FORACO INTERNATIONAL S.A. - Q1 2026 RESULTS

• Q1 2026 Financial Performance: Revenue reached US$66.3 million, a 20.4% increase year-over-year, driven by mining segment growth of 30%. EBITDA was US$7.4 million with an 11.1% margin, down from 12.8% in Q1 2025. Net profit collapsed to US$0.1 million compared to US$1.0 million previously.
• Operational Expansion: Five new rigs deployed under long-term contracts; workforce increased by 16%. Rig utilization rate improved to 40% from 30% YoY.
• Backlog Visibility: Record order backlog of US$404 million as of December 31, 2025, with US$228.5 million slated for execution in FY 2026 (+14% YoY).
• Capital Expenditures & Debt: Capex totaled US$9.9 million in Q1 to support new rig deployment. Net debt increased to US$90.9 million as of March 31, 2026 (up from US$71.1 million at Dec 31, 2025).
• Financing: Secured a US$4.7 million loan for Capex and a US$4.0 million credit line in the United States for working capital.
• Management Commentary: CEO Tim Bremner attributed margin compression to the ramp-up phase of new contracts, noting approximately US$15 million of revenue is not yet at full operating efficiency.

• Revenue Growth vs. Profitability: The 20% revenue growth validates the backlog conversion strategy and confirms demand in North America (+39%) and South America (+98%). However, the net profit collapse to US$0.1 million is a significant deterioration in earnings quality that requires close monitoring despite management's explanation of ramp-up costs.
• Debt Leverage Risk: Net debt increased by approximately US$20 million in a single quarter (from $71.1M to $90.9M). For a company generating only US$0.1 million net profit this quarter, the interest burden on this additional leverage poses a tangible risk if cash flow does not improve rapidly in Q2 and Q3 2026.
• Margin Compression: Gross margin compressed from 14.1% to 10.7%. While management attributes this to temporary ramp-up costs (US$15M revenue at partial efficiency), the trend indicates operational inefficiencies during expansion that could persist longer than expected if utilization rates do not accelerate further.
• Guidance Alignment: The profit miss and debt increase align with prior transcript guidance regarding "ramp-up costs" and Capex investment for long-term contracts. This reduces surprise risk but confirms the execution phase is capital intensive.
• Strategic Positioning: Securing Tier-One gold producer contracts in Nevada (US$60M) and extending Canada/Chile contracts (US$150M) strengthens the revenue base, reducing reliance on volatile spot markets.

• Core Business: Foraco International provides drilling services primarily to the mining sector (gold, copper) and water sectors globally.
• Flagship Projects: The company is currently executing a fleet expansion strategy focused on Tier-One gold producers in Nevada (US$60M contracts) and extending long-term agreements in Canada and Chile (US$150M contracts).
• Geographic Focus: North America, South America, EMEA, and Asia Pacific. Recent growth is heavily weighted towards North America (+39%) and South America (+98%).
• Service Mix: Includes surface coring, deep directional drilling, reverse-circulation services, and water well drilling.