North American Construction Group Ltd. · TSX:NOA
North American Construction — Q4 2021 Earnings Presentation
39 slides from North American Construction's earnings presentation, Feb 17, 2022
Slide 1: Q4 2021 Earnings Presentation
2021 Q4 EARNINGS PRESENTATION February 17, 2022 1
Slide 2: Forward-looking statements & Non-GAAP financial measures
Forward-looking statements & Non-GAAP financial measures This presentation contains forward-looking information which reflects the current plans and This presentation presents certain non-GAAP financial measures because management EARNINGS Q4 2021 expectations of North American Construction Group Lt
Slide 3: Agenda
EARNINGS Q4 2021 AGENDA 2021 accomplishments Operational performance Financial overview Operational priorities 3 Outlook for 2022
Slide 4: Everyone Gets Home Safe
Everyone Gets Home Safe Total Recordable Injury Frequency • Consistent TRIF in 2020 • Continued focus on slips, EARNINGS Q4 2021 and 2021 despite trips and falls as we work challenging conditions through the winter season • 2021 near miss & hazard • Roll out of high potential ID program resulted in
Slide 5: 2021 Records & Accomplishments
2021 Records & Accomplishments Banked highest backlog1 in NACG history EARNINGS Q4 2021 Generated record free cash flow 1 Awarded milestone P3 project Achieved record levels of EPS1 and EBITDA1 Formally issued our inaugural Sustainability Report Exceeded EBIT diversification targets Commissioned exp
Slide 6: 2021 Diversification Target Exceeded
2021 Diversification Target Exceeded Diversified Adjusted EBIT 1,2 EARNINGS Q4 2021 2020 Actual 2021 Target 2021 ACTUAL 2019 Actual Canadian oil sands 26% Other locations & 35% 45% commodities 50% Diversification target achieved ahead of plan, with 50% EBIT1 generated outside of Canadian oil sands i
Slide 7: Operational Performance
EARNINGS Q4 2021 OPERATIONAL PERFORMANCE 7
Slide 8: 2021 Q4 Performance
2021 Q4 Performance $235m $56m +18% 14% EARNINGS Q4 2021 Total combined Adjusted EBITDA1 EBITDA1 increase from Combined gross revenue1 comparable Q4 2019 profit margin1 • Record quarter for combined revenue1 $70 Adjusted EBITDA1 • Effective performance at major sites from consistent operating condit
Slide 9: Equipment Utilization is a Key Driver
Equipment Utilization is a Key Driver 2021 Q4 demonstrated consistency in utilization during winter season EARNINGS Q4 2021 • Increased fleet utilization as winter season demand allowed for the full deployment of the fleet • Heavy-duty mechanic and operator shortages due to quarantine & travel restr
Slide 10: Operational Excellence
Operational Excellence Second half of 2021 performance trending back toward pre-pandemic operational excellence EARNINGS Q4 2021 • Operational excellence key to achieving management’s expected margins and shareholder returns • Improving site conditions has resulted in return of long-held operating r
Slide 11: Equipment Operating Hours
Equipment Operating Hours NACG operating hours show increase in demand from prior quarter EARNINGS Q4 2021 • Q4 saw high demand as is typical of winter season, with most sites operating at allowable capacity • Increased stability of operating hours throughout the year demonstrates a reduction in sea
Slide 12: Financial Overview
EARNINGS Q4 2021 2021 Q4 FINANCIAL 12 OVERVIEW
Slide 13: Combined Results
Combined Results (figures in millio ns o f Canadian do llars, except per share amo unts) 2021 Q4 2020 Q4 2021 2020 EARNINGS Q4 2021 Wholly-owned entities $181 $136 $654 $498 Share of amounts from investments $54 $34 $158 $85 TOTAL COMBINED REVENUE 1 $235 $170 $812 $583 Combined gross profit1 $32 13.
Slide 14: Adjusted EBITDA and EPS
Adjusted EBITDA1 and EPS (figures in millio ns o f Canadian do llars, except per share amo unts) 2021 Q4 2020 Q4 2021 2020 EARNINGS Q4 2021 1,3 Adjusted EBITDA $56 24.0% $45 26.6% $207 25.5% $174 29.9% 1,3 Adjusted EBIT $25 10.7% $18 10.3% $93 11.4% $81 14.0% Adjusted EPS1 $0.59 $0.36 $2.06 $1.73 Ge
Slide 15: Cash Provided by Operating Activities
Cash Provided by Operating Activities (figures in millio ns o f Canadian do llars unless o therwise stated) 2021 Q4 2020 Q4 2021 2020 EARNINGS Q4 2021 Cash provided by operations prior to change in working capital 1 $45 $45 $165 $150) Net changes in non-cash working capital 21 18 1 (3) Cash provided
Slide 16: 2021 Capital Allocation
2021 Capital Allocation Free cash flow1 generated in 2021 was deployed EARNINGS Q4 2021 fairly evenly towards our three main objectives 24% 30% 1. Growth spending $67m 2. Debt reduction 3. Direct shareholder activity 46% (NCIB, dividends, trust) Strong cash flow allowed for allocation towards all ca
Slide 17: Balance Sheet
Balance Sheet (figures in millio ns o f Canadian do llars unless o therwise stated) December 31, 2021 December 31, 2020 December 31, 2019 EARNINGS Q4 2021 Cash $17 $43 $5 1 Liquidity 198 148 114 Property, plant & equipment 641 632 586 Total assets 869 839 791 Senior debt 1,2 $226 1.5x $353 2.0x $296
Slide 18: 2021 Performance
2021 Performance Actual results Stated targets EARNINGS Q4 2021 Adjusted EBITDA1 $207m $205 – $215 ✓ Sustaining capital1 $102m $95 – $105 ✓ Adjusted EPS1 $2.06/share $1.95 – $2.15 ✓ Free cash flow1 $67m $65 – $85 ✓ Deleverage1 $17m $15 – $35 ✓ Share purchases $22m $17 – $35 ✓ Growth capital & $25m $
Slide 19: 2022 Outlook
19 Q4 2021 EARNINGS 2022 OUTLOOK
Slide 20: Priorities for 2022
Priorities for 2022 EARNINGS Q4 2021 1 2 3 Commitment to refocus Maximize operating Staff, procure & mobilize safety efforts & prevent utilization of heavy for successful Fargo- serious injuries equipment fleet Moorhead earthworks commencement 4 5 6 Implement various site Increase external Enhance a
Slide 21: Fargo-Moorhead Project Update
Fargo-Moorhead Project Update EARNINGS Q4 2021 • Project Finance International (PFI) named project as the P3 Deal of the Year for 2021 • Work is ongoing with the Authority to achieve initial operational milestones • Procurement of equipment underway & workforce recruiting in process • Health and saf
Slide 22: World-Class Maintenance Capability
World-Class Maintenance Capability Full machine rebuilds EARNINGS Q4 2021 • Compelling economics vs buying new and further prolonging equipment life Existing 6,000 square feet of component rebuild space • Being expanded by +7,000 sq. ft. will expand the component rebuild catalogue • Final drives, tr
Slide 23: Rebuilding Growth
Rebuilding Growth +40% Average savings on +5 New ultra-class rebuilding a haul haul trucks added truck versus a new to the Canadian oil purchase sands region 23
Slide 24: Sourcing Components
Sourcing Components EARNINGS Q4 2021 Sourcing quality low-cost components critical to overall success of maintenance vision Solving Logistics Cost of components & parts are the majority of our • Specialize in acquiring and distributing components sustaining capital program (~75%) and a significant f
Slide 25: Bid Pipeline
Bid Pipeline ESTIMATED PROJECT COMMENCEMENT TIMING EARNINGS Q4 2021 2022 2023 onward Preferred opportunities & extensions Projects in the active tender phase Projects in the pre- tender phase Diversified resources & geography • Bid pipeline1 contains ~$3.0 billion of specific scopes of work Canadian
Slide 26: Contractual Backlog at $1.7 billion
Contractual Backlog1 at $1.7 billion • Fargo–Moorhead flood diversion project provides EARNINGS Q4 2021 diversified backlog1 and geographically enhances work in the United States • Contractual backlog provides stability which, in turn, provides significant benefits throughout the organization (ie. a
Slide 27: Environmental Initiatives
Environmental Initiatives EARNINGS Q4 2021 HYDROGEN PROJECT SOLAR ARRAY Hydrogen dual fuel project progressing, expecting Full rooftop solar panels installed with the maintenance feasibility study completion in 2022 Q1 with decision for facility expansion, now totaling +400,000 kWh annually advancin
Slide 28: Inclusivity & Diversity
Inclusivity & Diversity • Over 1,600 hours of inclusion and diversity training EARNINGS Q4 2021 occurred during the year on indigenous awareness and respect in the workplace. • All-female crew established at oil sands mine site with about twenty haul truck, shovel, and support equipment operators. W
Slide 29: Strong Indigenous Partnerships
Strong Indigenous Partnerships Consistent momentum in our ➔ Kitikmeot Corporation EARNINGS Q4 2021 partnerships with Nuna Group of Majority partner of Nuna, Kitikmeot Corporation is a Companies, Mikisew North wholly-owned business of Kitikmeot Inuit Association American Limited Partnership, and Dene
Slide 30: 2022 Outlook
Current line of sight and assumption of steady site 2022 Outlook access restrictions offer ability to provide outlook for 2022 • Adjusted EPS1 is built on Key Measures EBITDA1 range, current run- EARNINGS Q4 2021 rate depreciation and stable Adjusted EBITDA1 $100 $215 - $245 $250 tax & interest rate
Slide 31: Supplemental Information
EARNINGS Q4 2021 SUPPLEMENTAL INFORMATION Q4 2021 EARNINGS PRESENTATION 31
Slide 32: Company Overview
Company Overview Premier provider of mining and heavy construction services EARNINGS Q4 2021 • Established reputation with over 65 years in business • Long-term contracts awarded based on safe cost-effective operations Mobile fleet of ~900 heavy equipment assets • Fully backed by support equipment &
Slide 33: Nuna Group of Companies
Nuna Group of Companies Nuna Group of Companies is the premier mining EARNINGS Q4 2021 contractor in northern Canada Formed in 1993, Nuna is the established incumbent contractor on the mine sites in Nunavut and the Northwest Territories • Full year and Q4 2021 both represented strongest the year and
Slide 34: Long Term Contracts
Long Term Contracts Owner Contract1,2 EARNINGS Q4 2021 Base Mine – Millennium Suncor Energy MUA & North Steepbank Services Inc. with term 2023 2040 MUC Fort Hills Mine Fort Hills Energy LP 2023 2059 with term Mildred Lake & MSA Syncrude Canada 2023 2046 Aurora mines with term Kearl Mine Imperial Oil
Slide 35: Mine Site Scopes – First In, Last Off
Mine Site Scopes – First In, Last Off Site Development (1 to 4 years) Production & Reclamation (5 to 50+ years) ▪ Initial site infrastructure, access roads, upgrades, ▪ Overburden removal, mine infrastructure development, pit development, etc. reclamation, tailing ponds remediation, equipment and Q4
Slide 36: Steady State Production Resiliency
Steady State Production Resiliency • WTI pricing above US$30/bbl means full utilization of our fleets with minimal variability in demand • Illustrative sensitivity below highlights our experience in the Canadian oil sands region • Significant development costs are followed by decades of low-cost ste
Slide 37: Heavy Equipment Fleet
Heavy Equipment Fleet • As at December 31, 2021, ~900 mobile heavy equipment assets provide operational flexibility EARNINGS Q4 2021 • Managed on an individual asset basis and deployed with sole objective of maximum operating utilization • ~280 assets operated within the Nuna Group of Companies • Ne
Slide 38: Understanding the Market
Understanding the Market Based on experience, NACG estimates we move ~7% of overburden volumes in the oil sands region Estimated overburden volumes moved in the Canadian oil sands region EARNINGS Q4 2021 • Vast majority of overburden is moved by mine owner fleets which is an opportunity of growth fo
Slide 39: Debt Structure
Debt Structure $0 Annual Current Net debt1 of $369 million as at December 31, 2021 $0 8.9% Cost of Debt Composition EARNINGS Q4 2021 • Split between three primary debt instruments $0 30% • Overall liquidity1 of $198 million based on $181 million of$0 capacity combined with $17 million of cash on han
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