North American Construction ((TSE:NOA)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for North American Construction Group painted a picture of robust growth and operational success, particularly in the Australian market. The company reported record-breaking revenue and backlog figures, alongside a positive free cash flow. However, challenges such as the downturn in the Canadian oil sands, adverse weather conditions in Australia, and slower progress in non-oil sands mining in Canada were noted as areas of concern.
Record Annual Revenue in 2024
North American Construction Group achieved record annual revenue in 2024, primarily driven by substantial growth in Australia. The MacKellar Group, a significant part of their Australian operations, recorded its highest revenue quarter ever in Q4, underscoring the strength of their performance in this region.
Significant Backlog Growth
The company concluded the year with a record backlog of $3.5 billion, thanks to major contract wins. Notably, a four-year $500 million regional contract extension in the Canadian oil sands and other significant projects contributed to this impressive backlog.
Strong EBITDA and Margin Performance
In Q4, the company reported an EBITDA of $104 million with a 27.8% margin, reflecting strong operational performance in both Australia and Canada. This robust financial metric highlights the company’s efficiency and profitability.
Australian Business Exceeds Expectations
The acquisition of MacKellar in Australia has been a key driver of growth in 2024. With high utilization rates and positive returns on capital, the Australian operations have positioned the company well for future growth.
Improvement in Canadian Fleet Utilization
The Canadian fleet utilization improved to 54% in Q4, with expectations to reach a target range of 75% by the end of 2025. This improvement is a positive indicator of the company’s operational efficiency in Canada.
Strong Free Cash Flow and Debt Reduction
The company reported a free cash flow of $50 million, which contributed to a reduction in net debt, ending the quarter at $856 million. This financial health metric is crucial for the company’s long-term sustainability.
Challenges in Canadian Oil Sands
The oil sands business in Canada experienced a 30% drop from previous levels, attributed to uncertain factors such as deferred work or in-sourcing. This decline poses a challenge that the company needs to address.
Weather Impact in Australia
Operations in Australia were affected by rain in February and cyclone Alfred during Q1, impacting short-term performance. Such weather-related disruptions are a concern for the company’s Australian operations.
Uncertain Non-Oil Sands Mining Awards in Canada
Despite expectations, the company has seen slower-than-anticipated success in non-oil sands mining awards in Canada. This uncertainty could impact future growth prospects in this sector.
Higher General and Administrative Expenses
Q4 saw general and administrative expenses slightly above the target at 4.5% of revenue, impacted by lower revenue in the oil sands. Managing these expenses will be crucial for maintaining profitability.
Forward-Looking Guidance
Looking ahead, North American Construction Group has set ambitious targets for 2025. The company expects combined revenue between $1.4 billion to $1.6 billion, with adjusted EBITDA projected between $415 million to $445 million. Additionally, they aim for a net debt leverage target of 1.7 and plan to expand infrastructure projects to 25% of their business, focusing on U.S. and Australian markets.
In summary, North American Construction Group’s earnings call highlighted a strong operational and financial performance, particularly in Australia, despite facing challenges in the Canadian oil sands and weather impacts. The company’s forward-looking guidance suggests a positive outlook, with significant growth expected in revenue and EBITDA. Investors and stakeholders will be keen to see how the company navigates its challenges and capitalizes on its growth opportunities.