Release Date: March 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- North American Construction Group Ltd (NOA, Financial) achieved record annual revenue in 2024, driven by strong growth in Australia.
- The company ended the year with a record backlog of $3.5 billion, including major contract wins in the Canadian oil sands and Australia.
- The MacKellar acquisition in Australia has exceeded expectations, contributing significantly to growth and diversification.
- The company's EBITDA margin improved to 27.8%, reflecting effective operations in both Australia and Canada.
- NOA's bid pipeline remains robust at over $10 billion, with strong demand in Australia and increasing opportunities in Canadian mining projects.
Negative Points
- Canadian fleet utilization remains below target, with Q4 utilization at 54% and a target of 75% by the end of 2025.
- The Oil Sands business experienced a 30% revenue drop last year, with current levels expected to remain consistent.
- The company faced significant shipping and logistics costs for equipment sent to Australia, impacting gross profit margins.
- General and administrative expenses were slightly above the company's target, at 4.5% of reported revenue.
- The first quarter in Australia is typically impacted by weather, affecting operational performance.
Q & A Highlights
Q: Can you provide an update on the 2025 outlook in Canada, particularly regarding utilization and non-oil sands mining awards?
A: Joseph Lambert, President and CEO, explained that they expect utilization to remain similar to last year with slight increases in oil sands demand. Achieving a 75% utilization target would require winning additional work outside of oil sands, with active tenders in Ontario. If necessary, they could prioritize work in Australia or sell underutilized assets.
Q: What factors contributed to the decline in the Oil Sands business, and is it expected to recover?
A: Joseph Lambert noted a 30% drop last year, with current levels expected to remain consistent. The decline could be due to deferred work or in-sourcing, but it's challenging to pinpoint. They plan for current demand levels and see potential upside with increased barrel production in the oil sands.
Q: Can you elaborate on the adjustments made to gross margin, particularly regarding shipping costs and claims?
A: Joseph Lambert clarified that the shipping costs were higher than anticipated, and a claim was resolved as part of a four-year contract extension, which was negotiated into the contract.
Q: How does North American Construction Group plan to mobilize equipment for new awards in Australia, given the current utilization levels?
A: Joseph Lambert stated that they would continue transferring underutilized assets from Canada to Australia, as it makes sense for long-term commitments and returns on capital. They would prioritize using existing assets before purchasing new ones.
Q: Is there any progress on changing North American Construction Group's GICS code or corporate name to better reflect its business?
A: Jason Veenstra, CFO, mentioned that they are engaging in a GICS review to reflect their diversified business. Discussions are scheduled for next week, following the completion of a trailing 12 audit. The company is also considering a name change.
Q: How has the weather in Australia impacted Q1 operations, and what is the outlook for the rest of the year?
A: Joseph Lambert explained that Q1 is typically the most weather-impacted quarter in Australia due to rains. Cyclone Alfred had a significant impact, but the rest of the year is generally unimpacted by weather. Growth assets are expected to ramp up in the second half of the year.
Q: What types of infrastructure projects is North American Construction Group targeting in the US, and how does this align with their capital intensity strategy?
A: Joseph Lambert stated that they are targeting capital-light infrastructure projects, similar to the Fargo project, which are modest on capital and offer positive cash flow. They see high demand for climate resiliency projects and aim to expand in the US and Australia.
Q: How is the competition for bids in Australia, and has there been any change in sentiment due to global market noise?
A: Joseph Lambert noted strong demand and disciplined competition in Australia. They are confident in winning work due to their safe, low-cost structure and strong client relationships. They continue to see early renewal and expansion opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
