Good morning, ladies and gentlemen, and welcome to the Foraco International SA first quarter 2022 earnings call. Note that at this time, all lines are in a 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 an operator. Also note that the call is being recorded on Tuesday, May 3, 2022. I would like to turn the conference over to Daniel Simoncini. Please go ahead, sir.
Thank you, Sylvie. Thank you all for joining us for our Q1 2022 results conference. I'm 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 Group. If you did not receive a copy of the release, please visit www.foraco.com. The first quarter of 2022 was another successful step for Foraco, and we are pleased to report that our revenue for the period was up 24% at roughly EUR 68 million compared to the same quarter last year. This performance is remarkable given the highly contagious COVID Omicron wave, which hit a lot of regions in the quarter and disrupted many operations worldwide.
The rigs utilization rate reached an average of 53% in Q1 compared to 48% a year ago. A rather good level for a first quarter, which is generally seasonally lower. Meanwhile, metal prices were generally on the rise even before Ukraine invasion, and we continue to witness a strong demand for our services. Inflation and scarce manpower continue to impact somehow the industry, and we are very busy to renegotiate our prices with our customers in order to protect our profitability, while our efforts to train, retain, and recruit talented people increased. I will now pass the conference to Jean-Pierre Charmensat. Revenue was EUR 67.6 million compared to EUR 54.6 million for the same quarter last year, a 24% increase. This increase is the result of the favorable market dynamics and our capacity to deliver.
By reporting segment, the mining segment represented 88% and 12%. During the quarter, North America and South America were the most active regions. In North America, revenue amounted to EUR 21.6 million, a 16% increase compared to Q1 2021, thanks to the holding of long-term contracts. Revenue in EMEA for the quarter was $15.2 million compared to $18.8 million in Q1 2021, a 19% decrease. The activity was stable in Europe and CIS, while the activity increased 37% at EUR 10.3 million compared to the same quarter last year, reflecting the ongoing improvement of the activity. In Q1 2022, the geographical activity split was North America 32%, South America $6 million versus $6 million for the same quarter last year, a 58% increase.
Ongoing contracts reported expected performances and most of the cost increases were compensated in our selling prices. SG&A to EUR 5.2 million for the same period last year, but decreased as a percentage of revenue from 9.6% to 8.8%. The EBIT, our operating result, was a EUR 3.6 million profit versus a EUR 0.8 million in Q1 2021. EBITDA compared to EUR 5.1 million in Q1 2021 or 9.4% of revenue. We do not report adjusted EBITDA. In Q1 2022, the working capital requirement was EUR 12.6 million compared to EUR 7.7 million for the same period last year. This is mainly linked to the increased activity requiring higher inventories and resulting in higher receivables at quarter end.
CapEx amounted to EUR 5.2 million in cash compared to EUR 4.4 million in cash in Q1 2021. This CapEx relates to acquisition of rigs, major rigs overhauls, ancillary equipment, and roads. At March 31, 2022, our net debt, including lease obligations, IFRS 16, amounted to EUR 100.8 million versus EUR 85.7 million at December 31, 2021. Our leverage ratio is 2.2. Finally, we increase our activity and our profitability thanks to the strong deleveraging our balance sheet. I will now return the call to Daniel for his closing remarks. Daniel?
Thanks, Jean-Pierre. As you know, the world is facing an increasing set of threats from a reported accelerating climate change, rising geopolitical tension, growing more complex.
The commodity space, and especially the metal space, are under high scrutiny as there are some widening gaps between demand and supply, not mentioning gold demand, which is meant to grow as a safe haven. Most of our clients have so far reacted calmly to these rising tensions and confirmed their drilling plans, you know, if not increased them, like in the battery metal market.
At Foraco, we remain very focused to deliver the service quality as expected by our customers in this environment, and are very active to set our workforce level at the right size, both in terms of expertise and number. We think we have succeeded to do the heavy lifting last year on that point. Now that COVID constraints are receding, we feel a little bit more comfortable. Indeed, wages remain a central question, depending on the local market conditions. Our customers who have the same issue are very accommodated. Similarly, we keep getting hit with rising supply costs. Fortunately, we are able to pass that to our client as well. Now, we are focusing on mitigating the impact of delivery times, which are rising and keep getting unreliable. Thank you for listening.
I will now turn the call to Sylvie, who will take the first question. Sylvie?
Thank you. Ladies and gentlemen, if you would like to ask a question, please slowly press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. If you would like to remove yourself from the question queue, please press star followed by two. If you're using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and press star one now if you have any questions. Your first question will be from Gordon Lawson at Paradigm Capital. Please go ahead.
Hey, good morning, everyone. Congratulations on another great quarter.
Hi, Gordon.
Talking about South America, it's quickly becoming one of your largest segments. Has there been a recent focus on securing contracts in this region? Are you able to comment on the current political environment, specifically for Peru and Chile?
Okay. South America, I am speaking under Homburg control is Brazil for us. Brazil, Argentina and Chile. Brazil is the biggest by far, the biggest piece of it. Yes, we have been able to secure long-term contracts with a lot of prestigious customers in Brazil, like Vale, AngloGold, to name some of them. We're also very active in, let's say, large junior well-funded. We have no comment on the political situation there. Argentina is the fastest growing market for us. We have put the feet on the brake because of our inability to export hard currencies from this country for the moment. We ramp up in Argentina, especially in the lithium and gold space.
We ramp up slowly because we are compliant with the local laws, and we're expecting that Argentina and IMF will soon reach a deal whereby we could freely send money and get money from this country. Last one, which is Chile. Chile is a country whose you know major as far as copper production is concerned. We are working with the big names there as like Codelco, for instance, and Teck. We follow the political news there, and especially the constituent assembly, which will define you know the future of this country as far as one of the main mining jurisdiction in the planet. There, the market is more let's say fragmented.
Everybody is more or less on the waiting line. We are not, as we speak, involved in any operation in Peru or in Bolivia.
Okay, great. Thanks very much. Moving over to your European division, it seems to be the only one that declined in revenue year-over-year. Can you comment on that, please?
Yes. We had a contract last year in Africa, mining contract. You know, Europe and EMEA. Yeah. This one has been, we start again in Q2, so this explain the main difference between Q1 2021 and Q1 2022. Okay. The rest in Europe and CIS, it's the revenue is very similar compared to last year.
Okay. That clears it up. Thank you very much. That's it for me.
Thanks, Gordon.
Thank you. Next question will be from al. Please go ahead.
Hi, Daniel. How are you? I echo the last person's comment about the great quarter and thank you for everything you've done for this company.
Thanks, Steven.
Two quick questions. One is, you mentioned in one of your releases recently that you were thinking about considering dividends. I was wondering if that would be a special dividend or that would be something that would be ongoing.
No. Maybe I've not been clear. What we are saying is that our first priority as far as the cash management is concerned is to deleverage our balance sheet and pay off as much debt as we can. We would have a second priority, which was gonna an acceleration in the CapEx investment because the market demand is very high. Most of our long-term contract and long-term customers are increasing their own program. First priority is deleveraging, and number two is a kind of.
This year, this quarter, right?
Yeah, this is you.
What?
This is due mainly because of working capital, Steven. It's just seasonal.
We strongly increase our activity, yeah? This is why our working capital has increased, and mainly in March compared to last year. Right. $400 million in revenues, you think, in this cycle with gross margins over 20%?
In terms of possibility of our fleet and the company, of course, we can. Whenever we're gonna do that, nobody knows. There are too many variables out there. Our you know our let's say strategy is to you know increase first profitability and get more margin from our prices and businesses by working on pricing and secondly to increase our efficiency and productivity. The second one is to gain activity. We have the fleet and we already outlined that in the past quarters.
The limiting factor as we speak, I mean, we're declining a ton of jobs, because basically we cannot crew the rigs, and we don't want to screw up a job or hurt an employee, which is gonna be a rookie guy or, you know, a green hat, as we call them, because he has not simply the experience. We are very cautious and conservative on this approach.
Right. Yeah. No, I know. I'm sure it's frustrating losing business because of.
It is. You know, this is something which is beyond our reach, right? We do, like all our colleagues in the space, as much as we can. I mean, you need time. Remember, I mean, mineral drilling is a business, a people business. It's not a process.
Yeah.
a patent issue, you know.
Right.
to take care and train the guys. You don't put a rookie into, you know, a Dreamliner cockpit, right?
No. I wouldn't wanna fly in that plane. You have a great business. You've done such a great job. The one question I always have is the liquidity of the company in terms of the share trading and ability to buy and sell shares. I mean, people looking at the EV market and the battery metals and the growth in that industry, this company would be a fabulous way for investors to invest in that area and to leverage up their bets in the EV and battery. It just, you know, the stock is just so illiquid, because you don't have a chance to buy into it because you know how difficult and how illiquid it would be to hold it forever.
Yeah. That's a sore point as far as the share value is concerned, our liquidity. As you know, we are pushing as much as we can on the market and having regular webinars to talk to as many institutional investors as we can. We held one last week. We had a very good turnaround. It takes time, Steven. This stock went up to $5 or $5.50, you know, in the good days, and we don't see why. The liquidity at that time was, you know, slightly better, but not that high.
We think that, you know, once the COVID was a kind of issue, our former debt was a kind of issue, we cleared that. Now there is Mr. Putin, you know, wrecking the world. We are very confident that we can turn this around and get this stock at the right value. Okay. Don't get me wrong, we are really focused on doing whatever we can.
You just outlined. You've managed through so many different crises, and now this is the time, you know? This is the time.
We share that. Thanks, Steven.
Thank you. Thanks, Denis.
Take care.
Thank you.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please. Mr. Simoncini, we have no further questions. Please proceed.
Thank you, Celine. Thank you, everyone for listening, for this first quarter of the year. Talk to you end of July for next one, but stay tuned. Okay. Have a good day. Bye-bye.
Bye-bye.
Thank you.