Earnings Call: Q1 2021

Jun 10, 2020

Morning, ladies and gentlemen, and welcome to the ADF Group First Quarter Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, 06/10/2020. I would now like to turn the conference over to Jean Francois Bourcier, Chief Financial Officer. Please go ahead. Thank you. Good morning, ladies and gentlemen. Welcome to ADF's conference call covering the first quarter ended 04/30/2020. I'm currently at our Tabas Net office, where we will hold our Annual Shareholders Meeting right after this call by way of webcast in light of the COVID-nineteen situation. I will first update you on our quarterly results, which were disclosed earlier this morning by press release and then update you on our operations. But first, a word of caution. 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 first quarter ended 04/30/2020, which were filed with SEDAR this morning. Please also consider that although for the moment, the impact of COVID-nineteen on ADF's operation is limited, The extent to which the virus can have an impact on our results will depend on future developments, which are very uncertain and cannot be predicted at this time, including new information that may emerge regarding the COVID-nineteen and the measures taken to contain it or address its impact, among others. This said, our revenues for the first quarter stood at $45,800,000 compared with $37,100,000 last year. The increase in revenues is in line with the increase of our backlog. As previously mentioned, ABS fabrication, industrial coatings and steel erecting activities were not impacted by the pandemic, at least during the quarter ended 04/30/2020. Gross margins at 10.6% was lower than the 15.5% reported a year ago. Last year, first quarter gross margin benefited from the finalization of contractual changes, which improved margins. The margins for the quarter ended April 3020, are in line with the ones from the quarter ended last January 31 and even somewhat even better and represent the pricing of recently signed work presently in our plants. At the close of the three months ended 04/30/2020, EBITDA stood at $3,000,000 which is the same level as for the corresponding quarter a year ago. The decrease in gross margins in dollars was offset by the lower selling and administrative expenses. This decrease coming from the lower legal fees associated to last year's third quarter out of court settlement. Year to date, net earnings stood at $68,000 compared with net earnings of $1,600,000 a year ago. Besides the elements mentioned before, the net earnings for the quarter ended last April was negatively impacted by $1,800,000 non monetary foreign exchange loss. This loss comes from the quarter end fair market valuation as required by IFRS guidelines of our outstanding FX contracts on end as of 04/30/2020. Our balance sheet remains somewhat under pressure. Working capital as at 04/30/2020, at $28,500,000 was just under its 01/31/2020 level. This said, cash flow from operation is starting to reap the benefit of the increased backlog and associated fabrication volumes and as such generated $12,000,000 during the three months ended 04/30/2020. In light of the uncertainty surrounding the COVID-nineteen, we are taking a cautious approach with our liquidities and accordingly are tailoring our CapEx program to the situation with only $200,000 spent during the quarter ended last April 30. These operating inflows enabled us to reduce the ground credit facility by $4,200,000 and finished the quarter and we finished the quarter with $7,000,000 in cash and cash equivalents. As mentioned in our April 3020 MD and A, ADF, like many others, is currently navigating into unchartered waters. As mentioned before, and although the impact of the COVID-nineteen pandemic as of this date had a limited impact on ADF's operation, we remain abreast of economic developments and trends. We continued to grow our order backlog, which ended the first quarter at three and forty three point three million dollars and also significantly improved our cash position. Risk management has always been of paramount importance for ADF. In these uncertain times, our approach offers us comfort and allows us to face these challenges with determination. Ladies and gentlemen, thank you for your interest and confidence in ADF. I will now answer your questions. Thank You will hear a three tone prompt acknowledging your request, and your questions will be pulled in the order that they are received. Should you wish to decline from the polling process, please press the star followed by two. Question. You will hear a three tone prompt acknowledging your request, and your question will be polled. Should you decline from asking your question, please press star followed by two. It seems like there are no questions at this time. So, mister Boussier, please proceed. Again, I wish to thank you for your interest in ADF Group. Thank you.