North American Construction Group Ltd. · TSX:NOA
North American Construction — Q2 2022 Earnings Presentation
29 slides from North American Construction's earnings presentation, Jul 28, 2022
Slide 1: 2022 Q2 Earnings Presentation
2022 Q2 EARNINGS PRESENTATION July 28, 2022
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 Q2 2022 expectations of North American Construction Group Lt
Slide 3: Everyone Gets Home Safe
Everyone Gets Home Safe Total Recordable Injury Frequency 0.50 • Q2 2022 rate of 0.51 • Roll out of high potential EARNINGS Q2 2022 trending back towards injury reduction program to company target focus resources on events that have a more serious 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q2
Slide 4: What We're Experiencing at Site
What We’re Experiencing at Site EARNINGS Q2 2022 1. Strong demand for equipment & service • Demand for production creates demand for services • Heavy equipment, in particular, is fully booked 2. Wide-ranging & significant inflationary pressure • Substantial cost increases from key suppliers & vendor
Slide 5: What We Are Doing
What We Are Doing Operational excellence and low-cost execution remains our priority EARNINGS Q2 2022 • Expanding Acheson shop capacity to accommodate work from mine sites to lower costs • Adding in-field senior maintenance management with focus on increasing efficiency and machine availability • De
Slide 6: Equipment Utilization
Equipment Utilization 1 EARNINGS Q2 2022 80% 70% 64% 65% 59% 60% 52% 40% 20% 24% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018 2019 2020 2021 2022 Q2 2022 rate of 59% impacted by shortage of skilled labour 1 NACG fleet only; data lab
Slide 7: Low Cost Rebuild Capabilities
Low Cost Rebuild Capabilities In-house refurbishments provides a significant competitive advantage vs buying new heavy equipment EARNINGS Q2 2022 • Investment in rebuilt equipment, adding ultra-class haul trucks into the Mikisew North American Limited Partnership (MNALP) • Provides 60% savings vs pu
Slide 8: Our Point of View
Our Point of View We remain well-positioned as a reliable heavy construction EARNINGS Q2 2022 contractor despite short-term headwinds Valuable Indigenous partnerships +900 units of in-demand mobile based in local communities heavy equipment fleet ~80% of scopes in H1 2022 completed +$2.1b replacemen
Slide 9: 2022 Q2 Financial Overview
2022 Q2 FINANCIAL 9 OVERVIEW
Slide 10: 2022 Q2 Performance
2022 Q2 Performance $228m $42m 59% 9.6% EARNINGS Q2 2022 Total combined Adjusted EBITDA1 Equipment utilization Combined gross revenue1 profit margin1 • Consistent top-line growth as trailing $70 Adjusted EBITDA1 twelve-month combined revenue1 now $60 exceeds $900 million • Gross trendlines reflect c
Slide 11: Combined Results
Combined Results (figures in millio ns o f Canadian do llars, except per share amo unts) 2022 Q2 2021 Q2 Q2 2022 YTD Q2 2021 YTD EARNINGS Q2 2022 Wholly-owned entities $168 $139 $345 $307 Share of amounts from investments $60 $37 $120 $61 TOTAL COMBINED REVENUE 1 $228 $176 $465 $368 Combined gross p
Slide 12: Adjusted EBITDA and EPS
Adjusted EBITDA1 and EPS (figures in millio ns o f Canadian do llars, except per share amo unts) 2022 Q2 2021 Q2 Q2 2022 YTD Q2 2021 YTD EARNINGS Q2 2022 Adjusted EBITDA1,3 $42 18.3% $42 24.1% $99 21.4% $104 28.1% 1,3 Adjusted EBIT $13 5.6% $15 8.4% $37 8.1% $43 11.8% 1 Adjusted EPS $0.17 $0.31 $0.6
Slide 13: Cash Provided by Operating Activities
Cash Provided by Operating Activities (figures in millio ns o f Canadian do llars unless o therwise stated) 2022 Q2 2021 Q2 Q2 2022 YTD Q2 2021 YTD EARNINGS Q2 2022 Cash provided by operations prior to change in working capital 1 $33 $28) $78) $88) Net changes in non-cash working capital 2 (3) (19)
Slide 14: Balance Sheet
Balance Sheet (figures in millio ns o f Canadian do llars unless o therwise stated) June 30, 2022 December 31, 2021 December 31, 2020 EARNINGS Q2 2022 Cash $12 $17 $43 1 Total capital liquidity 193 233 178 Property, plant & equipment 642 641 632 Total assets 870 869 839 Senior debt 1,2 $244 1.6x $22
Slide 15: 2022 Outlook
15 2022 OUTLOOK
Slide 16: Priorities for Remainder of 2022
Priorities for Remainder of 2022 EARNINGS Q2 2022 1 2 Stabilize cost Staff, procure, & mobilize escalations & contract for successful Fargo- administration with Moorhead earthworks customers & vendors commencement in Q3 3 4 Secure Canadian oil Attract, develop & retain sands region project and skill
Slide 17: Fargo-Moorhead Project Update
Fargo-Moorhead Project Update ~$650M 6-year construction project EARNINGS Q2 2022 NACG share of revenue plus a 29-year O&M contract • Ground-breaking ceremony scheduled for early August and earthworks to commence in Q3 2022 • Work continues with preliminary designs submitted; initial notice to proce
Slide 18: Bid Pipeline
Bid Pipeline ESTIMATED PROJECT COMMENCEMENT TIMING EARNINGS Q2 2022 H2 2022 2023 onward Preferred opportunities & extensions Projects in the active tender phase Projects in the pre- tender phase Diversified resources & geography • Bid pipeline1 contains ~$4.0 billion of specific scopes of work Canad
Slide 19: Contractual Backlog
Contractual Backlog1 at $1.6 billion 60% of backlog1 tied to established Indigenous partnerships EARNINGS Q2 2022 50% of backlog1 through major oil sands producers 50% of backlog1 through customers in other mining, continues to provide line of sight for core business resource & civil construction in
Slide 20: Updated Outlook
Updated outlook reflects cost escalations and skilled labour Updated 2022 Outlook vacancies experienced in the first half of 2022 • 2022 estimates remain Key financial measures resilient providing free cash EARNINGS Q2 2022 Adjusted EBITDA1 $75 $200 - $230 $250 flow flexibility Sustaining capital1 $
Slide 21: Revenue & Margins
Revenue & Margins We have the backlog1, bid pipeline & low-cost culture for both continued revenue growth & margin improvement • Momentum regained from pre-pandemic operating performance and improved commodity market EARNINGS Q2 2022 • Projected revenue growth range based on improving equipment util
Slide 22: Supplemental Information
SUPPLEMENTAL INFORMATION 2022 Q2 EARNINGS PRESENTATION 22
Slide 23: Company Overview
Company Overview EARNINGS Q2 2022 Premier provider of mining and heavy construction services • 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 24: Diversified Business
Diversified Business Adjusted EBIT 1 Breakdown EARNINGS Q2 2022 Objective to continue grow both business areas while maintaining 50-50 distribution • Project awards and acquisitions have established a clear path to maintain diversification 20% Mine management • Current backlog1 split evenly between
Slide 25: Long Term Contracts
Long Term Contracts Owner Contract1,2 EARNINGS Q2 2022 Base Mine – Millennium Suncor Energy MUA 2023 2040 & North Steepbank Services Inc. with term MUC 2023 2059 Fort Hills Mine Fort Hills Energy LP with term Mildred Lake & MSA 2023 2046 Syncrude Canada Aurora mines with term MSA 2027 2060 Kearl Min
Slide 26: Heavy Equipment Fleet
Heavy Equipment Fleet • As at June 30, 2022, ~900 mobile heavy equipment assets provide EARNINGS Q2 2022 operational flexibility • Managed on an individual asset basis and deployed with sole objective of maximum operating utilization • ~300 assets operated within the Nuna Group of Companies • New re
Slide 27: Equipment Operating Hours
Equipment Operating Hours EARNINGS Q2 2022 500,000 Nuna fleet 400,000 NACG fleet 300,000 200,000 100,000 - Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2019 2020 2021 2022 Since low of Q2 2020, consistent performance with upside available in both fleets 27
Slide 28: 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 Q2 2022 • Vast majority of overburden is moved by mine owner fleets which is an opportunity of growth fo
Slide 29: Prudent Capital Allocation
Prudent Capital Allocation Proven track record of shareholder friendly activity • Doubling of dividend in Q1 2022 based on strong free cash flow projections • Execution of issued NCIB programs reflects conviction of Board & management in company outlook EARNINGS Q2 2022 • +14.0 million shares cancel
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