TORONTO, Nov. 2 /CNW/ -- - - Revenues up, net income and EPS down
versus a year ago - - Third Quarter Highlights -- Revenues up 13%
from the same period last year -- Operating Profit up 3% (including
gain on purchase of Cow Harbour) -- EPS of $0.27 per diluted share
is down from $0.35 a year ago -- Backlog up 31% from year ago (and
a record high for Q3) -- Outlook remains positive TORONTO, Nov. 2
/CNW/ - Aecon Group Inc. (TSX: ARE) today reported its financial
results for the third quarter of 2010. Revenue, Operating Results
and Net Income Three Months Ended Nine Months Ended September 30
September 30 $ millions, except per share 2010 2009 2010 2009
amounts Revenues $ 800 $ 707 $ 1,908 $ 1,661 Gross profit 58.3 76.2
140.8 172.2 EBITDA 43.1 46.3 72.1 84.7 Depreciation and
amortization (10.5) (14.5) (28.0) (37.5) Operating profit 32.6 31.8
44.1 47.1 Interest expense, net (7.1) (2.1) (17.0) (2.1) Earnings
before taxes 25.5 29.7 27.0 45.0 Income tax expense (6.9) (9.6)
(5.4) (13.9) Net income 17.2 19.6 18.4 28.9 Earnings per share -
diluted $ 0.27 $ 0.35 $ 0.33 $ 0.53 Backlog - September 30 $ 2,525
$ 1,924 Third quarter revenues reached $800 million, an increase of
$93 million over the same period last year. The increase
reflects growth in the Infrastructure, Industrial and Buildings
segments, only partially offset by a decrease in the Concessions
segment. EBITDA (representing income from
operations before net interest expense, income taxes, depreciation
and amortization, and non-controlling interests) of $43.1 million
in the quarter represents a decrease of $3.2 million from the third
quarter of 2009, as decreases in the Industrial and Buildings
segments offset increases in Infrastructure and Concessions.
Depreciation and amortization expense of $10.5 million in the
quarter was $4.0 million lower than in the same quarter last
year, due to lower depreciation and amortization charges this year
on property, plant and equipment and intangible assets relating to
South Rock and from lower amortization expense on concession rights
relating to the Quito airport project. Operating profit
(representing income from operations before net interest expense,
income taxes and non-controlling interests) increased by $0.8
million to $32.6 million, as increased operating profits in the
Infrastructure and Concessions segments offset decreases in the
Industrial and Buildings segments. Infrastructure's operating
profits include a $14.0 million gain arising from the difference
between fair market value and the price at which the assets of Cow
Harbour Inc. were purchased. Increased interest expense related to
the convertible debentures issued late in the third quarter of
2009, along with an increase in non-recourse project debt, brought
net interest to $7.1 million and earnings before taxes
(representing income from operations before income taxes and
non-controlling interests) to $25.5 million in the quarter.
This represents a decrease in pre-tax earnings of $4.2 million
compared to the same quarter last year. Net income of $17.2 million
($0.27 per diluted share) in the quarter compares to $19.6 million
($0.35 per diluted share) in the same period last year. Outlook
"Aecon's record backlog, the ongoing strength, depth and durability
of the public infrastructure markets, and the increasing return to
strength of the oilsands market, combine to signal a strong outlook
for Aecon," said John M. Beck, Aecon's Chairman and CEO. "The
impact of this improving market outlook should gain momentum
throughout 2011 and into 2012 as lagging markets also begin to
improve." "Aecon's diverse and vertically integrated operations
allow us to mitigate the impact of downturns in any one sector or
region," said Aecon President Scott Balfour. "In addition, Aecon's
sound financial fundamentals and substantial surety capacity, each
of which is among the strongest in the industry, position us well
to exploit the many profitable growth opportunities that exist in
today's market." Backlog and New Business Awards Backlog at
September 30, 2010 reached a third quarter record $2.5 billion, a
31% increase from the same time last year. The largest
increase occurred in the Infrastructure segment, where backlog
remained over $1 billion for the second consecutive quarter.
Notably, the number of large multi-year contracts secured this year
has more than quadrupled the value of Aecon's long duration backlog
(that with a duration of more than 24 months) compared to a year
ago. While new business awards of $579 million in the quarter
were down from the $971 million recorded in the same quarter last
year, year-to-date awards reached a record $2.2 billion, compared
to $1.8 billion in the first nine months of 2009. Not
included in backlog but important to Aecon's prospects due to the
significant volumes involved, are the expected revenues from
Aecon's growing alliances and supplier-of-choice arrangements where
the amount of work to be carried out is not specified. A
substantial portion of Aecon's bidding pipeline and backlog
includes large projects such as major highway extensions,
hydroelectric plants, hospitals and public transit projects. As
such, Aecon's new business and backlog profile can be somewhat
'lumpy', with large increases in some quarters when one or more of
these large projects are awarded and little change or small
declines in quarters where no large projects are awarded. Third
Quarter Business Highlights -- On July 15, 2010, Aecon announced
that it had signed an agreement to sell its 25% interest in the
Cross Israel Highway concessionaire, Derech Eretz Highways (1997)
Ltd., subject to third party approvals and certain adjustments on
closing, for $77.8 million. The sale price represents approximately
two times the book value of Aecon's investment, and is expected to
generate an after tax gain of approximately $30 million upon
completion of the sale. -- On August 26, 2010, Aecon announced that
it had completed the asset purchase of Fort McMurray based Cow
Harbour Construction Ltd. (now operating as Aecon Mining). Under
the asset purchase agreement, Aecon acquired substantially all of
Cow Harbour's capital assets in Alberta, including its fleet of
over 500 pieces of mining equipment, as well as all of Cow
Harbour's real property, inventory, contracts, leases, licenses,
intellectual property and other assets. Aecon paid $60 million on
closing and will pay a further $120 million within 90 days of the
closing date. -- Average week day traffic on the Cross Israel
Highway in September 2010 surpassed 132,000 vehicles, a 9% increase
over September 2009. -- Nearly 1.8 million passengers departed
through the existing Quito airport in the first nine months of
2010, an 8% increase over the same period in 2009. Subsequent
Events On October 8, 2010, Aecon announced that it had completed
the issuance of convertible unsecured subordinated debentures on a
bought deal basis to a syndicate of underwriters. The total gross
proceeds of the offering were $92 million, including the exercise
of an over-allotment option granted to underwriters. Aecon
will use the net proceeds of the offering to help fund the
remaining purchase price payable in connection with the acquisition
of assets from Cow Harbour Construction Ltd. Segmented Results
Aecon reports its results in four segments: Infrastructure,
Buildings, Industrial and Concessions. -- Infrastructure The
Infrastructure segment includes all aspects of civil construction
from highways, bridges and tunnels to airports, marine facilities,
transit and power projects as well as mining and utilities
construction. Financial Highlights (1)(2) Three Months Nine Months
(3) Ended September 30 Ended September 30 ($ millions) 2010 2009
2010 2009 Revenues $ 386 $ 341 $ 708 $ 686 EBITDA 47.0 32.0 48.0
29.1 Segment operating profit 42.5 24.9 36.8 14.2 (loss) Segment
operating margin 11.0% 7.3% 5.2% 2.1% Backlog - September 30 $
1,080 $ 576 (1) Segment operating profit (loss) represents the
profit (loss) from operations, before net interest expense, income
taxes and non controlling interests. (2) Segment operating margin
is calculated as segment operating profit (loss) as a percentage of
revenues. (3) Included in backlog at September 30, 2010 is $32
million (2009 - 52 million) related to the Quito airport project.
Although Aecon's 50% share of the remaining construction revenues
from this project is estimated at $55 million (2009 - $89 million),
the amount reported as backlog has been reduced by $23 million
(2009 - $38 million) or 42.3%. This reduction is to reflect the
fact that since Aecon has a 42.3% interest in the concession joint
venture for which the Quito airport is being constructed, it cannot
report revenue, and therefore does not report backlog, that
effectively arises from transacting with itself. In the
Infrastructure segment, third quarter revenues of $386 million were
13% higher than last year, due primarily to increases in civil
operations in Ontario and Quebec offsetting a decline in
international operations. Segment operating profit of $42.5
million in the quarter represents a $17.6 million increase over the
third quarter of 2009, as increases in civil and materials
operations, and from a $14 million gain related to the Cow Harbour
acquisition, offset decreases in international and utilities
operations. Backlog at September 30, 2010 was $1.1 billion,
representing a $504 million increase over the same time last
year. The increase results primarily from awards for Aecon's
share of the construction of the Lower Mattagami Hydroelectric
Complex in Ontario and the expansion of Quebec's Autoroute 30, both
of which were awarded in the second quarter of this year. New
contract awards totalled $242 million in the third quarter of 2010,
compared to $328 million a year earlier. -- Buildings The Buildings
segment includes all aspects of Aecon's commercial, institutional
and multi-unit residential building construction and renovation
activities. Financial Highlights Three Months Nine Months ($
millions) Ended September 30 Ended September 30 2010 2009 2010 2009
Revenues $ 123 $ 121 $ 403 $ 344 EBITDA (2.4) 1.1 (11.5) 1.4
Segment operating profit (2.6) 0.9 (12.0) 0.9 (loss) Segment
operating margin (2.1)% 0.8% (3.0)% 0.3% Backlog - September 30 $
574 $ 630 Third quarter revenues from the Buildings segment
increased $2 million to $123 million, due primarily to an increase
in Quebec operations, partly offset by a decline in Ontario
operations. The Buildings segment incurred an operating loss of
$2.6 million in the third quarter of 2010 compared to a profit of
$0.9 million in 2009, with most of the decline occurring in Ontario
as a result of margin reductions on certain projects.
Backlog of $574 million at the end of the third quarter was $56
million lower than at the same time last year, with most of the
decrease occurring in the segment's Ontario operations. New
contract awards totalling $47 million were recorded in the third
quarter, which compares with awards of $231 million in the
same period of 2009. -- Industrial Industrial operations
include all of Aecon's industrial manufacturing and construction
activities from in-plant construction to the fabrication of
specialty pipe and the design and manufacture of Once-Through Steam
Generators, as well as Aecon's commercial mechanical
operations. The segment includes all of the Lockerbie &
Hole operations acquired last year. Financial Highlights Three
Months Nine Months ($ millions) Ended September 30 Ended September
30 2010 2009 2010 2009 Revenues $ 266 $ 216 $ 734 $ 557 EBITDA
(2.9) 15.4 33.3 52.0 Segment operating profit (6.1) 13.1 24.2 43.2
(loss) Segment operating margin (2.3)% 6.1% 3.3% 7.8% Backlog -
September 30 $ 871 $ 718 In the Industrial segment, third quarter
revenues of $266 million were $51 million higher than in 2009, as
increases in both the heavy industrial and mechanical construction
operations in Western Canada offset declines in Ontario and Eastern
Canada. A third quarter operating loss of $6.1 million in the
Industrial segment compared to a profit of $13.1 million in the
same quarter last year. The largest decline in operating
profits occurred in the heavy industrial units where weaker market
conditions for industrial services in recent quarters resulted in
generally lower gross profit margins, and where adjustments to
margin expectations offset higher volumes. In addition, lower
volumes in some of the segment's units contributed significantly to
the lower operating profits in the current period. Segment
backlog of $871 million compares with $718 million at the same time
last year, with the increase due largely to higher backlog in
Western Canada and Ontario. New contract awards of $265
million in the quarter compares with $382 million in the same
period last year. -- Concessions The Concessions segment includes
the development, operation and financing of infrastructure projects
by way of public-private partnership, build-own-operate-transfer or
other alternative financing contract structures. This segment
focuses primarily on the operations, management, maintenance and
enhancement of investments in transportation infrastructure
concessions, including the Cross Israel Toll Highway and Quito
International Airport concession companies. Financial Highlights
Three Months Nine Months ($ millions) Ended September 30 Ended
September 30 2010 2009 2010 2009 Revenues $ 25 $ 31 $ 67 $ 79
EBITDA 7.8 4.0 21.0 19.6 Segment operating profit 5.9 (0.2) 16.1
7.5 (loss) Segment operating margin 24.1% (0.7)% 24.3% 9.5%
Concessions segment revenues of $25 million in the third quarter
were $7 million lower than last year, due primarily to a
decrease from the operator of the Cross Israel Highway, a company
in which Aecon holds a 30.6% interest. Segment operating
profit of $5.9 million in the third quarter represents an increase
of $6.1 million from the same period in 2009, primarily from higher
operating profits from the Quito airport concessionaire, which
includes the results from operating the existing Quito airport
while the new airport is being constructed. The profit
improvement in the Quito airport concessionaire is mostly due to
the fact that no profits were recognized by the concessionaire in
the third quarter of 2009 due to the uncertainty at that time as to
the financial impact on the project of a legal ruling issued by the
Constitutional Court of Ecuador. Progress continues to be made
toward resolving issues surrounding Aecon's concession interest in
the Quito project. Execution of a new commercial arrangement and
legal structure acceptable to all parties, including the Ecuadorian
State and the project's senior lenders, remains subject to various
conditions and approvals by the senior lenders and Ecuadorian
authorities, including the State Comptroller General.
Assuming prompt and favourable approvals by these institutions and
delivery of the remaining closing conditions, the effective date of
the new agreement should occur in the fourth quarter of 2010. Aecon
does not include in its reported backlog potential revenues from
operations management contracts and concession agreements. As
such, while Aecon expects future revenues from its concession
assets, no concession backlog is reported at September 30.
Consolidated Results The Consolidated Results for the three months
and nine months ended September 30, 2010 and 2009 are available at
the end of this News Release. Balance Sheet Highlights
__________________________________________________________________
|(thousands of dollars) | |September 30, 2010| |Dec. 31, 2009|
|_____________________________|_|__________________|_|_____________|
|Cash and cash equivalents, |$| 236,792|$| 414,447| |restricted
cash, marketable | | | | | |securities and term deposits | | | | |
|_____________________________|_|__________________|_|_____________|
|Other current assets | | 984,494| | 714,164|
|_____________________________|_|__________________|_|_____________|
|Property, plant and equipment| | 406,860| | 200,883|
|_____________________________|_|__________________|_|_____________|
|Other long-term assets | | 374,459| | 359,844|
|_____________________________|_|__________________|_|_____________|
|Total Assets |$| 2,002,605|$| 1,689,338|
|_____________________________|_|__________________|_|_____________|
|Current liabilities |$| 1,192,722|$| 843,826|
|_____________________________|_|__________________|_|_____________|
|Non-recourse project debt | | 22,461| | 70,000|
|_____________________________|_|__________________|_|_____________|
|Other long-term debt | | 57,540| | 63,037|
|_____________________________|_|__________________|_|_____________|
|Convertible debentures | | 160,800| | 158,614|
|_____________________________|_|__________________|_|_____________|
|Other long-term liabilities | | 91,904| | 91,540|
|_____________________________|_|__________________|_|_____________|
|Equity | | 477,178| | 462,321|
|_____________________________|_|__________________|_|_____________|
|Total Liabilities and Equity |$| 2,002,605|$| 1,689,338|
|_____________________________|_|__________________|_|_____________|
Conference Call A conference call has been scheduled for Wednesday,
November 3, 2010 at 10:30 a.m. ET to discuss Aecon's 2010 third
quarter financial results. Participants should dial 416-981-9035 or
1-800-734-8507 at least 10 minutes prior to the conference
time. The reservation number is 21485607. A replay will be
available after 12:30 p.m. at 1-800-558-5253 or 416-626-4100 until
midnight on November 10, 2010. About Aecon Aecon Group Inc. is
Canada's largest publicly traded construction and infrastructure
development company. Aecon and its subsidiaries provide services to
private and public sector clients throughout Canada and on a
selected basis internationally. Aecon is pleased to be recognized
as one of the Best Employers in Canada as published by Maclean's
Magazine. The information in this press release includes certain
forward-looking statements. These "forward-looking" statements are
based on currently available competitive, financial and economic
data and operating plans but are subject to risks and
uncertainties. In addition to general global events outside
Aecon's control, there are factors which could cause actual
results, performance or achievements to vary from those expressed
or inferred herein including risks associated with an investment in
the common shares of Aecon and the risks related to Aecon's
business, including Large Project Risk and Contractual Factors.
Risk factors are discussed in greater detail in the section on
"Risk Factors" in the Final Short Form Prospectus filed on October
1, 2010 and available at www.sedar.com. Forward-looking
statements include information concerning possible or assumed
future results of operations or financial position of Aecon, as
well as statements preceded by, followed by, or that include the
words "believes," "expects," "anticipates," "estimates,"
"projects," "intends," "should" or similar expressions.
Important factors, in addition to those discussed in this document,
could affect the future results of Aecon and could cause those
results to differ materially from those expressed in any
forward-looking statements. Consolidated Statements of Income for
the three months ended September 30, 2010 and 2009 (in thousands of
dollars, except share and per share amounts) (unaudited) 2010 2009
Revenues $ 800,181 $ 707,094 Direct costs and expenses (741,905)
(630,921) 58,276 76,173 Marketing, general and administrative
(30,430) (28,937) expenses Gain from business combination 13,984 -
Foreign exchange gains (losses) 389 (1,007) Income from
construction projects accounted 599 - for using the equity method
Gain on sale of assets 237 41 Depreciation and amortization
(10,493) (14,501) Interest expense (9,422) (4,330) Interest income
2,314 2,238 (32,822) (46,496) Income before income taxes and 25,454
29,677 non-controlling interests Income tax (expense) recovery
Current (5,366) (16,634) Future (1,519) 7,027 (6,885) (9,607) Net
income for the period 18,569 20,070 Net income attributable to
non-controlling (1,345) (432) interests Net income attributable to
the Company $ 17,224 $ 19,638 Earnings per share Basic $ 0.32 $
0.36 Diluted $ 0.27 $ 0.35 Weighted average number of shares
outstanding Basic 54,516,842 55,045,089 Diluted 71,973,671
56,729,786 Consolidated Statements of Income for the nine months
ended September 30, 2010 and 2009 (in thousands of dollars, except
share and per share amounts) (unaudited) 2010 2009 Revenues $
1,907,905 $ 1,661,216 Direct costs and expenses (1,767,142)
(1,488,994) 140,763 172,222 Marketing, general and administrative
(88,476) (84,945) expenses Gain from business combination 13,984 -
Foreign exchange losses (25) (2,725) Loss from construction
projects accounted (1,113) - for using the equity method Gain on
sale of assets 6,991 97 Depreciation and amortization (28,034)
(37,533) Interest expense (25,195) (9,012) Interest income 8,151
6,903 (113,717) (127,215) Income before income taxes and 27,046
45,007 non-controlling interests Income tax (expense) recovery
Current 388 (19,174) Future (5,773) 5,265 (5,385) (13,909) Net
income for the period 21,661 31,098 Net income attributable to
(3,252) (2,157) non-controlling interests Net income attributable
to the Company $ 18,409 $ 28,941 Earnings per share Basic $ 0.34 $
0.54 Diluted $ 0.33 $ 0.53 Weighted average number of shares
outstanding Basic 54,711,468 53,443,813 Diluted 71,294,732
54,898,744 %SEDAR: 00004778EF To view this news release in HTML
formatting, please use the following URL:
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pMitch Pattenbr/ Senior Vice President, Corporate Affairsbr/ Aecon
Group Inc.br/ 416-297-2615br/ a
href="mailto:aecon@aecon.com"aecon@aecon.com/abr/ a
href="http://www.aecon.com" font-style="italic"www.aecon.com/ai/i/p
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