Major Drilling’s Record Revenue Amid Operational Challenges

Major Drilling ((TSE:MDI)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for Major Drilling presented a mixed sentiment, with the company showcasing impressive revenue growth and strategic positioning for future demand. However, these positives were tempered by challenges such as margin decline, operational issues in Indonesia, and increased costs. While the company expressed optimism about future opportunities, current financial pressures and operational challenges were notable concerns.

Record-Setting Quarterly Revenue

Major Drilling reported a record-setting quarterly revenue of $244 million, marking a 29% increase and the highest in the company’s 45-year history. This significant achievement underscores the company’s robust growth trajectory and its ability to capitalize on market opportunities.

Strong Performance in North and South America

The company’s operations in North and South America, particularly in Canada and Peru, demonstrated strong performance. Canadian operations experienced a remarkable 63% year-over-year revenue increase, driven by the acquisition of Explomin, which significantly boosted the Peruvian market.

Increased Cash Position and Liquidity

Major Drilling successfully increased its cash position by $17.6 million, concluding the quarter with $14.3 million in net cash. The total available liquidity expanded to over $149 million, providing the company with a solid financial foundation to support future growth initiatives.

Positive Outlook for Calendar 2026

The company maintains a positive outlook for calendar 2026, anticipating increased demand for drilling services due to rising gold and copper prices and a growing focus on critical minerals. This optimistic forecast positions Major Drilling to leverage its strong balance sheet for rapid deployment in the coming years.

Margin Decline

Despite the revenue growth, Major Drilling faced a decline in adjusted gross margin percentage, which fell to 26% from 30.5% in the previous year. This decrease was attributed to competitive pricing and increased spending on training and maintenance programs.

Operational Challenges in Indonesia

The company encountered operational challenges in Indonesia, where mine site activity was suspended due to incidents, impacting the performance in the Australasian and African regions. This situation highlights the operational risks the company faces in certain markets.

Increased G&A Costs

General and administrative expenses rose by $3.6 million to $21.7 million, partly due to the integration of Explomin’s operations. This increase reflects the additional costs associated with expanding the company’s operational footprint.

Lower Net Earnings

Net earnings for the quarter decreased to $13.9 million or $0.17 per share, compared to $18.2 million or $0.22 per share in the prior year. This decline in profitability highlights the financial pressures the company is currently navigating.

Forward-Looking Guidance

Looking ahead, Major Drilling remains optimistic about the future, with expectations of increased demand for drilling services driven by higher gold and copper prices. The company is preparing for a busier year by making significant investments in its fleet and inventory, while also addressing potential labor cost pressures. Despite challenges in certain regions, the company is well-positioned with a fleet of 707 drills at 51% utilization, ready to meet future demand.

In summary, Major Drilling’s earnings call reflected a balanced view of strong revenue growth and strategic positioning against the backdrop of operational challenges and financial pressures. The company’s record-setting revenue and positive outlook for 2026 are encouraging, yet the decline in margins and operational hurdles in Indonesia warrant careful attention. Investors will be keen to see how Major Drilling navigates these challenges while capitalizing on future opportunities.