|
Article Excerpt
OPERATOR: Ladies and gentlemen, thank you for standing by, and welcome to the 2008 Third Quarter Financial Results Analyst Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded Wednesday, October 29th, 2008.
I would now like to turn the conference over to Mitch Patton. Please go ahead, sir.
MITCH PATTON, SVP OF CORPORATE AFFAIRS, AECON GROUP INC.: Good morning and thank you for participating in our analyst conference call this morning regarding Aecon's 2008 third quarter results. My name is Mitch Patton. I'm the Senior Vice President, Corporate Affairs for Aecon Group. Joining us this morning are John Beck, Aecon's Chairman and CEO, and Scott Balfour, our President and CFO.
Before turning the call over to Scott and John, I want to remind our listeners that some of the information we're sharing with you today includes forward-looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. And while Aecon believes that the expectations reflected in these statements are reasonable, we can obviously give no assurance that these expectations will prove to be correct.
I'll now turn the call over to Scott Balfour. Scott?
SCOTT BALFOUR, PRESIDENT AND CFO, AECON GROUP INC.: Thank you Mitch. Good morning everyone and thank you for joining us. I'll begin this morning with a brief overview of Aecon's consolidated results and then touch on some of the key segmented results before turning you over to John, who will discuss our outlook going forward.
Overall, the third quarter of 2008 continued Aecon's record of strong results. The quarter was characterized by increased revenues, continued profit growth and a very healthy backlog, all of which combined to make this the strongest quarter ever reported by Aecon.
Revenues in the quarter reached a record $535 million, an increase of 24% over the same quarter last year. And this revenue increase was complemented by an increase in margin percentage as well. Gross margin increased to 12.8% of revenues for the third quarter of 2008, up from 9.9% in the same quarter last year.
The combination of revenue growth and margin growth resulted in pretax earnings more than doubling from the same quarter last year. Pretax earnings reached $35.7 million in the quarter, up from $17.4 million in the third quarter of 2007. In addition, Aecon's net income in the quarter of $23.1 million or $0.45 per diluted share, up from $19 million a year ago makes this our most profitable quarter ever.
Finally, Aecon's backlog at September 30th reached $1.5 billion, an increase of $227 million since this time last year, also a new record for Aecon.
In the Infrastructure segment, third quarter revenues of $238 million were $12 million higher than in 2007, with revenues from road building, utilities and heavy civil operations, each increasing quarter over quarter. Operating profit of $16.8 million in the Infrastructure segment represents a $4.9 million increase over the same quarter last year. The largest increase occurred in heavy civil operations, which benefited from recognition of profits on the Quito Airport construction project. Quarter-over-quarter operating profits also increased in utilities operations, while lower operating profits, were reported by the segment's road building operations. Infrastructure segment backlog at September 30th was $581 million or $146 million increase from the same time last year, primarily as a result of higher backlog in road building operations. New contract awards in this segment totaled $218 million, a 76% increase from the third quarter of 2007.
In the Buildings segment, third quarter revenue was $109 million, $4 million lower than the same period in 2007. The decrease was largely due to a temporary decline in revenues from Ottawa operations where two new projects awarded in the quarter are in the process of ramping up to full production. Most of the decline in Ottawa was made up by an increase in revenues from the greater Toronto area, where production continued on a number of large projects. Segment operating loss of $0.9 million in the quarter compares with a profit of $2.4 million in the same quarter last year. Most the quarter-over-quarter decline occurred in Montreal where profits decreased by $3.3 million due to write downs on some projects and severance costs associated with the restructure of this operation. Backlog in the Buildings segment reached a record $618 million at the end of the third quarter, 39% higher than at the same time last year. New contact awards totaled $231 million in the quarter, up from $209 million in the same quarter last year.
In the Industrial segment, third quarter revenues of $172 million were double the $86 million reported in the same quarter last year. While all operating units recorded higher revenues, the segment's construction operations in Ontario had the largest quarter-over-quarter improvement due primarily to increases in the power, nuclear and gas sectors. Operating profit in the Industrial segment for the quarter was $21.2 million, a 175% increase from the $7.7 million reported in the third quarter of 2007. Most of the improvement occurred in Western Canada operations, up $7 million and Ontario construction operations, up $6.4 million. Segment backlog of $301 million was $89 million lower than at the same time last year, with decreases in Ontario construction and Western Canada operations offsetting increases in the IST and Fabrication backlog. New contact awards totaled $89 million in the quarter, down from $147 million in the same quarter last year.
Concession segment revenues in the third quarter were $16 million, a $1 million increase compared to the same period in 2007. The segment's operating profit of $3.3 million in the quarter was an increase of $2.2 million over the same quarter last year with increases from both the Quito Airport Concessionaire and Aecon's interest in the operator of the Cross Israel highway contributing to these results.
Overall, Aecon's results for the third quarter of 2008 represents a continuation of the positive results Aecon has delivered consistently over the past three years.
On that note, I'll turn you over to John Beck who will provide some insight into Aecon's outlook going forward. John?
JOHN BECK, CHAIRMAN AND CEO, AECON GROUP INC.: Thank you Scott. As we enter the final quarter of 2008, the turmoil in world equity and debt markets provides a cautionary context for an otherwise strong outlook. Notwithstanding the very real concerns in the marketplace that recessionary pressures may reduce demand and negatively impact margins, as of today I can report that most of the trends that shape Aecon's strong outlook earlier this year remain in place. Backlog is 18% higher than the record third quarter backlog reported a year ago, providing a strong and contractually secure revenue base upon which to build.
The record level of government spending on transportation infrastructure is expected to continue. With Premier McGuinty as recently as last week, renewing his call for continued investment in infrastructure, even in the face of potential deficits.
Similarly, investment in...
|
