Foraco International Q4 Earnings Call Highlights

Foraco International (TSE:FAR) reported fourth-quarter 2025 revenue of $66 million, excluding adverse foreign exchange impacts, up from $61 million in the same period a year earlier, as the company pointed to a late-year acceleration in demand across most regions and a record order book heading into 2026. Management described the fourth quarter as an “inflection point” after a market transition that weighed on full-year results.

Q4 results: revenue up, EBITDA flat amid ramp-up and seasonality

Chief Executive Officer Tim Bremner said Q4 EBITDA was essentially flat year-over-year at $10 million, citing the commencement of new contracts and typical seasonal effects. He quantified the combined impact of these factors at about $3 million in the quarter.

Chief Financial Officer Fabien Sevestre, noting that Foraco reports under IFRS in U.S. dollars, put fourth-quarter revenue at $63 million versus $61 million a year earlier. Sevestre said mining accounted for 82% of quarterly revenue, with water representing 18%.

For the quarter, gross margin including depreciation was $10 million, or 16% of revenue, down from $11 million, or 18% of revenue, in Q4 2024. Sevestre attributed the decline primarily to higher depreciation costs tied to “significant CapEx” needed to execute long-term contracts awarded during the period.

SG&A was stable at $5 million (8% of revenue), and EBIT was $5 million compared to $6 million in the prior-year quarter, according to Sevestre. EBITDA was $10 million, unchanged from Q4 2024.

Full-year 2025: lower revenue and margins during market transition

On a full-year basis, Bremner said revenue was $258 million versus $293 million in 2024, while EBITDA margin was 18% compared to 21% in the prior year. Sevestre added that full-year gross profit was 18% versus 21% in 2024 and that EBIT totaled $27 million (10% of revenue), down from $43 million (15% of revenue) in 2024.

Despite the year-over-year declines, Bremner framed Q4 as a turning point, saying the company saw “significant growth in virtually all regions” as demand surged and began to show clearly in the commercial pipeline.

Regional performance and activity mix

Sevestre detailed divergent regional trends during the quarter:

• North America: $20 million of revenue, down 13% year-over-year, driven by the completion and deferral of certain Canadian contracts.
• Asia Pacific: revenue decreased to $18 million due to an earlier seasonal break in drilling operations compared with last year.
• South America: revenue increased 95%, which Sevestre said reflected strong momentum. He noted that operations in all three countries were still not at targeted performance levels, but were improving and supported by growing customer demand.
• EMEA: revenue grew 15% to $6 million, supported by continued ramp-up of contracts initiated during previous periods.

For Q4 2025, Sevestre said the geographic activity split was North America 32%, Asia Pacific 28%, South America 31%, and EMEA 9%.

Record backlog, tier-one mix, and gold exposure

Management highlighted what Bremner called a record order book of $404 million as of Dec. 31, 2025, with $228 million expected to be completed in 2026. Bremner also said tier-one customers represent 90% of the order book, with the junior/spot market representing about 10%.

In response to analyst questions about backlog duration and margin expectations, Bremner emphasized continuity from tier-one customers and said the company remained selective as the tender pipeline stayed “very brisk.” On margins, he said Foraco was anticipating some cost inflation, but also believed it could tender new work at improved commercial terms; he added that performance in areas that have underdelivered on margins was improving, which could support sustained or slightly improving margins.

Bremner said a major theme in 2025 was positioning the business “for where the market was going,” including increasing exposure to gold while maintaining discipline during the market transition. He said gold represents over 35% of the company’s 2026 order book.

He also said demand was being driven by record gold prices and continued structural demand for copper tied to electrification and grid investment. Bremner cited increased interest in other commodities, including tungsten, antimony, and rare earth metals, which he attributed to geopolitical tension and supply chain uncertainty.

Utilization, cost pressures, CapEx, and balance sheet priorities

On utilization, Bremner said the company was at 40% in Q4 and “currently just over 50%” while continuing to mobilize rigs. He said he did not want to speculate on a full-year utilization rate, but noted it was improved from the prior year. Later in the call, he said the highest utilization the company had achieved historically was 74% (in 2012) and characterized that level as effectively maximum due to normal business interruptions, mobilizations, and maintenance. He added that “67% of the fleet is gonna be used at any given time” this year across all rig types, while noting some rigs are site-specific and not interchangeable across projects.

On ramp-up costs, Bremner said Q4 included startup costs associated with new projects in Latin America and continued scaling in the U.S. He said those ramp-up dynamics should ease as utilization rises and the business reaches a “cruise level” expected for 2026, adding that the company did not expect ramp-up costs “to mitigate much beyond the end of Q2,” unless it continues to add new opportunities.

Management also discussed cost and supply constraints, including price increases in rock cutting tools tied to higher silver and tungsten input costs, tightening labor markets across regions, and longer delivery timelines for rigs as demand has risen. Bremner said Foraco anticipated these dynamics early, moved more than 20 drills globally in 2025 to align capacity with opportunities, and placed orders for new drills that are being delivered now and in coming months. He also said the company maintained discipline with crews in a competitive labor market, supporting retention and hiring.

On capital spending, Sevestre said 2025 CapEx was $23 million in cash, compared with about $18 million to $19 million the prior year. He said investments were mainly related to building new proprietary rigs, acquiring new rigs and ancillary equipment, and roads to support new contracts. Asked about fiscal 2026 CapEx, Sevestre said spending would correspond with the order book and be “very in line” with the late-2025 level, and “a little bit higher compared to 2025.”

Sevestre said working capital requirements were $0.6 million at Dec. 31, 2025, compared with $10 million in 2024. Net debt, including lease obligations, was $71 million (or $65 million at constant exchange rates) at year-end 2025, up from $61 million at the end of 2024.

When asked about capital allocation and leverage, Bremner said reducing net debt is the company’s “number one priority” and that it intends to deleverage the balance sheet to “somewhere under half a turn,” while maintaining some debt to keep the business sustainable through unexpected market changes.

About Foraco International (TSE:FAR)

Foraco International SA is the business of providing mineral and water drilling services and hydraulic drilling. It specializes in drilling in harsh environments and isolated locations including desert, and mountainous regions. The principal sources of revenue consist of drilling contracts for companies involved in mining and water exploration. The group has its operations in Europe, the Middle East and Africa, North America, South America and the Asia Pacific.