Adf Group Inc

TSX:DRX

Earnings Call Transcript 2021-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to the ADF Group First Quarter Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, June 10, 2020. I would now like to turn the conference over to Jean-François Boursier, Chief Financial Officer. Please go ahead.

[Jean-François Boursier]

Thank you. Good morning, ladies and gentlemen. Welcome to ADF's conference call covering the first quarter ended April 30, 2020. I'm currently at our Terrebonne office, where we will hold our annual shareholders' meeting right after this call by way of webcast in light of the COVID-19 situation.I will first update you on our quarterly results, which were disclosed earlier this morning by press release and then update you on our operations.But first, a word of caution. Please note that some of the issues discussed today may include forward-looking statements. These are documented in ADF Group's management report for the first quarter ended April 30, 2020, which were filed with SEDAR this morning. Please also consider that, although for the moment, the impact of COVID-19 on ADF's operation is limited, the extent to which the virus can have an impact on our results will depend on future developments, which are very uncertain and cannot be predicted at this time, including new information that may emerge regarding the COVID-19 and the measures taken to contain it or address its impact among others.This said, our revenues for the first quarter stood at $45.8 million compared with $37.1 million last year. The increase in revenues is in line with the increase of our backlog. As previously mentioned, ADF fabrication, industrial coatings and steel erecting activities were not impacted by the pandemic, at least during the quarter ended April 30, 2020.Gross margins at 12 -- at 10.6% was lower than the 15.5% reported a year ago. Last year, first quarter gross margin benefited from the finalization of contractual changes, which improved margins. The margins for the quarter ended April 30, 2020, are in line with the ones from the quarter ended last January 31, and even somewhat even better, and represent the pricing of recently signed work presently in our plants.At the close of the 3 months ended April 30, 2020, EBITDA stood at $3 million, which is the same level as for the corresponding quarter a year ago. The decrease in gross margins in dollars was offset by the lower selling and administrative expenses, this decrease coming from the lower legal fees associated to last year third quarter out-of-court settlement.Year-to-date, net earnings stood at $68,000 compared with net earnings of $1.6 million a year ago.Besides the elements mentioned before, the net earnings for the quarter ended last April was negatively impacted by $1.8 million nonmonetary foreign exchange loss. This loss comes from the quarter end fair market valuation as required by IFRS guidelines of our outstanding FX contracts on end as at April 30, 2020.Our balance sheet remains somewhat under pressure. Working capital as at April 30, 2020, at $28.5 million was just under its January 31, 2020 level. This said, cash flow from operation is starting to reap the benefit of the increased backlog and associated fabrication volumes. And as such, generated $12 million during the 3 months ended April 30, 2020.In light of the uncertainty surrounding the COVID-19, we are taking a cautious approach with our liquidities. And accordingly, are tailoring our CapEx program to the situation with only $0.2 million spent during the quarter ended last April 30. These operating inflows enabled us to reduce the drawn credit facility by $4.2 million and finished the quarter -- and we finished the quarter with $7 million in cash and cash equivalents.As mentioned in our April 30, 2020 MD&A, ADF, like many others, is currently navigating into unchartered waters. As mentioned before, and although the impact of the COVID-19 pandemic as of this date had a limited impact on ADF's operation, we remain abreast of economic developments and trends. We continue to grow our -- we continued to grow our order backlog, which ended the first quarter at $343.3 million and also significantly improved our cash position. Risk management has always been of paramount importance for ADF. In these uncertain times, our approach offers us comfort and allows us to face these challenges with determination.Ladies and gentlemen, thank you for your interest and confidence in ADF. I will now answer your questions.

[Operator]

[Operator Instructions] It seems like there are no questions at this time. So Mr. Boursier, please proceed.

[Jean-François Boursier]

Again, I wish to thank you for your interest in ADF Group. Thank you.