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Orbit Garant Drilling Reports Fiscal 2020 Second Quarter Financial Results

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VAL-D’OR, QC, Feb. 12, 2020 /CNW/ – Orbit Garant Drilling Inc. (TSX: OGD) (“Orbit Garant” or the “Company”) today announced its financial results for the three and six-month periods ended December 31, 2019. All dollar amounts are in Canadian dollars unless otherwise stated. Percentage calculations are based on numbers in the financial statements and may not correspond to rounded figures presented in this news release.

Financial Highlights

($ amounts in millions,

except per share amounts)

Three months ended
December 31, 2019

Three months ended
December 31, 2018

Six months ended

December 31, 2019

Six months ended

December 31, 2018

Revenue

$38.3

$33.7

$81.6

$71.0

Gross Profit

$2.4

$2.9

$9.3

$8.5

Gross Margin (%)

6.3

8.6

11.5

12.0

Adjusted Gross Margin (%)¹

12.5

15.2

17.2

17.9

EBITDA2

$1.0

$0.9

$6.1

$4.3

Net loss

$(2.4)

$(1.7)

$(1.3)

($1.3)

Net loss per share





       – Basic and diluted

$(0.06)

$(0.04)

$(0.03)

($0.03)

Total metres drilled

365,696

311,318

753,120

627,363


1

Adjusted Gross Margin is a non-IFRS financial measure and is defined as Gross Profit excluding depreciation
expenses. See “Reconciliation of Non-IFRS financial measures”.


2

EBITDA is a non-IFRS financial measure and is defined as earnings before interest, taxes, depreciation, and
amortization. See “Reconciliation of Non-IFRS financial measures”.

“Our growth in revenue and metres drilled in the quarter was driven by increased drilling activity in Canada, a trend that is supported by the strengthening price of gold, which is currently at its highest levels since 2013. This is providing gold mining companies of all sizes with improved access to capital to support the advancement of their exploration and mine development drilling programs,” said Eric Alexandre, President and CEO of Orbit Garant.

“Our fiscal second quarter is typically our weakest quarter due to project shutdowns during the December holidays and decreased drilling activity in West Africa due to the rainy season.  Beyond these seasonal factors, our international operations were also impacted by civil protests in Chile and regional security issues in Burkina Faso during the quarter, which resulted in delays or interruptions of certain customer projects. These factors, combined with the conclusion of a multi-year drilling contract in Chile, impacted our gross margins in the quarter,” added Mr. Alexandre. “Looking ahead, we are pleased by the strengthening customer demand in Canada. We expect increasing industry utilization rates in Canada to have a positive impact on contract pricing. Internationally, we believe the political situation in Chile has stabilized and while we continue to monitor Burkina Faso, we are actively seeking drilling projects in other jurisdictions in West Africa.”

Second Quarter Results

Revenue for the three-month period ended December 31, 2019 (“Q2 FY 2020”) totalled $38.3 million, an increase of 13.6% compared to $33.7 million for the three-month period ended December 31, 2018 (“Q2 FY2019”). Drilling Canada revenue increased 21.2% to $28.6 million, compared to $23.6 million in Q2 FY2019, reflecting increased meters drilled. International revenue was $9.7 million, a decrease of $0.4 million compared to $10.1 million in Q2 FY2019, reflecting the completion of a multi-year drilling contract in Chile during the fourth quarter of fiscal 2019 and a decrease in drilling activities in Burkina Faso and Ghana, partially offset by new drilling projects in Guyana and Argentina. 

Orbit Garant drilled a total of 365,696 metres in Q2 FY2020, a 17.5% increase from the 311,318 metres drilled in Q2  FY2019. The Company’s average revenue per metre drilled in Q2 FY2020 was $104.53, compared to $107.85 in Q2 FY2019. The decline in average revenue per metre drilled was attributable to a decrease in international specialized drilling activity.  

Gross profit for Q2 FY2020 was $2.4 million, or 6.3% of revenue, compared to $2.9 million, or 8.6% of revenue, in Q2 FY2019. Adjusted gross margin, excluding $2.4 million in depreciation expenses, was 12.5% in Q2 FY2020, compared to adjusted gross margin, excluding $2.2 million in depreciation expenses, of 15.2% in Q2 FY2019. The decline in gross profit and margins was primarily attributable to the completion of a large drilling contract in Chile during the fourth quarter of fiscal 2019 and decreased drilling activity in Burkina Faso.

General and administrative (“G&A”) expenses were $4.2 million, or 10.8% of revenue, in Q2 FY2020, compared to $4.9 million, or 14.4% of revenue, in Q2 FY2019. G&A expenses in Q2 FY2020 included $0.1 million of acquisition and integration costs related to the acquisition of the drilling business of Projet Production International BF S.A. (“PPI”) in Burkina Faso, compared to $0.7 million in Q2 FY2019. 

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was $1.0 million in Q2 FY2020, compared to $0.9 million in Q2 FY2019. Net loss for Q2 FY2020 was $2.4 million, or $0.06 per share, compared to net loss of $1.7 million, or $0.04 per share, in Q2 FY2019.

During Q2 FY2020, Orbit Garant generated $1.5 million from financing activities, compared to $7.6 million in Q2 FY2019. The Company withdrew a net amount of $2.3 million during Q2 FY2020 on its secured, three-year revolving credit facility (the “Credit Facility”) with National Bank of Canada Inc. (the “Lender”), compared to a withdrawal of $7.1 million in Q2 FY2019. The Company’s long-term debt under the Credit Facility, including the current portion, was $30.4 million as at December 31, 2019, compared to $25.3 million as at June 30, 2019. The Company’s debt was incurred to support working capital requirements, the financing of the PPI acquisition in Q2 FY2019, and the acquisition of capital assets, property, plant and equipment.

As at December 31, 2019, the Company’s working capital was $57.7 million ($55.1 million as at June 30, 2019) and 37,021,756 common shares were issued and outstanding.

Orbit Garant’s unaudited interim consolidated financial statements and management’s discussion and analysis for Q2  FY2020 are available via the Company’s website at www.orbitgarant.com or SEDAR at www.sedar.com

Conference call

Eric Alexandre, President and CEO, and Alain Laplante, Vice President and CFO, will host a conference call for analysts and investors on Thursday, February 13, 2020 at 10:00 a.m. (ET). The dial-in numbers for the conference call are 416-764-8609 or 1-888-390-0605. A live webcast of the call will be available on Orbit Garant’s website at: http://www.orbitgarant.com/en/sites/fog/investors.aspx.

To access a replay of the conference call, dial 416-764-8677 or 1-888-390-0541, passcode: 826292 #. The replay will be available until February 20, 2020. The webcast will be archived following conclusion of the call.     

RECONCILIATION OF NON – IFRS FINANCIAL MEASURES

Financial data has been prepared in conformity with IFRS. However, certain measures used in this discussion and analysis do not have any standardized meaning under IFRS and could be calculated differently by other companies. The Company believes that certain non-IFRS financial measures, when presented in conjunction with comparable IFRS financial measures, are useful to investors and other readers because the information is an appropriate measure to evaluate the Company’s operating performance. Internally, the Company uses this non-IFRS financial information as an indicator of business performance. These measures are provided for information purposes, in addition to, and not as a substitute for, measures of financial performance prepared in accordance with IFRS.

EBITDA:
Net earnings (loss) before interest, taxes, depreciation and amortization.

Adjusted gross profit:
Contract revenue excluding operating expenses. Operating expenses comprise material and service expenses personnel expenses, other operating expenses, excluding depreciation.

EBITDA

Management believes that EBITDA is an important measure when analyzing its operating profitability, as it removes the impact of financing costs, certain non-cash items and income taxes. As a result, Management considers it a useful and comparable benchmark for evaluating the Company’s performance, as companies rarely have the same capital and financing structure.

Reconciliation of EBITDA

(unaudited)

(in millions of dollars)

3 months ended

December 31, 2019

3 months ended

December 31, 2018

6 months ended

December 31, 2019

6 months ended

December 31, 2018

Net loss for the period

(2.4)

(1.7)

(1.3)

(1.3)

Add:





Finance costs

0.7

0.5

1.4

0.9

Income tax expense (recovery)

(0.1)

(0.4)

0.4

Depreciation and amortization

2.8

2.5

5.6

4.7

EBITDA

1.0

0.9

6.1

4.3

Adjusted Gross Profit and Margin

Although adjusted gross margin and margin are not recognized financial measures defined by IFRS, Management considers them to be important measures as they represent the Company’s core profitability, without the impact of depreciation expense. As a result, Management believes they provide a useful and comparable benchmark for evaluating the Company’s performance.

Reconciliation of Adjusted Gross Profit and Margin 











(unaudited)

(in millions of dollars)

3 months ended

December 31, 2019

3 months ended

December 31, 2018

6 months ended

December 31, 2019

6 months ended

December 31, 2018






Contract revenue

38.3

33.7

81.6

71.0

Cost of contract revenue
(including depreciation)

35.9

30.8

72.3

62.5

Less depreciation

(2.4)

(2.2)

(4.7)

(4.2)

Direct costs

33.5

28.6

67.6

58.3

Adjusted gross profit

4.8

5.1

14.0

12.7

Adjusted gross margin (%) (1) 

12.5

15.2

17.2

17.9

(1) 

 Adjusted gross profit, divided by contract revenue X 100

About Orbit Garant

Headquartered in Val-d’Or, Quebec, Orbit Garant is one of the largest Canadian-based mineral drilling companies, providing both underground and surface drilling services in Canada and internationally through its 233 drill rigs and more than 1,300 employees. Orbit Garant provides services to major, intermediate and junior mining companies, through each stage of mining exploration, development and production. The Company also provides geotechnical drilling services to mining or mineral exploration companies, engineering and environmental consultant firms, and government agencies. For more information, please visit the Company’s website at www.orbitgarant.com.

Forward-looking information

This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to business of Orbit Garant Drilling Inc. (the “Company”) and the environment in which it operates. Forward-looking statements are identified by words such as “believe”, “anticipate”, “expect”, “intend”, “plan”, “will”, “may” and other similar expressions. These statements are based on the Company’s expectations, estimates, forecasts and projections. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. These risks and uncertainties are discussed in the Company’s regulatory filings available at www.sedar.com. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made. The Company undertakes no obligation to publicly update any such statement or to reflect new information or the occurrence of future events or circumstances.

SOURCE Orbit Garant Drilling Inc.

For further information: Alain Laplante, Vice President and Chief Financial Officer, (819) 824-2707 ext. 122; Bruce Wigle, Investor Relations, (647) 496-7856

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Coronavirus latest: China’s banks to face up to $1.1tn surge in questionable loans, S&P warns

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China’s banks face up to $1.1tn surge in questionable loans, S&P warns

China’s lenders may be hit with an increase of as much as Rmb7.7tn ($1.1tn) in questionable loans as the coronavirus outbreak deals a heavy blow to China’s economy, S&P Global Ratings has warned.

The Covid-19 outbreak, which has prompted China to lock down large swaths of its sprawling economy, will cause some individuals and companies to “have difficulty with debt repayment,” S&P said in a report issued on Thursday in Hong Kong.

In a worst-case scenario in which the outbreak does not peak until April, S&P forecasts China’s economy, the second biggest in the world, will expand 4.4 per cent in 2020. That would mark a dramatic slowdown from the 6.1 per cent growth in 2019 and be the weakest pace since 1990, according to World Bank data.

S&P’s base scenario, in which the virus peaks next month, points to 2020 growth of 5 per cent, which would also be the lowest in three decades. Even in the best case in which the virus peaks in February, GDP growth is forecast at 5.5 per cent.

The “growth shock” would cause the value of non-performing loans in China’s banking sector to surge by Rmb7.7tn to Rmb10.1tn in S&P’s worst-case scenario. In the base case, the figure would jump Rmb5.4tn to Rmb7.8tn. In the best case, the NPLs would rise Rmb3.4tn to Rmb5.8tn. The ratio of NPLs to total loans would be 7.8 per cent, 6 per cent and 4.5 per cent in the worst, base and best case scenarios, respectively.

S&P said it also expects Chinese regulators to relax rules for what counts as a bad loan and potentially give certain loans to affected communities and business “special consideration” in how they are accounted for on bank balance sheets.

The ratings firm said it “may take years for domestic banks to revert to normal standards, with long-term repercussions for the creditworthiness of some institutions.”

China has already begun to take action aimed at stimulating its economy and easing conditions in its financial system. The loan prime rate, a key lending rate, was reduced on Thursday after the People’s Bank of China earlier this week reduced another important medium-term lending rate.

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What to know in markets Thursday

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Thursday’s economic data earnings releases are poised to shed more light on the impact of the coronavirus to the domestic economy and some individual companies in the travel industry.

The Philadelphia Fed will release its February business activity outlook survey Thursday morning at 8:30 a.m. ET. Consensus economists expect the report will show manufacturing activity weakened slightly in the region in February versus January, with the headline index dropping to 11.0 from 17.0. February’s print had marked the highest level since May 2019.

The report comes on the heels of a much stronger than Empire State manufacturing index, which rose to the highest level in nine months, data earlier this week showed. Beneath the headline report, the new orders index registered at the best level since September 2017, and shipments were the strongest since November 2018.

That print, which captured manufacturing activity trends for the New York region, was the first since the escalation of coronavirus case, providing some respite for investors on edge over the impact of the global outbreak to domestic industrial companies.

“We acknowledge some upside risk [for the Philadelphia Fed index] after the Empire State results,” Rubeela Farooqi, chief U.S. economist for High Frequency Economics, wrote in a note Wednesday. “The export-oriented manufacturing sector was weighed down by the trade war last year. However, in the aftermath of the ‘Phase One’ deal with China, trade tensions have eased somewhat, and early indications suggest conditions for manufacturers are improving.”

The coronavirus outbreak and related disruptions to company supply chains remains a near-term risk, Farooqi added. And ongoing issues with Boeing, as its 737 Max aircraft remain grounded and production halted, have also been an overhang on the manufacturing sector.

Earnings

Separately, Norwegian Cruise Lines (NCLH) is also due to release fourth-quarter results Thursday.

The cruise operator’s stock has been in focus since the start coronavirus outbreak, which has resulted in more than 2,000 deaths among more than 75,000 global cases to date. Shares of companies in the travel industry – including airlines, hotel and casino operators, in addition to cruise lines – have been especially volatile amid coronavirus developments. Shares of Norwegian have fallen 11% for the year to date through Wednesday’s close, after rising 38% in 2019.

The Norwegian Jewel cruise ship was in lock down while health authorities test a man for Coronavirus on February 14, 2020 in Sydney, Australia. The ship is docked in Sydney this morning following a 10 day tour of New Zealand. (Photo by Lisa Maree Williams/Getty Images)

Consensus analysts expect Norwegian Cruise will deliver fourth-quarter adjusted earnings of 70 cents on sales of $1.43 billion, according to Bloomberg data. These results, however, will exclude the most recent impact of the coronavirus on cruise demand, with the virus having escalated throughout late January and early February.

As a result, first-quarter and full-year guidance will be paramount, with consensus analysts expecting the company to guide toward first-quarter EPS of 61 cents. Such a result would represent a 36% decline over last year’s earnings.

Norwegian Cruise Lines’ earnings results come after peer cruise operator Royal Caribbean warned about a 25-cent impact to first-quarter EPS, and an at least 65-cent hit to full-year EPS, due to cruise cancelations and other itinerary changes amid the coronavirus. Royal Caribbean has so far canceled 18 cruises in Southeast Asia as the outbreak continues.

For Norwegian Cruise Lines, Wall Street firm Stifel said its checks suggest cancelations are running close to 10%, or “basically double the normal average.”

“However, that cancellation number is factually inaccurate, given those cancellations include cancelled itineraries. If a passenger on a canceled sailing decides to take a different itinerary that still incorporates the passenger as ‘canceled’ and a new net booking,” Stifel analyst Steven Wieczynski wrote in a note last week.

“We believe until investors get a better sense of the ultimate impact this ‘noise’ will have on the business, they will continue to tread water around these names,” he said.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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China to expel three Wall Street Journal reporters

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China will expel three Wall Street Journal reporters in the coming days, marking the first time in decades that the country has cancelled the press cards of multiple foreign reporters at the same time.

Beijing said on Wednesday that the move was in retaliation for a comment piece headlined “China Is the Real Sick Man of Asia” published on February 3, which they said “smears the efforts of the Chinese government” in fighting the coronavirus outbreak.

The expulsions come a day after the US designated five Chinese media outlets as foreign diplomatic missions, saying their journalists operated as propaganda agents and required greater monitoring.

Washington said it would require Xinhua, China’s official news agency, China Radio International, China Global Television Network and the distributors of newspapers China Daily and People’s Daily — China Daily Distribution Corporation and Hai Tian Development USA — to register the names of US employees, declare any property holdings and seek approval to add any more.

“The fact of the matter is each and every one of these entities does work for the Chinese government,” a senior state department official said on Tuesday, describing them as organs of a one-party state propaganda apparatus that “take their orders directly from the top”.

The decision will, in effect, treat the five organisations as foreign embassies, although US officials said they would not restrict their work, reporting or access. They will also not be given diplomatic immunity or forced to reveal any meetings with US officials or educational and research institutions.

A Chinese foreign ministry spokesman criticised the decision, accusing Washington of “wantonly restricting and thwarting Chinese media outlets’ normal operations”. He added that Beijing would “reserve the right to take further measures in response”.

Mike Pompeo, the US secretary of state, condemned China’s decision to expel the Wall Street Journal’s journalists. “Mature, responsible countries understand that a free press reports facts and expresses opinions,” he said. “The correct response is to present counter arguments, not restrict speech.”

Two of the reporters — deputy bureau chief Josh Chin and reporter Chao Deng — are US nationals, the paper said. The third, Philip Wen, is Australian. All three have reported on Beijing’s mass surveillance policies and controversial detention of Uighur Muslims in the Xinjiang region.

China refused to renew the accreditation of another Wall Street Journal reporter in August.

Beijing said the expulsions were punishment for a February 3 comment article by Walter Russell Mead, a professor at Bard College and a Wall Street Journal columnist, who strongly criticised Chinese authorities’ response to the coronavirus outbreak.

The article sparked an angry backlash on Chinese social media, with nationalist tabloids and liberal commentators alike saying the author had crossed a line by “insulting” China during a period of national crisis.

William Lewis, publisher of the Wall Street Journal, said the company regretted that the article had “caused upset and concern among the Chinese people”. But he added that the newspaper’s news and comment sections operated separately, adding that “none of the journalists being expelled had any involvement with it”.

China’s leaders have frequently tapped into nationalist sentiment in recent years over perceived slights by foreign nations to justify harsh retaliatory measures.

But the Foreign Correspondents’ Club of China said it was the first expulsion of a foreign correspondent since 1998.

“The action taken against the WSJ correspondents is an extreme and obvious attempt by the Chinese authorities to intimidate foreign news organisations by taking retribution against their China-based correspondents,” the club said in a statement.

The US has previously designated foreign media outlets as extensions of governments in the past, including Vietnam’s news agency five years ago. During the cold war, Washington treated several Soviet media outlets as part of the Moscow government.

Jim Risch, a Republican senator who chairs the Senate foreign relations committee, described the decision as “a smart and reasonable step”.

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