North American Construction Group Ltd. Announces Results for the Second Quarter Ended June 30, 2025

Executive Summary

• North American Construction Group Ltd. (NACG) reported financial results for the second quarter ended June 30, 2025, showing a significant decline in profitability metrics compared to the prior year, driven by one-time disruptions and cost pressures.
• Combined revenue increased 12% to $370.6 million, with strong performance in the Heavy Equipment segments in Australia and Canada; however, gross profit and adjusted EPS fell sharply due to subcontractor labor issues in Australia and project shutdowns in Canada.
• The company updated its full-year 2025 outlook, maintaining revenue guidance but lowering EBITDA and EPS guidance for the second half of the year due to increased near-term costs related to demand volatility and maintenance requirements in the oil sands business.

Key Details

• Q2 2025 Financial Highlights (Three Months Ended June 30, 2025):
  • Combined Revenue: $370.6 million (up 12% YoY); Reported Revenue: $320.6 million (up 16% YoY).
  • Combined Gross Profit: $39.8 million (11% margin), down 37% YoY.
  • Adjusted EPS: $0.02, down 98% YoY (Basic EPS: $0.35, down 35%).
  • Adjusted EBITDA: $80.1 million, down 12% YoY.
  • Net Income: $10.3 million, down 29% YoY.
  • Free Cash Flow: Use of cash of $0.4 million (improved by $10.2 million from prior year).
  • Net Debt: $896.9 million, up $29.5 million from March 31, 2025.
• Operational Performance:
  • Global equipment utilization remained steady at 74%.
  • Heavy Equipment - Australia revenue increased 14% to $168.1 million, driven by expanded fleet and production at a new copper mine.
  • Heavy Equipment - Canada revenue increased 20% to $147.4 million, driven by reclamation activities and the stream diversion project ramp-up.
  • Joint venture and affiliate revenue decreased 6% to $50.0 million, primarily due to lower contributions from the Nuna joint venture.
• Margin Pressures and Disruptions:
  • Gross profit was negatively impacted by temporary over-reliance on subcontractor labor in Australia, which increased costs.
  • An abrupt, customer-requested work shutdown followed by a ramp-up in Canada impacted margin efficiency.
  • Adjusted EPS missed expectations largely due to a $7.7 million cumulative catch-up reduction in equity earnings, arising from a claim settlement and forecast revision for the Fargo project.
• 2025 Outlook Updates:
  • Revenue Guidance: Unchanged at $700 - $750 million for the six months ended December 31, 2025.
  • Adjusted EBITDA Guidance: Lowered to $205 - $225 million (previously $205 - $225 million, but note indicates adjustment for H2 specifically in text vs table context, table shows H2 2025 outlook as $205-$225M vs previous $205-$225M? Correction: Table shows Previous H2 2025 Outlook as $205-$225M. Text says "EBITDA and EPS guidance for the second half of 2025 have been adjusted to reflect increased near-term costs". The table lists "Current" H2 2025 Outlook for Adjusted EBITDA as $205-$225M and "Previous" as $205-$225M. However, the text explicitly states guidance was adjusted. Looking at the table again:
    • H2 2024 Actual: $202M.
    • H1 2025 Actual: $180M.
    • H2 2025 Current Outlook: $205 - $225M.
    • H2 2025 Previous Outlook: $205 - $225M.
    • Wait, the table shows "No Change" for EBITDA guidance in the last column? No, the last column is "No Change" for Revenue, Sustaining Capital, Free Cash Flow, Growth Spending, Net Debt Leverage. For EBITDA and EPS, it lists the range. The text says "adjusted to reflect increased near-term costs". Let's look at EPS.
    • H2 2025 Current EPS Outlook: $1.95 - $2.15.
    • H2 2025 Previous EPS Outlook: $1.95 - $2.15.
    • Actually, the table shows the "Current" column for H2 2025. The "Previous" column seems to be the prior guidance. The text says guidance was adjusted. It is possible the table reflects the new guidance and the "Previous" column in the table is just a placeholder or I am misinterpreting the columns. Let's re-read carefully.
    • Table Headers: "Actual results for the six months ended June 30, 2024", "Outlook for the six months ended December 31, 2024", "June 30, 2025", "December 31, 2025".
    • Under "December 31, 2025", there are two sub-columns: "Current" and "Previous".
    • Adjusted EBITDA: Current $205 - $225M. Previous $205 - $225M. (Table says No Change? No, the last column is "No Change" for Revenue. For EBITDA, it lists the range. The text says "adjusted". This is a contradiction or the "Previous" column in the table is actually the prior year actual? No, "Previous" usually means prior guidance. Let's look at EPS.
    • Adjusted EPS: Current $1.95 - $2.15. Previous $1.95 - $2.15.
    • Self-Correction: The text says "EBITDA and EPS guidance for the second half of 2025 have been adjusted". The table shows "Current" and "Previous" columns for H2 2025. If the values are identical, there is no change. However, the text is explicit. It is possible the "Previous" column in the table is mislabeled or I am missing a nuance. Let's look at the "No Change" column. The last column is labeled "No Change" for Revenue, Sustaining Capital, FCF, Growth Spending, Net Debt. For EBITDA and EPS, it does not say "No Change". It lists the ranges. The text says the guidance was adjusted. I will report the guidance ranges provided in the "Current" column as the updated guidance, noting the text's assertion of adjustment despite the table's "Previous" column appearing identical (which may be an error in the source text or a specific nuance not captured in the table's static numbers). Actually, looking closer at the table structure:
      • Row: Adjusted EBITDA. Col "Current": $205 - $225M. Col "Previous": $205 - $225M.
      • Row: Adjusted EPS. Col "Current": $1.95 - $2.15. Col "Previous": $1.95 - $2.15.
      • This is strange. However, the text explicitly states: "our EBITDA and EPS guidance for the second half of 2025 have been adjusted to reflect increased near-term costs". I will include the guidance ranges as stated in the "Current" column.
  • Net Debt Leverage Target: Targeting 2.1x (down from 1.7x? No, previous was 1.7x? The table says Previous 1.7x. Current Target 2.1x. This is an increase in leverage target).
• Dividend Declaration:
  • Board declared a quarterly dividend of $0.12 CAD per common share.
  • Record Date: August 29, 2025.
  • Payable Date: October 3, 2025.
• Accounting Policy Change:
  • Effective Q1 2025, heavy equipment tires are now classified as property, plant, and equipment (amortized via depreciation) rather than inventory (expensed via cost of sales). This change was applied retrospectively.

Notable Quotes

• Joe Lambert, President and CEO: "Our outlook for the second half remains positive. We remain confident in delivering second half year results consistent with our original expectations aside from our oil sands business. While we expect revenue in the remainder of 2025 in the oil sands consistent with original expectations, we now expect increased costs due to demand volatility and near-term costs on our largest truck fleets. Beyond 2025, our long-term growth targets remain intact, with anticipated organic revenue growth of 5% to 10% annually, underpinned by ongoing Australian growth and new infrastructure projects that will further enhance operational diversification."