Good morning, ladies and gentlemen, and welcome to the Foraco International Q3 2021 Earnings Call 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 Wednesday, November 3rd, 2021. I would like to turn the conference over to Mr. Simoncini. Please go ahead.
Thank you, Grant. Thank you all for joining us on our Q3 2021 result 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 didn't receive a copy of the release, please visit our website, www.foraco.com. After the outline of the financial results, we will open the call for questions. From the COVID-19 pandemic perspective, the Q3 has been overall much less problematic for us than the previous ones. As of today, we have three employees who are under medical monitoring, and 71% of our employees are fully vaccinated. We continue to work hard so all of our people can be vaccinated, but this depends only on us.
Meanwhile, we continue to maintain very strict sanitary protocols throughout our different branches. Even if metal prices index has eased 6% over the quarter, the metal prices are still well above their multi-year average levels, and we continue to enjoy a growing demand for our services. Q3 2021 was one of the best quarters of Foraco in terms of activity, and the company achieved a revenue of $70.6 million for the quarter, up 26% year-over-year, while the utilization rate reached 60% compared to 49% a year ago. All geographical areas once again ended the quarter with significant growth, and there were even remarkable performances in Canada, Russia, and Brazil. Our financial performances have been somewhat impacted by the general economic context, including supply chain disruption, labor constraints, and inflationary cost pressures, which are deemed to continue in the upcoming quarters.
We are working on mitigating the impact of these factors and on passing additional costs through price increases upon renewal of our long-term contracts, but there is often a lag effect before it becomes fully effective. I will now pass the conference to Jean-Pierre, who will walk us through the financials in more detail. Jean-Pierre?
Thank you, Daniel. Good morning, everyone. Revenue for Q3 2021 amounted to $70.6 million compared to $55.9 million for the same quarter last year, a 26% increase. By reporting segment, the mining segment represented 88%, and water represented 12%. Double-digit growth was recorded in all geographic regions. North America and E MEA were again the most active regions. In North America, revenue amounted to $25.1 million, a 23% increase compared to $20.4 million in Q3 2020. The activity in North America continues to be driven by strong demand. Revenue in E MEA for the quarter was $19.7 million compared to $17.1 million in Q3 2020, a 15% increase, mainly linked to new significant contracts in Russia secured in Q1 2021. Revenue in South America increased by 71% at $14.1 million compared to $8.2 million in Q3 2020.
The activity in the region recovered after the disruption last year due to the effect of the COVID-19 pandemic. At $11.7 million, revenue in Asia Pacific increased 12% compared to the same quarter last year. New contracts were mobilized in 2021 and will continue in 2022. So during this quarter, the geographical activity spread was North America 35%, EMEA 28%, South America 20%, and Asia Pacific 17%. During the quarter, the gross margin, including depreciation within cost of sales, as per IFRS rules, was a profit of $14.9 million versus $12.8 million for the same quarter last year, a 16% increase. Ongoing contracts reported solid performances, while pressures on supply chains and procurement, as well as the tight labor market, generated inflation and costs, and these costs increased were not yet compensated in our selling prices.
SG&A increased by 13% to $5.9 million compared to $5.2 million for the same period last year, but decreased as a percentage of revenue from 9.3%-8.3%. EBIT, or operating result, was a $9 million profit versus $7.6 million in Q3 2020. EBITDA amounted to $13.8 million, or 19.6% of revenue, a 19% increase compared to $11.6 million in Q3 2020, or 20.7% of revenue. We do not report adjusted EBITDA or any other adjustment to the IFRS figures. On a nine-month basis, revenue amounted to $200.8 million compared to $152.9 million for the same period last year, a 31% increase. This increase results from the combination of favorable market dynamics and the lower impact of the COVID-19 on the 2021 operations.
Revenue increased in all geographic regions: 38% in North America, 52% in South America, 26% in the MEA, and 11% in Asia Pacific compared to the nine-month period in 2020. The year-to-date 2021 gross profit was $36.7 million versus $29.3 million for the same period last year, a 25% improvement mainly due to increased activity, performance of contracts, and tight cost control, while inflationary pressures on prices and salaries were not yet passed on through selling prices. The year-to-date 2021 EBIT was a positive $19.8 million, or 10% of revenue, compared to $13.8 million, or 9% of revenue, for the same period last year, mainly as a result of increased gross margin. The EBITA for the nine-month period was a positive $33.6 million compared to $26.2 million in the same period last year.
On a TTM basis, our revenue amounts to $255 million, and our EBITDA amounts to $41.5 million. For the nine-month period, working capital requirement was $5.6 million versus $1.6 million for the same period last year, mainly linked to the increased activity. During the nine-month period, CapEx amounted to $14.7 million in cash compared to $7.3 million in cash in 2020. This CapEx is driven by the increased activity. It relates to the acquisition of eight new rigs, major rigs, overhauls, and similar equipment and roads. As already disclosed, we finalized on July 7, 2021, our financial reorganization and raised $100 million of new bonds to repay our previous bonds. As of September 30, 2021, our net debt, including these obligations as per IFRS 16, amounted to $86.1 million versus $141.7 million at December 31, 2020.
Thanks to this financial reorganization, we deleveraged our balance sheet, but also extended the debt maturity through the end of 2025, eased our financial constraints and covenants. This transaction is significantly attractive for our shareholders. At the end of this Q3, our leverage ratio was 2.1, and our net debt to equity ratio 1.3. We are pleased to note that the financial community started to recognize our track record and our capacity to pursue profitable growth. I will now return the call to Daniel for his closing remarks. Daniel?
Yeah, thanks, Jean-Pierre. Mid-October, Standard & Poor's published their non-ferrous exploration budget report for 2021, which is a good proxy for our business base. In short, they estimate that the global non-ferrous exploration budget will increase 35% year over year to $11.2 billion in 2021 from $8.7 billion in 2020. Gold and copper will account for 55% and 28%, respectively, while majors represent 50% of this spending, which is remarkable at a time when the junior companies have full access to the capital market. Standard & Poor's forecasts 2022 at an even higher level. We hope this trend will continue in the next quarters, and we are very busy to train the next generation of crews, which will help us to satisfy our customers' increasing demand.
We have interesting discussions with our customers who, in general, require more rigs for next year now that the budget season is in full swing. Currently, and due to logistics and supply chain constraints, our most sophisticated rigs are now delivered with a year lead time, which indeed has an effect on our potential growth rate. This is why we are discussing with our customers to double-shift operations whenever possible and move either rigs where the demand is high when we can. We are confident our business model, which is based on risk mitigation, will continue to show its financial efficiency and that we have ample capacity to deliver our best-in-class profitable growth on the long term. Thank you for listening. I will now turn the call to Grant, who will take the first question. Grant?
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order that they are received. Should you wish to decline from the polling process, please press the star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Gordon Lawson from Paradigm Capital. Please go ahead.
Hello, good morning, everyone. You mentioned that you're working on passing additional costs and new contracting, but is there any flexibility in existing contracts?
Yes. Some have rise-and-fall clauses. Some don't, so it's a kind of patchwork. And because most of the anniversary dates are going now, even for multi-year contracts, we have a lot of doors open to renegotiate that. So bottom line, we are not stuck in long-term contracts with no way to renegotiate prices.
Okay, thank you. And also, your Q4 tends to be a seasonally weak quarter. Can you comment on how this year is shaping up, particularly as it relates to improvements in COVID cases, as well as additional higher-margin drill rig contracts?
Gordon, we usually don't give any forward-looking statements. Our order book is full, and we don't see any difference from the, let's say, the last Q4s, irrespective of the COVID impact. The biggest impact on Q4 is just the Christmas and holiday season where clients and contractors are just shutting down for two or three weeks. So we don't have any, let's say, more comment than that.
Okay, thank you. But is there any color you could provide in terms of your specialized drill rigs and how the utilization rates are ramping up in that field?
At the difference of some other contractors, we do not split our utilization rates by specialized rigs or large-diameter coring rigs or deep directional rigs, etc., etc. But what I can tell you is that quasi all our deep directional rigs are busy. The only exception is three or four rigs in Australia, which are in between contracts. But we are running at full capacity in this category of services. If that is your question, Gordon.
Yes, that is. Thank you very much. That's it for me.
Your next question comes from Steven Green from Ordinance Capital. Please go ahead.
Hi. Hey, Daniel. How are you?
Hi, Steven. How are you?
I'm surprised somebody else asked the question. That's nice. It's a big step in the right direction. I noticed that your CapEx increased a lot this quarter. Is that a sign of confidence, or is that new rigs, or is that old rigs you're repairing?
I will let Jean-Pierre answer that. It's kind of a mix between rods, new rigs, and overhauls. Jean-Pierre, can you comment on that?
Yeah. We have eight new rigs since the beginning of the year and some overhauls of rigs. If we compare the amount of CapEx as a percentage of revenue, we are not that far compared to last year. And you must remember that a big portion of our CapEx relates to rods, okay, to drilling rods. And these are really, let's say, have a direct relation to the number of meters that we drill. So the more activity, the more drills, and the more CapEx. So this explains the difference.
Yeah. Steven, bear in mind that I think we are the only drilling contractor in the space to report in full IFRS, where the other guys don't do that. So our CapEx category is a bit more inclusive than the competition.
I see. And so 60%, that's quite a bit of utilization. Are we going to go higher than that? Are we going to go to 70% or 75% before you reach full capacity?
We wish we can do as well as back in 2012 when we hit 70-ish, 72, 73%. We still have the capacity to put more rigs at work. But again, I'm just flagging that the industry is having human resources issues. And today, it's very complicated in certain countries, especially Canada and Australia, to crew a rig. So the limiting factor to the growth today, as we speak, is a crew. Okay? But yes, in theory, we can easily get another 10%.
That's great. I noticed a lot of the new materials, like lithium and stuff, are those the same contracts? Are those the same players who are playing in that market? Or are there different miners that you're working for in some of the new chemicals, the new minerals for electric vehicles?
No. No. Normally, it's not because we go lithium that we find a new competition, for instance. Lithium is on two types. You have the brine, the salty form, and the rocky form. The rocky form is something that we treat like any kind of ore. It can be copper or whatever. And the salt form is treated as in-situ leaching, which is what we call solution mining, and it's very, very close to the water well technology. So all in all, we don't have more or new competitors for new battery metals such as lithium, for instance.
But how about the customers? It's not the traditional Vale or it's the traditional people.
But you have already very big players in place in lithium for the last, let's say, four, five, 10 years. And mainly, the main guys are the South American guys like SQM, the Chilean one, which produce, let's say, a good 40% of the world's production. And yes, there are newcomers now in terms of juniors companies who are moving fast to open lithium mines. You are correct.
You have relationships with those as well now?
Well, Steven, we fully booked quasi, so we have a hard time to satisfy the growing demand of our existing customers. Marginally, we have gained market share in the lithium space, especially in Argentina.
That's great. Well, I think I'm excited where this is going. It's been a long time, and it's great to see that we're on the cusp of a real upcycle here, which is exciting. Thanks for all the hard work.
Cross fingers.
Thank you.
Thanks. And be well.
You too.
Ladies and gentlemen, as a reminder, should you have a question, please press star followed by one. There are no further questions at this time. Please proceed.
Thank you, Grant. Thank you, everybody, for listening, and speak to you, talk to you next quarter. Bye-bye. Have a good day.
Thank you. Bye-bye.
Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.