North American Construction Group Ltd. · TSX:NOA
North American Construction — Investor Presentation (May 2023)
40 slides from North American Construction's investor presentation, May 2023
Slide 1: Investor Presentation May 2023
Investor Presentation May 2023
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 expectations of North This presentation presents certain non-GAAP financial measures because management believes that they may be American Construction
Slide 3: Who we are
01 02 03 04 05 06 Who we are What we do What creates Competitive How do we plan Capital allocation demand advantage to grow bigger and better 01 Who we are 3
Slide 4: Company Overview
COMPANY OVERVIEW Provinces, territories and states with significant current operations Premier provider of mining and heavy construction services Head office in Acheson, Alberta, Canada • Established reputation with over 70 years in business • Long-term contracts based on safe cost-effective operati
Slide 5: Largest Heavy Construction & Mining Contractor
LARGEST HEAVY CONSTRUCTION & MINING CONTRACTOR EQUIPMENT FLEET IN NORTH AMERICA +3,500 employees across +3,500 all business lines +900 >$2B mobile heavy equipment replacement units cost NORTH AMERICAN CONSTRUCTION GROUP 5
Slide 6: NOA 2022 Financials @aglance
NOA – 2022 Financials $1.1B $245M $2.41 @aglance Combined Adjusted Adjusted revenue1,2 EBITDA1,2 EPS1,2 1.5x $709M TSX/ Net debt leverage1,2 Market capitalization3 NYSE Dual listing 1 See Slide 2 or 2022 Annual Report for Non-GAAP Financial Measures 2 Financial metrics and leverage ratios calculated
Slide 7: What we do
01 02 03 04 05 06 Who we are What we do What creates Competitive How do we plan Capital allocation demand advantage to grow bigger and better 02 What we do 7
Slide 8: NOA – Operations @aglance
NOA – Operations @aglance HEAVY CIVIL & BULK EARTHMOVING ongoing operational support & large construction projects supported by equipment fleet & labour force PROJECT & MINE SITE MANAGEMENT mining & engineering competence combined with real-world practical experience 8
Slide 9: First in Last off
Mine lives routinely exceed First in 50years Last off 9
Slide 10: Founded in 1953 Experience Matters
FOUNDED IN 1953 EXPERIENCE MATTERS Since the 1950’s Since the 1970’s Since the 1980’s Since the 1990’s Infrastructure Fort McMurray Canadian resource Diamond mines and ice projects oil sands region industry roads Thousands of projects completed over seven decades 10
Slide 11: Diversified Business
DIVERSIFIED BUSINESS • Three countries • Eight commodities • Thirty operational sites CANADIAN MINING, 30% CIVIL CONSTRUCTION, 10% MINE MANAGEMENT, 5% EXTERNAL MAINTENANCE, 5% CANADIAN OIL SANDS CUSTOMERS, 50% (FOUR CUSTOMERS) NORTH AMERICAN CONSTRUCTION GROUP 11
Slide 12: Oil Sands Region
ESTIMATED OVERBURDEN VOLUMES MOVED IN THE OIL SANDS REGION OIL SANDS REGION Contractor 50% of overall EBIT1 Competition Mine Owner 95% with Indigenous Partnerships Fleets • Life of mine projections out to 2060 • High developments costs with lower ongoing operating costs NACG Contracted • High barrie
Slide 13: Canadian Mining & Construction
CANADIAN MINING & 124 CONSTRUCTION 30% of overall EBIT1 new mines planned in Canada over 100% with next ten years2 Indigenous Partnerships 200 • Potential for significant growth across Canada • Operating in Northern Ontario, Nunavut & Northwest Territories current mines ~20 years average mine life B
Slide 14: Fargo-Moorhead Project
CIVIL CONSTRUCTION Fargo-Moorhead project • Flood diversion project in North Dakota & Minnesota • Largest infrastructure project in NACG’s history • Primary construction occurring from 2023 to 2025 • Two joint ventures: D&B JV - ASN (30% stake); Financing JV - RRVA (15% stake) ~$650M 6-year 29-year
Slide 15: What creates demand
01 02 03 04 05 06 Who we are What we do What creates Competitive How do we plan Capital allocation demand advantage to grow bigger and better 03 What creates demand 15
Slide 16: Mining & Civil Construction Mega Projects
MINING & CIVIL HARD ROCK COMMODITY CONSTRUCTION MINING Gold, iron, platinum, MINING Potash, coal, MEGA PROJECTS nickel, diamonds oil sands ARE ON THE RISE • Commodity & energy demand • Robust government infrastructure spending • Large scale environmental infrastructure projects & climate change resi
Slide 17: Steady Growth in Oil Sands
STEADY TOTAL ALBERTA OIL SANDS PRODUCTION + WTI PRICE (MONTHLY DATA, JAN 2010 – NOV 2022) GROWTH 3.4 mmbpd IN OIL SANDS 3.5 $120 PRODUCTION 3.0 $100 DESPITE Total Oil Sands Production (mmbpd) 2.5 PRICE $80 WTI PRICE (US$/BBL) VOLATILITY 2.0 $84.37 $60 1.5 $40 1.0 $20 0.5 0.0 $0 10 11 12 13 14 15 16
Slide 18: Increasing Metals & Mineral Demand
INCREASING METALS & MINERAL DEMAND Generational NACG Opportunity is well positioned to take advantage of a surging metals & mineral sectors NORTH AMERICAN CONSTRUCTION GROUP 18
Slide 19: Bid Pipeline ~$4.8 Billion
BID PIPELINE ~$4.8 BILLION1 ESTIMATED PROJECT COMMENCEMENT TIMING Q2 2023 H2 2023 2024 2025+ >90% of pipeline projects have Preferred opportunities Indigenous partnerships & extensions Projects in the active tender phase Projects in the pre-tender phase +$2.0B Backlog target • Oil sands summer scope
Slide 20: Competitive advantage
01 02 03 04 05 06 Who we are What we do What creates Competitive How do we plan Capital allocation demand advantage to grow bigger and better 04 Competitive advantage 20
Slide 21: Competitive Advantage #1 Low-Cost Operator
COMPETITIVE ADVANTAGE #1 LOW-COST OPERATOR Internal Competency Rebuild Capacity Technology • 90% of maintenance • DGI Trading & BNAJV • 10 fully equipped dedicated bays TELEMETICS PROGRAM: CONNECTED ASSETS: activities handled in-house provide global access to provide +170,000 sq. ft. of heavy Demons
Slide 22: Competitive Advantage #2 Established Indigenous Partnerships
COMPETITIVE ADVANTAGE #2 ESTABLISHED INDIGENOUS PARTNERSHIPS • Essential criteria for majority of request for proposals • Productive partnerships with strong track record • Decades of experience improves decision making and lowers risk • Collaborative investment opportunities are common >90% of proj
Slide 23: Competitive Advantage #3 Contractual Backlog
COMPETITIVE ADVANTAGE #3 CONTRACTUAL BACKLOG1 Operations Committed volumes means efficient asset utilization Platform secures incremental scopes of work at site Lessens disruptive impacts of remobilization $1.1B Q1 2023 HR Predictable and continuous work attracts talent and builds recruiting mom
Slide 24: Large Barriers to Entry
LARGE BARRIERS TO ENTRY 1. Purchase of heavy equipment & associate infrastructure requires significant capital investment 2. World-class safety with a documented safety record is an uncompromising requirement of working on large mine sites 3. Existing internal maintenance capabilities required to ac
Slide 25: How do we plan to grow bigger and better
01 02 03 04 05 06 Who we are What we do What creates Competitive How do we plan Capital allocation demand advantage to grow bigger and better 05 How do we plan to grow bigger and better 25
Slide 26: Performance
PERFORMANCE Maximizing equipment utilization 75% 65% 55% 45% 75-85% 35% full year utilization by 2024 25% 2018 2019 2020 2021 2022 2023E 2024E Key Initiatives • Continue pursuing vertical integration of in-house maintenance • Telematics to prevent losses and optimize operations • Increase headcount
Slide 27: People
PEOPLE NACG MAINTENANCE HEADCOUNT Growing our maintenance 450 personnel 400 350 • Focus on maintaining and furthering successes in 2023 300 • Increased headcount improves fleet availability 250 200 TARGETED PROFILE 150 • 150 Heavy equipment technicians (HET) 100 • 100 HET apprentices 50 • 125 Direct
Slide 28: Revenue & Margins
REVENUE & MARGINS COMBINED REVENUE1 (TTM-BASIS, C$M) ADJUSTED EBIT1 (TTM-basis, C$m) We have the backlog1, bid pipeline & low-cost $1,500 culture for both continued revenue growth & margin improvement $150 $1,250 • Momentum regained from pre-pandemic operating performance and improved commodity mark
Slide 29: Investing in Technology
Investing in Technology Telematics – Whole Machine Monitoring • Onboard hardware installed on heavy equipment fleet streams data in real-time • Sensors provide maintenance monitoring & operational data to centralized command center • Data provides machine health KPI’s, GPS tracking, operator feedbac
Slide 30: Bolt-on acquisitions & vertical integration have led to…
Bolt-on acquisitions & vertical integration have led to….. • 2018 – strategic acquisition of heavy equipment fleet and ownership stake in Nuna Group of Companies • 2020 – six-bay component rebuild facility added to provide capacity for low-cost components • 2021 – acquired DGI Trading provided globa
Slide 31: …strong growth over the past five years
…..strong growth over the past five years Adjusted EBITDA1 ($m) Adjusted EPS1 $250 +19% CAGR2 $245 $3.00 2.4x increase $2.50 $2.41 $200 $2.00 $150 $1.50 $102 $100 $1.00 $1.00 $50 $0.50 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Acquisitions & expansions will continue to drive growth NORTH AME
Slide 32: Capital allocation
01 02 03 04 05 06 Who we are What we do What creates Competitive How do we plan Capital allocation demand advantage to grow bigger and better 06 Capital allocation 32
Slide 33: Capital Allocation
Capital Allocation Debt Repayment Acquisitions Evaluating smaller bolt-on Lowering leverage acquisitions as well as larger continues to be a prudent transformative targets use of capital $100-115m Range for 2023 free cash flow1 Share repurchases Dividends Lower share price valuation Annual dividend
Slide 34: 2023 Updated Financial Guidance
2023 UPDATED FINANCIAL GUIDANCE Key financial measures 2023 Q1 performance increased expectations for the year Adjusted EBITDA1 $255-$275 • Range based on continued & consistent increases in equipment utilization Sustaining capital1 $120 - $130 • Leverages backlog1 and well-maintained fleet provide
Slide 35: Q&A
Q&A
Slide 36: 2023 Priorities
2023 Priorities Shifting into Next Gear 1 2 Drive safety performance & expectations Leverage technology & operational focused on front-line supervision & initiatives to effect improved green-hand training equipment utilization & lower costs 3 4 • Win regional tender opportunity in oil Attract, devel
Slide 37: 2022 Accomplishments
2022 ACCOMPLISHMENTS 1 Equipment utilization continuing to gain momentum Sourcing of heavy equipment technicians 4 Acquired servicing company to improve internal maintenance Lower operating costs to provide payback in driving gains three years 2 5 Nuna completed largest scopes ever in a 12- Construc
Slide 38: Long-Term Contracts
LONG-TERM CONTRACTS OWNER CONTRACT1,2 Base Mine – Millennium Suncor Energy MUA & North Steepbank Services Inc. with term 2023 2040 MUC Fort Hills Mine Fort Hills Energy LP 2023 2059 with term Mildred Lake & MSA Syncrude Canada 2023 2046 Aurora mines with term MSA Kearl Mine Imperial Oil Limited with
Slide 39: Financial Outcomes
FINANCIAL OUTCOMES COMBINED COMBINED GROSS RETURN ON NET DEBT REVENUE1 ($M) PROFIT MARGIN1 (%) INVESTED CAPITAL1 (%) LEVERAGE1,2 (C$M) $1,054 15.0% 14.3% 15.0% 13.0% $400 13.0% 13.0% $300 11.0% 11.0% $200 9.0% 9.0% $100 7.0% 7.0% 5.0% 5.0% $0 2019 2020 2021 2022 2019 2020 2021 2022 2019 2020 2021 20
Slide 40: Sustainable ESG Initiatives
SUSTAINABLE ESG INITIATIVES SAFETY EMISSIONS REDUCTION SOLAR UTILIZATION RECYCLING Total Recordable Injury Rate Reduce emissions intensity 10% by +400,000 kWh annually Reduced oil consumption by 76,464 Target (TRIR) <0.5 2025, 20% by 2028, and achieve net offsetting ~15% of facilities litres through
North American Construction Group — Investor Presentation (May 2023) on 6ix