted by our mix of U.S. versus Canadian affiliates, profit or loss, generating an effective tax rate of 64% for the quarter ended July 31, 2019, compared to year-to-date effective tax rate of 18%. We expect our full year rate to trend toward our statutory rate of 27% or lower.

In light of what I just explained, net income for the second quarter ended July 31, 2019, stood at $0.4 million or $0.01 per share, basic and diluted, compared to a net loss of $0.5 million a year ago. Year-to-date, net earnings totaled $2 million or $0.06 per share, basic and diluted, compared with a net loss of $1.4 million a year ago.

With the increase in volume and revenues, our balance sheet remained somewhat under pressure. In spite of this, working capital as of July 31, 2019 at $34.2 million was strong and even higher than our January 31, 2019 working capital, which stood at $31.8 million.

Cash flow from operation generated $3.6 million for the second quarter ended July 31, 2019, while year-to-date, our operation generated $0.8 million.

Year-to-date, CapEx stood at $0.6 million, including a $0.8 million grant we received from the Quebec provincial government related to the reduction of greenhouse gases following the replacement of the VAC system at our ADF's fabrication complex in Terrebonne.

Our Board of Directors also approved yesterday the payment of a semiannual dividend of $0.01 per share, which will be paid on October 16, 2019 to shareholders of record as of September 30, 2019.

Our order backlog stood at $345.1 million as at July 31, 2019, compared with a backlog of $141.1 million a year ago and $219.5 million on January 31, 2019. Looking forward, this increase in our backlog is obviously key for ADF's success. We have mentioned time and time that our focus was on growing our backlog since it is so intertwined with our results.

Since the beginning of last year, where the uncertainty around steel and aluminum tariffs played havoc with our results, we have signed over $400 million worth of new contracts. We will keep pushing to add to this total, thus not only improving our top line but also our internal efficiencies. This growth comes with added working capital pressures, but we are proactive and have the financial means to support this growth.

Ladies and gentlemen, thank you for your interest and confidence in ADF. Should there be any, I will now answer your questions.

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Operator [3]

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(Operator Instructions) And currently, Mr. Boursier, it appears we have no questions, sir.

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Jean-François Boursier, ADF Group Inc. - CFO [4]

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Again, I wish to thank you for your interest in ADF Group. We will remain available to answer your questions. Have a great day.

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Operator [5]

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Thank you, sir. Ladies and gentlemen, this does concludes your conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.