Thank you for joining us on our Q2 2020 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 CNW Newswire. If you did not receive a copy of the release, please visit www.foraco.com. After the outline of financial results, we will open the call for questions. When we last addressed Foraco quarterly results back on May 1st, the world total reported cases of COVID-19 contaminated people were just above 3 million. As we speak, we've passed the 17 million mark 90 days later, or 155,000 new reported infections per day. Over the quarter, 34 Foraco employees have been reported tested positive, 32 of them being in Russia.
Out of these 34, all have recovered except two who are still under medical monitoring. We maintain a very strict sanitary protocol throughout our different branches and work closely with our customers to maintain the highest barriers against the virus spread. The impact of the pandemic on our activity in Q2 was relatively limited in our main operation centers, and overall, we continue to outperform the market growth with a 3% decrease adjusted for currency fluctuations when compared to Q2 2019, and we post a revenue of $47.4 million this quarter. Some operations were suspended throughout April, but as soon as May started, we were able to resume some operations and did not receive any significant cancellation orders during the quarter. Our utilization rate was 47% this quarter, compared with 50% a year ago.
We continue to steadily grow our water-related business in Canada, Australia, Chile, and Africa, and this now represents 15% of our quarterly revenue. Foraco expertise is now fully recognized, and many customers rely on us for the monitoring of the use of their groundwater resources. The profitability of our operation was quite satisfactory this quarter, and we reached a 23% gross margin, which is an eight-year high. 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 this quarter amounted to $47.4 million, compared to $54.1 million for the same quarter last year, a 12% decrease, but only 3%, excluding the effect of foreign exchange fluctuations. By reporting segment, we recorded a 40% increase in the water segment, mainly in Africa, Australia, and Canada. Water represented 15% of Q2 revenue. The impact of COVID-19 on the Q2 2020 revenue has been uneven between regions. The pandemic particularly affected the activity in North and South America, but the activity remained solid in other areas.
EMEA, North America, and Asia-Pacific were the most active regions. In EMEA, revenue for the quarter was $17.8 million, compared to $15.9 million in Q2 2019, an 11% increase. Africa increased 5% thanks to the continuation of deep water works contracts, and Europe, mainly Russia, 15% in the mining segment.
In North America and Canada, the activity decreased at $11.6 million in Q2 2020, compared to $15.4 million in Q2 2019. This is mainly due to disruptions affecting a certain number of contracts linked to the COVID-19. These will resume in Q3 2020. Asia-Pacific recorded a 14% increase in revenue and 24% at constant exchange rates. Revenue in South America decreased by 48% compared to Q2 2019, or 31%, excluding the adverse foreign exchange impact. The activity in Brazil was particularly affected by the effect of the pandemic, which disrupted the commercial and operational activities and was also affected by the foreign exchange rate. In Q2 2020, the geographical activity split was EMEA 38%, North America 24%, Asia-Pacific 24%, and South America 14%. During this quarter, all the financial indicators improved compared to the same quarter last year.
The gross margin, including depreciation within cost of sales as per IFRS rules, was a profit of $11.2 million, 23.6% of revenue, versus $8.5 million or 15.7% of revenue for the same quarter last year. This increase is mainly due to improved performance on contracts. SG&A decreased to $5.1 million, -7%, compared to the same period last year. The EBIT, or operating result, was $6.1 million profit versus $3 million in Q2 2019, and the EBITDA amounted to $10.2 million compared to $7.3 million in Q2 2019. As a percentage of revenue, 21.5% in Q2 2020 versus 13.6% for the same quarter last year. Now, on a six-month basis, revenue amounted to $97 million compared to $99.3 million in H1 2020/2019, a 2% increase, but a 6% increase after adjusting for currency fluctuations.
Revenue increased 9% in Asia-Pacific and 31% in EMEA, while South America and North America, respectively, decreased by 30% and 13% due to disruption of the commercial and operational activities in Q2 2020. The year-to-date 2020 gross profit was $16.4 million versus $12.7 million for the same period last year, and 29% improvement, mainly due to the increased performance on contract and strong cost control. The year-to-date 2020 EBIT was a positive $6.2 million compared to $2.1 million for the same period last year, mainly as a result of the increased gross margin.
The year-to-date 2020 EBITDA for the six-month period was a positive $14.6 million compared to $10.8 million in the same period last year. In H1 2020, the cash flow generated for operating activities was $14.6 million compared to $10.8 million during the first six months of 2019, mainly due to the increased margin.
Working capital requirement was $2.2 million versus $0.2 million for the same period last year. During this six-month period, CAPEX amounted to $4.1 million in cash compared to $5.7 million in cash in H1 2019. This CAPEX relates to major rigs, overhauls, rods, and ancillary equipment. The free cash flow before debt servicing was $7.4 million positive in H1 2020 compared to $3.3 million positive in H1 2019. As of June 30, 2020, our net debt, including the effect of IFRS 16, amounted to $127.7 million compared to $131.3 million at the end of Q1 2020 and $128.9 million at 2019 year-end. We met our covenant as of June 30, 2020. During Q2, to strengthen our cash position, in addition to the internal measures taken, we have secured the low-interest credit lines guaranteed by the French government.
The drawing of these funds has been subject to an agreement with our lenders on certain additional conditions. I will now return the call to Daniel for his closing remarks. Daniel?
Thanks, Jean-Pierre. Three months ago, we anticipated that our Q2, if you remember well, would be significantly impacted by the diverse lockdowns and social distancing and other procedures and protocols imposed by the government where we operate. But finally, we were able to weather these adverse conditions much better than expected, thanks to the close cooperation we developed with our customers and the dedication and passion of our employees for their work, which allow us to deliver a good execution of our contracts.
The situation remains very volatile, as the recent outbreaks in Victoria, Spain, Hong Kong, and the worrying situation in Brazil and USA are here to remind us the virus is still circulating at great pace and nothing is really under control yet. We are focused on our employee health and safety and the best possible execution of our contract pipeline.
While it is way too early to get any vision of the type of recovery the world economy will experience, we are confident that our mix of commodities, including water and our client portfolio, will help us to go through the challenging period to come. Thank you for listening. I will turn now the call to the operator, who will take the first question for our listening audience. Operator?
As a reminder, if you'd like to ask a question, please press star followed by the number 1 on your telephone keypad. Again, that's star followed by the number 1. And our first question is from Steven Green with Ordinance Capital. Your line is open.
Daniel, hey, how are you doing?
Hey, Steven. Good to have you. I'm good. What about you?
I'm okay. Thank you. I got to commend you doing a fabulous job, obviously, in the difficult economic situation, but also keeping your employees safe. I'm sure the one outbreak you had was very concentrated, one that was all in one place. So thank you for keeping all the employees safe around the world.
Thank you.
Obviously, the big question I have is about the debt. I know that, obviously, since you had talked to the debt holders about taking on the additional credit lines from the French government, you're in direct, are you in direct negotiation or contact with the debt holders? Have you guys made a plan? Are there any identified lender who can come in and help us solve this debt? And is it my mistake to think that the debt, which was trading at, I don't know, 20 cents on the dollar or less when they bought it, can be taken out for less than par?
Your question is a kind of double question. Number one, the French government soft loan facility is something that everybody in France is eligible for, providing that you are in compliance and blah, blah, blah. It's a small amount. Okay? You're talking about $3 million-$4 million, okay? Under our current major debt lending agreement, we have to get the okay from our existing lenders to take on more debt if we need them.
This is what Jean-Pierre was referring to. We got the okay from the government, the okay from the bank, and we are still chit-chatting with our lenders, who are a bit, let's say, a bit difficult and greedy on certain aspects of the thing. That's number one. Number two, regarding the main debt, the main debt is still in place. They bought it at whatever the 20-25 cents of the dollar.
And we have to sit down with them and to decide what to do with it. Either we buy them out with new money lenders or we find a deal with them. Indeed, you understand that the COVID pandemic has frozen a lot of things, obviously, because everybody now is focused on getting a good P&L, restoring the cash position, maintaining the employees' health and safety, blah, blah, blah. So we have been, let's say, freezing this kind of task since, let's say, I would say, mid-March. And we don't anticipate to work on it before, let's say, before Q4. But it's not on the back burner and cold. We have a definite, let's say, ambition to go back to that job by end of Q3 and early Q4.
This is dictated also by the general, let's say, the general market condition on the lending side of the financial market, where the people, or the lenders, potential lenders, or debt restructurers are also a bit anxious to see how the company is doing through the COVID time. Okay? I think our Q2 and hopefully our next Q3 will show them that our business model resilience is good, and therefore they can look at the Foraco file with a positive look. Okay? So far, we stopped working on that for the last five months, and it's going to take another two months or three before we go back to that. Have I answered your question, Steven?
Yeah. Do you foresee, I know that you said the lenders are greedy, but do you foresee them refinancing or being taken out by other people at less than par, less than 100 cents on the dollar? They bought it for 25 cents. They wouldn't take 50 or 60 cents on the dollar and move on?
This is yet to be discussed. If we cannot exit at less than the par, then we better stay with them. Okay?
Right.
So it's going to be a negotiation. It's going to be a kind of market situation, whether or not there is some capital available, what kind of pricing, blah, blah, blah, before. But let's say we're optimistic that we can find a deal because, basically, at the end of the day, what everybody does in this business when you are a lender is you want to get your money back and make a profit. Okay?
Mm-hmm.
I think reason will prevail at the end, providing that the market is back and providing that Foraco business model is proven to be resilient.
Well, you're busy with all this.
I think it is.
It's doing well. Is the bidding season coming up, right, in the fall here?
Well, traditionally, yes, Steven, but I can tell you that now it's a kind of standstill in many places. Brazil is starting a bit early. Russia has been late. Canada can be muted, etc. So there is a kind of general disconnect between the different mining regions in the world. We don't think that we will have a kind of massive bidding season all compressed between November and February, but rather something which will be more extended. For instance, we are currently discussing with certain customers to extend our current contract another year or two because they are stressed by the COVID.
They don't want to launch a big, massive bidding tender contest. They're happy with us, and we try to negotiate on a few amicable bases. So it's yet to be confirmed whether or not we're going to have a bidding season per se.
Obviously, when the 2021 budgets will be approved within our customers, some tender will go out. But will it be as massive as before? We don't know. And remember, we roll over more than 40%-50% of our business from one year to the other one. Okay?
It'll be less, it'll still be business. It'll just be less compressed into the bidding season.
Yeah. Yeah. Exactly.
I feel like Newmont, Vale, FCX, they're doing great, it seems like. The gold prices are up, and are they increasing their capital investments, do you think, the majors?
I would say if they're not increasing it, they are maintaining it at the 2019 level, which was already quite good. So I mean, the sentiment is not bad. Everybody is a bit worried about the virus, of course. But the sentiment as far as the metal prices is not bad, to say the least, for the moment.
They're doing good.
Do you do silver business as well as gold, or just gold?
Our gold exposure is.
30%.
What is, Jean-Pierre?
30%.
On the quarter?
It's 30%.
This is on the quarter. On the year 2019, we were much higher than that.
Yeah. Between 33%-35%.
Do you have business in silver as well? Do you mine silver as well?
No. No. We don't drill silver. We don't drill silver. We drill diamonds for Diavik in the Northern Arctic, in precious things and PGMs, Platinum Group Metals in Canada, but not silver.
Do you see?
Don't I?
Your business is doing great. I mean, pretty good. So do you see, I mean, can you grow revenues to $300 million or $400 million a year, do you think? Or are you going to stay where it's $200 million where you're at?
Well, if you remember well, in the good years of 2012, on a pro forma basis, we were at $440 million. The current fleet at 300 rigs can push us to $250 million, short of $300 million, if everything goes well and the stars align, etc., etc. But so far, we are going to be very happy to deliver a good 20 years, and we'll see. Okay?
Right.
The world needs to heal.
Yeah. But the metal market seems to be doing pretty well. But my last question is for—it's an easy one, but I see in your presentation you list innovative services as your competitive advantage. What's an innovative service that you guys provide the market that is the big competitive advantage? Is it in the water, or where is the competitive advantage?
It's a kind of à la carte service. Okay? And we try to be innovative on a frugal basis. I would give you just a couple of examples. We have developed for the last 3-4 years a deep diamond drilling directional service, meaning we can navigate the drilling on 3D and reach very deep targets in a hard rock within a very, very good precision, like a meter or a meter and a half after a kilometer of rock. And so for us, it's, and we developed that together with a small startup in Eastern Europe, and we deploy that now in the Americas. And the clients love that.
So this is a kind of innovation. Another one is that, for instance, we have developed the big dewatering market in Western Australia by deploying rigs which are remote-controlled, like a drone, if I may use this kind of comparison.
The client loves this because there is nobody around the machine. There is nobody around the rig, and therefore the safety of our employees is guaranteed, okay, in a certain way. So we try to find little things which make our life much easier and our cost of service much better for our customers and continue to be creative rather than inventing a new technology of drilling, which this will not happen. Okay?
Right.
So we have to be innovative in different ways. And now we are looking at our carbon footprint because each and every rig we have is a diesel-powered, and we are trying to do some kind of exploration in terms of is it worthwhile to take electric or not. So we're thinking about some stuff like that.
Well, that's great. I mean, I think you guys are doing a great job. I know you guys own most of the company. So hopefully, we'll be rewarded one day. We've been in this for a long time, and hopefully, we'll get a reward because you guys deserve it. I think the shareholders, like myself, who've been in this thing for 10 years now, deserve a stock that is liquid and is going up. So hopefully, we'll all get rewards one day soon, and it'll pay off. Thank you again for all you do.
Thank you, Steven. Thank you for your patience and your dedication, and we are very proud to have shareholders like yourself. Okay? It's a very good thing we pass along to our personnel. Thank you so much. Take care. Be safe.
You too.
We have no further questions at this time. I turn the call back to presenters for closing remarks.
Thank you so much. So talk to you in a quarter time, and please be safe, everybody, and have a great summertime. Bye-bye.
Thank you. Bye-bye.
This concludes today's conference call. You may now disconnect.