Foraco signals 60% utilization is achievable as it targets margin recovery and cash conversion

Earnings Call Insights: Foraco International SA (FAR:CA) Q3 2026

Management View

• "The underlying demand environment remains supportive with gold continuing to be the strongest near-term driver of drilling activity." (Chief Executive Officer Timothy Bremner)
• "So while our industry fundamentals are favorable, our objective is disciplined profitable growth rather than volume for its own sake." (Chief Executive Officer Bremner)
• "Revenue reached $86.2 million, up 21.4% from $71 million a year ago." (Chief Executive Officer Bremner)
• "EBITDA increased 8.2% (sic) [ 8.1% ] to $15.4 million compared to $14.2 million in Q3 2025" and "our EBITDA margin was 17.8% versus 20% in prior year quarter." (Chief Executive Officer Bremner)
• "Fleet utilization... reached 53%, up 35% in the quarter last year and 51% in the second quarter of 2026." (Chief Executive Officer Bremner)
• "In North America, revenue increased 39% to $35.6 million from $25.6 million" and "South America generated $21.2 million, up 29% from $16.5 million" while "Asia Pacific, revenue was $21.4 million, down 10% from $23.8 million." (Chief Financial Officer Fabien Sevestre)
• "Mining remains the main growth engine with revenue of $76 million compared with $60.8 million last year" and "net profit was $4.4 million versus $5.5 million a year earlier." (Chief Financial Officer Sevestre)
• "Net debt was $78.1 million at the end of September, an improvement of $8 million during the quarter." (Chief Financial Officer Sevestre)

Outlook

• "We're certainly encouraged by the sequential improvement in the gross margins" and "we're not able to provide specific guidance, I'm afraid, on margin target for Q4 2026 or into 2027." (Chief Executive Officer Bremner)
• "What I can say is a 60% utilization rate is certainly achievable from an operating capacity standpoint" and "please don't take that as guidance." (Chief Executive Officer Bremner)
• "We certainly expect some normalization" in working capital "as the contracts progress, the outstanding receivables are collected" and "we can't commit to any specific target for Q4." (Chief Executive Officer Bremner)
• "With the major investment program now complete, the cash conversion, reducing the leverage ratio further is certainly something that we are expecting and planning." (Chief Executive Officer Bremner)

Financial Results

• "Revenue increased to $86.2 million" and "EBITDA was $15.4 million or 17.8% of revenue." (Chief Financial Officer Fabien Sevestre)
• "Gross margin was 16.7% compared with 19.7% in Q3 '25" and "net profit was $4.4 million versus $5.5 million a year earlier." (Chief Financial Officer Sevestre)
• "For the first 9 months of 2026, revenue reached $237 million compared with $195 million" and "net profit for the 9 months was $8.5 million compared with $12.5 million last year." (Chief Financial Officer Sevestre)
• "With our major investment program substantially complete, the priorities are working capital discipline, cash conversion and continued debt reduction." (Chief Financial Officer Sevestre)

Q&A

• Donangelo Volpe, Beacon Securities Limited: Could you provide color on labor and recruiting? Chief Executive Officer Bremner: "the labor market remains competitive" but "we've successfully increased our capacity" and "we don't consider it a uniform constraint across the group."
• Donangelo Volpe, Beacon Securities Limited: What drove Water profit improvement vs. Mining decline? Chief Executive Officer Bremner: "The Water segment continues to benefit because it's such a technical business" and Mining profitability was impacted by "almost hyperinflation in some of our consumables" plus "contract-specific and productivity challenges."
• Donangelo Volpe, Beacon Securities Limited: Break down maintenance vs. growth CapEx? Chief Executive Officer Bremner: "capital expenditures reached $21 million for the first 9 months of this year" and "we have invested in 7 new rigs... And that totaled $11 million of that $21 million" while "I can't give you an exact breakdown of the rods versus maintenance."
• Simon Wildsmith, Desjardins Securities: Confidence in margin expansion and a 20% margin target? Chief Executive Officer Bremner: "pricing adjustments progressively take effect" and "we're not able to provide specific guidance... on margin target."
• Simon Wildsmith, Desjardins Securities: Path toward 60% utilization? Chief Executive Officer Bremner: "a 60% utilization rate is certainly achievable" but "I certainly wouldn't want to characterize that as formal guidance."
• Simon Wildsmith, Desjardins Securities: Working capital unwind timing? Chief Executive Officer Bremner: "the working capital absorbed about $15.7 million" and "we certainly expect some normalization... but... can't commit to any specific target for Q4."
• Simon Wildsmith, Desjardins Securities: Deleveraging and 1x leverage commentary? Chief Executive Officer Bremner: "the net debt declined by $7.6 million" and "reducing the leverage ratio further is certainly something that we are expecting and planning."
• Steven Green: Sensitivity to gold prices and whether customers are pulling back? Chief Executive Officer Bremner: "we have not had any customer at all express reservations" and "in some cases, our customers are requesting even more at $4,000."
• Steven Green: Any large tenders coming soon and bidding strategy? Chief Executive Officer Bremner: "we're being much more selective than we were in the past" and "yes, there are some very large tenders which we are negotiating now... and these are priced appropriately."
• Steven Green: Water work alongside other contractors and competitor comparisons? Chief Executive Officer Bremner: "we frequently work alongside one another" and "it wouldn't be appropriate for me to comment on" a competitor’s water capabilities.

Sentiment Analysis

• Analyst tone was neutral to slightly positive on demand/utilization, with focused skepticism on margins, labor constraints, and cash conversion, shown in questions like "what kind of confidence do you guys have in continued margin expansion" (Simon Wildsmith, Desjardins Securities) and working-capital timing.
• Management tone was slightly positive but guarded on near-term profitability, emphasizing priorities and repeatedly limiting commitments, including "we're not able to provide specific guidance" and "please don't take that as guidance." (Chief Executive Officer Bremner)
• Versus last quarter, management again stressed pricing/cost pressures and margin recovery, but Q3 added more explicit caution on not giving targets and elevated emphasis on "cash conversion" and debt reduction (Chief Executive Officer Bremner; Chief Financial Officer Sevestre).

Quarter-over-Quarter Comparison

• Q3 revenue was $86.2 million vs. Q2 revenue of $84.5 million. (Chief Executive Officer Bremner; Chief Executive Officer Timothy Bremner in Q2)
• Q3 utilization was 53% vs. Q2 utilization of 51%, continuing the sequential climb management highlighted in both calls. (Chief Executive Officer Bremner)
• Q3 segment mix commentary shifted toward selectivity and technical tenders, with "we're being much more selective than we were in the past" (Chief Executive Officer Bremner) versus Q2’s emphasis on a broad tender environment and backlog visibility.
• Q3 balance-sheet discussion centered on net debt improving to $78.1 million, while Q2 highlighted net debt increasing to $85.7 million amid CapEx and working capital build. (Chief Financial Officer Sevestre)

Risks and Concerns

• "Inflation in labor, maintenance and consumables is putting pressure on contractors" and success "will depend... on pricing it appropriately and delivering it with high productivity and reliability." (Chief Executive Officer Bremner)
• Management described operational pressure points in Mining: "hyperinflation in some of our consumables" and "contract-specific and productivity challenges, which are being addressed." (Chief Executive Officer Bremner)
• Cash conversion remained a key concern: "cash generation remains central to our plan" and management tied mitigation to "working capital discipline, cash conversion and continued debt reduction." (Chief Executive Officer Bremner; Chief Financial Officer Sevestre)

Final Takeaway

Foraco’s Q3 call emphasized sustained demand and utilization momentum alongside a clear message that profitability and cash conversion are the priorities: management highlighted $86.2 million in revenue, 53% utilization, and net debt improving to $78.1 million, while repeatedly underscoring that margin recovery depends on pricing catching up to cost inflation and better contract execution, and that while 60% utilization is “achievable,” the company is not providing formal margin or quarterly guidance.

Read the full Earnings Call Transcript

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