Foremost Income Fund Reports Q3 2022 Results
Calgary, Alberta--(Newsfile Corp. - November 29, 2022) - Foremost Income Fund ("Foremost" or the "Fund") announces the financial results for the three- and nine-month periods ended September 30, 2022.
The Fund is an unincorporated open end mutual fund trust conducting its business through three operating segments, Foremost Energy Equipment (FEE), Foremost Mobile Equipment (FME), and Corporate. FEE, with its focus on the oil and gas industry in Western Canada, consists of three active manufacturing and service locations across Alberta. The locations manufacture oil-treating systems, shop tanks, field tanks, agriculture equipment, oil and gas process-treating equipment, and gas separators. FME manufactures and services hydrovac and vacuum trucks and equipment; off-highway, large-wheeled and tracked vehicles; and equipment for the custom drilling, construction, water well, and mining sectors. FME focuses on custom-built vehicles for its global clientele whom it serves through two manufacturing and service locations across Alberta.
Message to Unitholders
Foremost had a profitable quarter with increased revenue, gross margin, and EBITDA as compared to Q2 2022. Production volumes rose as chassis supply for hydrovacs improved and supply bottlenecks for critical materials for dual rotary rigs eased. Stronger demand in the drills, parts, and energy products segments helped drive higher revenues and gross margin.
FME produced revenues of $27.2 million vs $25.8 million in Q3 2021, a 6% increase. Gross margin was $5.3 million vs $5.5 million in Q3 2021, a 4% decrease. Demand for Dual Rotary Drills and Hydrovacs remained high, and sales into the mining, construction, and water-well sectors were robust. Gross margins were negatively impacted by material cost inflation and production inefficiencies caused by supply interruptions.
FEE produced revenues of $15.8 million vs $9.5 million in Q3 2021, a 67% increase. Gross margin was $1.0 million vs negative $0.1 million in Q3 2021. Shop tanks and field tanks used in oil & gas production led the improvement in this segment as activity increased in the Western Canadian energy sector. Compared to Q3 2021, agriculture bin sales were flat as high material costs led to higher unit prices, affecting sales volume.
The Fund's balance sheet remains strong, with a cash balance of $33.7 million at the end of Q3 2022. This is lower than the balance at the end of 2021 of $53.2 million primarily due to the strategic increase in inventory.
The overview: key measurements for Q3 2022 compared to Q2 2022
Revenue is $42.9 million, an increase of 24% from $34.5 million.
Gross margin is $6.3 million, which represents 15% of revenue, up from $4.5 million and 13%.
SG&A expenses are 10% of revenue, down from 12%. Total spend is $4.1 million compared to $4.0 million.
EBITDA is $2.7 million, an increase from $1.2 million in the previous quarter.
Foremost is facing broad supply chain challenges related to factors outside its control, including COVID shutdowns and the Ukraine war. Management, operations, and supply chain teams are engaged in proactive initiatives to reduce the impact of these supply issues. Higher input costs and a tight labour market are expected to continue tempering the forecasted outlook for the remainder of 2022.
Kevin Johnson, President
Q3 2022 VS Q3 2021 Highlights
Revenue for the third quarter of 2022 was $42.9 million, compared to $35.1 million for the same period in 2021. More information is in the Segmented Results of Operations section of the MD&A.
Gross profit for the third quarter of 2022 was $6.3 million and 15% of revenue, compared to $5.4 million and 15% of revenue in Q3 2021. More information is in the Segmented Results of Operations section of the MD&A.
Administration costs increased to $4.1 million and 10% of revenue in 2022, up from $3.2 million recognized in the third quarter of 2021.
Adjusted EBITDA (defined on page 13 of the MD&A) was $2.7 million for Q3 2022 compared to $3.2 million in Q3 2021.
The stated redemption price at November 29, 2022, has been increased to $6.50.
Certain statements in this news release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this news release, such statements use words such as "may", "will", "expect", "believe", "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this news release. These forward-looking statements involve a number of risks and uncertainties, including: the impact of general economic conditions, industry conditions, changes in laws and regulations, increased competition, fluctuations in commodity prices and foreign exchange, and interest rates.
For further Investor Relations information please contact:
Jackie Schenn, CA
Tel: (403) 295-5800 or toll free 1-800-661-9190 (Canada/US) - Fax: (403) 295-5832
E-mail: firstname.lastname@example.org - Website: www.foremost.ca
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/146070