Welcome to the Foraco International SA First Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Daniel Simoncini, Chairman and CEO. Please go ahead.
Thank you, Lindsay. Thank you all for joining us on our Q1 2021 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 these results was issued this morning prior to the opening of the TSX through the CNW Newswire. If you didn't receive a copy of the release, please visit www.foraco.com. After the outline, we're gonna get a Q&A session. The first quarter of 2021 has seen a surge in COVID cases across the planet, unfortunately, and that has impacted some of our operations. As we speak, we still have five employees who are still under medical monitoring in Russia, Brazil, and Canada, out of the 260 Foraco employees who tested positive since the beginning of the pandemic.
Be assured, we are doing all we can to get our people vaccinated, but the different countries we're operating in are not on the same page or the same protocols, so it will take few months more before we reach a sufficient protection for our employees. Meanwhile, we continue to maintain a very strict sanitary protocol throughout our four different branches in the world. Despite these adverse sanitary conditions, metal prices have continued to rise, supported by a solid demand, and we have been very busy to remobilize our project after the Christmas break. We're glad to report a 2021 Q1 revenue at $54.6 million in revenue, up 10% year-on-year, which is eight years high, and a positive EBIT and a rig utilization rate of 48%, up 4% compared to a year ago.
During the quarter, all of our regions performed well, and our sustainable economy-related segments were strong again this quarter. I will now pass the conference to Jean-Pierre, who will walk us through the financials in more detail. Jean-Pierre?
Thank you, Daniel, and good morning, everyone. So despite the COVID-19 pandemic, which continues to affect the logistics worldwide, revenue for the Q1 2021 quarter amounted to $54.6 million, compared to $49.7 million for the same quarter last year, a 10% increase, Q1 being generally the lowest quarter of the year. By reporting segment, we recorded a 12% increase in the mining segment and 2% in the water segment. Water represented 17% of Q1 2021 revenue. All regions contributed to this increase. EMEA and North America were the most active regions. The revenue in EMEA for the quarter was $18.8 million, compared to $15.1 million in Q1 2020, a 25% increase, mainly in Africa, thanks to new contracts mobilized at the end of 2020.
The activity in Russia was stable at a sustained level compared to Q1 2020. In North America, mainly Canada, revenue amounted to $18.6 million in Q1 2021, a 2% increase compared to Q1 2020. The activity in North America continues to be driven by a strong demand. At $7.5 million, revenue in Asia Pacific increased 4% compared to the same quarter last year. Revenue in South America increased by 5% at $9.6 million compared to Q1 2020. The activity in the region continues to be particularly impacted by the effect of the pandemic, which disrupts the logistics and operational activity since Q2 2020. In Q1 2021, the geographical activity split was EMEA 35%, North America 34%, South America 17%, Asia Pacific 14%.
During the quarter, the gross margin, including depreciation within cost of sales as per IFRS rules, was a profit of $6 million, versus $5.3 million for the same quarter last year. Ongoing contracts reported solid performance, while some new contracts in mobilization phase generated lower percentage of gross margin. SG&A increased by 2% to $5.2 million compared to the same period last year, but decreased as a percentage of revenue from 10.3% to 9.6%. The EBIT, our operating result, was a $0.8 million profit, versus a $0.1 million profit in Q1 2020. The EBITDA amounted to $5.1 million, or 9.4% of revenue, compared to four point five million in Q4 2020, or 9% of revenue.
Working capital increased by $7.7 million versus $2 million in Q1 2020, mainly due to increased activity and mobilization of new contracts. During the period, CapEx amounted to $4.4 million in cash compared to $2.8 million in cash in Q1 2020. This CapEx relates to major rigs overhaul and senior equipment and rods. As a result of the above, the free cash flow before debt servicing was -$8.2 million, compared to -$1 million in Q1 2020. At March 31, 2021, our net debt, including the effects of the IFRS 16, amounted to $140.1 million, compared to $136.2 million at year-end 2020. We met our covenants at March 31, 2021. So we are pleased to report these Q1 2021 improved results.
In our activity, the first quarter is characterized by significant mobilization and phasing of contracts, relatively high capital expenditures, and additional working capital requirement. Thanks to our improved results and the sustained demand for commodities, we are progressing with existing lenders and new lenders to refinance the outstanding bonds due in May 2022, in order to deleverage our balance sheet and improve and extend the terms of the debt. I will now return the call to Daniel for his closing remarks. Daniel?
Yeah. Thanks, Jean-Pierre. Many metals are up over the quarter, as you have noticed, and some breaking decade-long records like copper and iron ore. This translates into a solid activity in the mining space, and we are observing an increased effort of our customers in terms of production management, as many of them are increasing progressively their drilling budgets, asking either for an extension of contracts or additional rigs. There is also a growing inflation as far as wages and supplies are concerned across the board, as many people left the industry during the downturn, and there is a big disturbance in the maritime shipping business.
Foraco being considered as a company of choice for employees, this makes our talent reservoir one of the best in the industry, and we manage to keep the turnover as reasonable level for the time being. All that makes our life a bit more challenging, more than we'd like to, but as we share the same conditions with our customers, they understand very well the global mining space situation, and all of us are proactively supporting to each other to overcome these temporary conditions. It seems 2021 has started on a good foot for us, especially for EV metals and water, which amounted to 50% in our activity last year. We are confident that our business model is one of the most resilient in the industry, and that we will continue to improve our performance by many metrics going forward.
As Jean-Pierre mentioned, we are making progress to refinance our existing debt and will disclose any material development in due course, as per the TSX disclosure policy. Thanks for your listening. I will now turn the call to Lindsay, who will take the first question. Lindsay?
Thank you. As a reminder, ladies and gentlemen, please press star one on your telephone keypad to ask a question. We'll pause for just a moment to compile the Q&A roster. And again, that is star one on your telephone to ask a question. And we do have a question from Steven Green with Ordinance Capital . Your line is open.
Hi, Daniel. It's Steven. How are you? I'm glad to see things are improving. And I, I'm glad you're all safe. One question I have is, first, so the CapEx in this quarter went up a lot. I guess that you start new contracts in the first quarter, and that's why it's lower usually than the rest of the quarters, the activity, but the CapEx. So does that mean that you're really investing to support a strong future growth in revenues?
Hi, Steven. Good to hear you. Usually, the CapEx, we spend most of them in Q1 and Q2, because they are supporting the order book execution, if I may say so. And this year we had a kind of early good start, as you saw, compared to a year ago. And this is why we had to expense and to spend a bit more money than average. But we are very strict, and we are very disciplined on our CapEx total, I mean, yearly budget. And yes, most of the CapEx will be spent over the first half of the year.
But that's all to support new startups and contracts and stuff? That's what you do it for?
Yeah, yeah. Basically, we are not, you know, in the $8 million that Jean-Pierre mentioned, there is a lot of rods, of course, because under IFRS, we are obliged to amortize them and treat them as CapEx. And usually it's about 50% of that, and the rest is either new rigs that we are mobilizing here and there for new contracts or contracts extension. It's not a massive, it's not a massive exercise, but we are supporting, and we need to do that to execute our 2021 order book.
All right, good. And then can you just talk a little bit more about the chemicals or the minerals that you guys are mining for the EV sector? And how do you see that growing over the next few years?
Well, we are not mining, we are drilling for miners. Our exposure to EV metals, namely copper, nickel, cobalt, lithium, is about 30%, was 30% last year. And we see a very solid demand for our services in these categories of metals, indeed, because of the energy transition. We don't have any, let's say, crisp to the growth of that, but I can tell you, so when you look at the price of the copper, I mean, there is something happening, huh?
Right.
So but you, but you never know. I mean, you know, nickel is a kind of very volatile as well, because depending on the Indonesia policy, or whatnot, but so far, everybody is relatively bullish on the EV metals. And that's good for everybody in the space. Our exposure to EV is about 30%. We, we don't see that moving a lot, because we are relatively also heavily exposed, and we gladly to iron ore, for instance, to water, and so the... And gold is about 30% of what we're doing. So we are pretty well exposed and diversified on that.
Okay. On the balance sheet, I guess this has been going on for a while, and I was hoping to get some resolution, I'm sure you are as well. But does the delivering and improving the terms of the balance sheet that you mentioned in your release, does that mean that you're gonna get a reduction in the principal of your of the $140 million you carry? I mean, are you gonna be able to buy back the debt at a discount to what it's on the books for?
Steven, I praise you for your patience. At least as you know, which is as big as ours. The moment we have a deal, you're gonna get every single details of that. But for the moment, you will understand that we cannot talk about it.
Right. I assume you're-
But-
I mean, this has gone on for so long, I mean, we're making progress, like you said.
Yes, we do.
Good. Okay. And now, like, the last question, I'll ask a forward-looking question. I don't know if anybody else has questions. But, like, the last time we got to the top of the cycle, I guess, in 2012 and 2013, what were, like, our peak profit margin and utilization rates? And how do you see the - And what do you see revenue at the top of the cycle look like for Foraco?
I think 2012, 2011, 2012, we were speaking under Jean-Pierre control, but we were just above 60% overall.
Closer to 10.
Yeah. So that was red hot. The revenue is different because, you know, that's 10 years ago.
Right.
But the profit margin was at least between 5% and 8.9% above. So the 11-12 peak, Steven, was a kind of a singularity, because the space was going totally constrained, totally nuts, and everybody wanted to rig and at, you know, whatever the price was.
Right.
As we speak, we are very far from a crazy situation like that was, and I am glad it is not, because our customers are, you know, very and still very disciplined in terms of CapEx allocation, you know, exploration budget, brownfield, et cetera, et cetera, which make, you know, the growth much more sustainable.
Mm-hmm.
Right? So compared to the peak, the historical peak, we still have, you know, like, I don't know, 15% utilization, plus, maybe 10% on prices, average. So there is a lot of room to improve, you know, the situation, but this comes slowly. I mean, I hope.
All right, good. Well.
Okay.
I've been here since that cycle, so I'll be there for the next one.
Thank you, Steven. And be safe, okay?
You too.
Be safe.
You too.
Thank you. Thank you for your support. Bye.
There are no further questions in queue at this time. Mr. Simoncini, do you have any closing comments?
No, I just thank you, everybody, and especially Steven, for his loyalty. So thank you all, and talk to you for the next quarter. Have a nice day. Be safe. Bye-bye.
Bye-bye. Thank you. This concludes today's conference call. You may now disconnect.