Wednesday, May 9, 2012

Foraco ( Toronto - FAR ) -- Growth Intact

Foraco (FAR.to $4.85) reported excellent on target Q1 results.  Earnings climbed 50% to $.12 a share.  Sales improved 35% to $88.2 million.  Utilization rates improved by one percent to 71%.  Pricing improved, as well.  Backlog expanded in the quarter, setting the stage for additional gains in future periods.  Foraco purchased 51% of Brazil-based Servitec at the end of April.  That operation will be consolidated for two months in Q2.  A modest financial lift is expected right away, with bigger contributions possible down the road.  Incoming orders remain robust despite the recent drop in commodity prices.  Foraco drills exploratory wells for mining companies to delineate prospective deposits.  That work tends to be less volatile than actual production.  Further gains appear likely in 2013 as Foraco capitalizes on its expanding backlog and the Servitec business builds momentum.  Longer term, the company's niche water drilling business could become a more significant contributor.

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