Good morning, ladies and gentlemen, welcome to the Foraco International SA 1st Quarter 2023 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, February 16th, 2023. I would now like to turn the conference over to Daniel Simoncini. Please go ahead.
Thank you, Joelle. Thank you all for joining us on our Q1 2023 results conference. I am Daniel Simoncini, Chairman and CEO of Foraco, and with me today is Vice CEO and CFO, Jean-Pierre Charmensat. The news release of this result was issued this morning prior to the opening of the TSX through CNW Newswire. If you did not receive a copy of the release, please visit our website, www.foraco.com. After the outline of the financial results, we will open the line for questions. We are pleased to report that in Q1 we set an all-time high revenue record of $88.4 million in the first quarter of 2023, or an increase of 30% year-on-year. Our last 12 months revenue reached a new high of $351 million.
We are proud to see the results of the strategy we have designed and consistently deployed over the past few years. We believe we offer an optimal range of services, particularly well adapted to the communities that we target, including gold, battery metals, and water. We operate mostly in stable countries which offer great potential for long-term growth. Our utilization rates remain stable at 53% in Q1 compared to Q1 2022, and the growth in revenue comes from inflation-proof prices, higher added value drilling services during the period, and an excellent performance of our operation. As always, we remain focused on the long term and actively search opportunities to reinforce our business model. Meanwhile, the refocusing of our operation in Africa and the completion of the sale of our Russian subsidiary are progressing as planned.
I will now pass the conference to Jean-Pierre, who will walk us through the financials. Jean-Pierre?
Thank you, Daniel, and good morning, everyone. The revenue for the Q1 2023 quarter was $88.4 million compared to $67.7 million for the same quarter last year, a 30% increase. Long-term contracts were remobilized earlier than last year and reported solid performances. This increase in revenue with an utilization rate stable at 53% in Q1 2023 compared to Q1 2022 also reflects increased prices and better productivity of operations. By reporting segment, the mining segment represented 84% of revenue and water represented 16%. The increase in the mining segment amounts to 26%, and water services increased by 65%. By geographic regions, North America and South America were the most active regions.
In North America, revenue amounted to $29.7 million in Q1 2023, with 38% increase compared to $21.6 million in Q1 2022. This increase is linked to the early remobilization of long-term contracts renewed last year with majors. Revenue in South America increased by 51% at $31.1 million, compared to $20.7 million in Q1 2022. All countries, Brazil, Chile, and Argentina, increased their levels of activity driven by new long-term contracts with majors. At $16 million, Asia Pacific recorded the highest increase, 56% compared to the same quarter last year, reflecting quarter-over-quarter increased demand, new long-term contracts, and gain of market share. The revenue in EMEA for the quarter was $11.5 million compared to $15.2 million in Q1 2022, a 24% decrease.
Revenue in Southern Europe and Africa slightly increased compared to Q1 2022. The activity in Russia decreased by 48% due to the political and economic uncertainties. In Kazakhstan, the activity decreased by 50% due to delays in mobilization of contracts. In Q1 2023, the geographical activity split was South America 35%, North America 34%, Asia Pacific 18%, and EMEA 13%. During the quarter, the gross margin, including depreciation within cost of sales as per IFRS rules, was a profit of $21.1 million or 23.9% of revenue, versus $9.6 million or 14.1% of revenue for the same quarter last year, meaning a 121% increase. This reflects the combination of solid operating performance on ongoing contracts and better productivity.
SG&A increased compared to the same quarter last year, mainly due to the level of activity. As a percentage of revenue, SG&A decreased from 8.8% in Q1 2022 to 7.8% in Q1 2023. The EBIT, our operating result, was multiplied by 3 at $14.2 million versus $3.6 million in Q1 2022. The EBITA amounted to $19.1 million, or 21.6% of revenue, a 124% increase compared to $8.5 million or 12.6% of revenue in Q1 2022. As always, we do not report adjusted EBITA or any other adjustment to the IFRS figures. In Q1 2023, the working capital requirement was $10.5 million compared to $12.6 million in the same period last year.
The working capital requirement is a result of the seasonality of the activity and the ramp-up of the activity. During the period, CapEx totaled $8.6 million in cash compared to $5.2 million in Q1 2022. CapEx relates essentially to the acquisition of rigs, major rig overhauls and senior equipment and roads. Two large rigs were added to the fleet during the quarter and two rigs were retired from service. As of March 31, 2023, the net debt, including operational lease obligations, IFRS 16, amounted to $85.3 million compared to $76.2 million as of December 31, 2022. The net debt to EBITA ratio as of March 31, 2023 was 1.1, and it was already 1.1 at year-end 2022.
Despite the increase in interest rates, we posted a net profit of $8 million in Q1 2023 versus $0.8 million in Q1 2022. On April 5, 2023, we reported the signing of a preliminary agreement to sell our 50% shares in the Russian joint venture to our Russian partners, subject to the approval of the Russian authorities, expected at the end of the second quarter. In the upcoming quarters, with our strong balance sheet and our excellent financial performance, we will continue to explore alternatives to further reduce of our cost of capital. I will now return the call to Daniel for his closing comments. Daniel?
Thank you, Jean-Pierre. During the quarter, the macro environment has been overall favorable to the economy as recession fears continue to be moderate. Some central banks policies were delivered with a more balanced outlook and inflation slowdown progressing. Meanwhile, the IMF metals price index closed the quarter flat from one quarter earlier. It's worth to note that lithium has lost 60% of its stock price year to date without having triggered any halt in the exploration development of the project yet. We at Foraco remain very focused on the delivery of our long-term contracts and the improvement of our productivity as prices have now reached a kind of plateau. We believe our long-term strategic vision, coupled with some high added value niches, will set Foraco as one of the uptick in the industry going forward if the metal space fulfills its promises. Thank you for listening.
I will now turn the call to Joelle, who will take the first question. Joelle?
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Steven Green with Ordinance Capital. Please go ahead.
Hey. Hey, Daniel. How are you? This is Steven.
Hi, Steven. How are you?
Incredible, incredible job, really. of course, that leads to my frustration on the valuation of the company, but really an incredible job. Is this your last conference call before?
No, no, no. We'll be around. Don't worry.
You'll be around?
team will take the mic. Yeah, yeah.
Okay. I mean, you've done an incredible job, but it's just so frustrating because even on trailing earnings, trailing EBITDA, you guys are selling at 1.75x earnings, EBITDA. The stock price is actually down from a year ago when you guys reported. I don't know what we can do. I mean, the company is doing great. Growth trajectory.
Yeah, yeah, yeah.
We still can't get this thing. We can't get anybody to notice. I mean, even I looked at Boart Longyear and they, you know, they have net debt too of $122 million, but they're doing twice the amount of revenues as you guys, but they have a $500 million, almost a $600 million market cap, but we have a $135 million market cap. How do we get to our recognition?
It's the same question we have been circling around for a few quarters. We believe that, the debt issue and the liquidity are the two main breaks.
We are fully convinced that, you know, less and less and less and less market will be able to ignore the, you know, the numbers. You know, it's my job and Jean-Pierre job now to hit the road and make sure that, you know, the, the financial space is aware of us. You know, the market has not been very good for the small cap, right? Recently.
Right.
Depending on who you talk to, whether they are generalists or specialists, you have a different focus, a different knowledge of the dynamics of this market, et cetera, et cetera. We have a lot of hurdles, but we are passing them one by one, and we do believe that it's gonna be pay off sometime.
I hope so. Can you just explain a little more your statement where you say in the press release that you're exploring alternatives to capitalize on our strong balance sheet and excellent financial position to further reduce our cost to capital? Can you expand on that? Does the debt not allow you to pay any kind of dividends?
Yeah. The point is that we definitely need to restructure our debt and to reduce the cost of it. Jean-Pierre and Fabien are on deck on that, and they are leading this kind of effort. We cannot say more on that, but this is the meaning of this statement. Okay? We have to make sure that the debt cost comes back to something which is more reasonable.
Yeah, that's a big obstacle. Can you guys pay dividends with the current debt, or they don't allow... the covenants don't allow you to pay dividends?
We don't have per se covenants on that, but the gross debt is still too high to reasonably allow us to pay a dividend.
Okay.
Okay?
But there are-
Jean-Pierre, what was our quarter, end of the quarter leverage ratio?
1.1.
1.1.
We could pay... technically, we could pay dividend, but we prefer for the time being to give priority to the reduction of debt, and the reduction of cost of interest. This is why we want to readdress our the structure of our balance sheet, our debt and reduce the cost, let's say. Then we can consider paying dividends in the future.
Are there alternatives out there, or is it still very, the market very closed?
Oh, the market is quite closed. You see the bonds and given the interest rates, Johnny, we have not that many options, but we think we found some. We, you know, we are working hard to announce something in before end of Q2. Cross fingers.
Great. I wanna, I just wanna make sure. I know I ask a lot of questions and they sound negative, but I just wanna say what a great job you both have done and the company is really humming along. It's exciting to see. Hopefully we'll get our recognition one day.
Sure. The sooner the better. For sure.
For sure.
Okay, Steven. Be well, okay?
You too, Daniel.
You too, Jean-Pierre.
Ciao, ciao.
Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the one. There are no further questions at this time. Please proceed.
Thank you, Joelle. Thank you everyone for listening this conference call, and we'll be on the air again end of July. Have a good day. Thank you. Bye-bye.
Thank you. Bye-bye.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.