TORONTO, Nov. 1, 2016 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported results for the third quarter of 2016, including backlog of $4.6 billion.

"Aecon's solid third quarter and year to date results highlight the resiliency of Aecon's business model. Lower demand from commodity and resource related sectors, delays in commitments to and approvals of new pipelines, the slower than anticipated roll out of new infrastructure investments, and the impacts of the Alberta wildfires, have all presented challenges through 2016 that we are overcoming through an increasing transition into market segments that provide significant opportunity and play to Aecon's strengths, namely power, transit, and water infrastructure.  Our significant longer-term backlog provides both visibility and stability, and we are well positioned to continue to make progress across our diversified business segments," said Teri McKibbon, President and Chief Executive Officer, Aecon Group Inc.

HIGHLIGHTS

• Revenue of $838 million for the three months ended September 30, 2016 was lower by $37 million (4 per cent) compared to the same period in 2015, while revenue of $2,368 million for the first nine months of 2016 was higher by $324 million (16 per cent). 
   
• Adjusted EBITDA of $60.0 million (margin of 7.2 per cent) for the third quarter of 2016 compared to an Adjusted EBITDA of $76.1 million (margin of 8.7 per cent) for the same period last year.  For the first nine months of 2016, Adjusted EBITDA was $93.6 million (margin of 4.0 per cent), compared to $88.0 million (margin of 4.3 per cent) on a like for like basis excluding Aecon's previous ownership of IST and investment in the Quito airport concession for the first nine months of 2015.  
   
• Diluted earnings per share increased in the third quarter of 2016 to 42 cents per share from 35 cents per share in the third quarter of 2015.
   
• New contract awards of $500 million and $3,658 million were booked in the third quarter and first nine months of 2016, respectively, compared to $1,681 million and $2,785 million in the same periods of 2015.  
   
• Backlog as at September 30, 2016 of $4.6 billion is 34 per cent higher than the $3.4 billion backlog as at the same time last year. 

OPERATING AND FINANCIAL RESULTS

Revenue of $838 million for the three months ended September 30, 2016 was lower by $37 million compared to the same period in 2015.  The largest decrease occurred in the Energy segment, as an increase in utilities volume was offset by lower revenue in industrial operations driven by lower activity in Western Canada. 

Adjusted EBITDA of $60.0 million (margin of 7.2 per cent) for the third quarter of 2016 compared to an Adjusted EBITDA of $76.1 million (margin of 8.7 per cent) for the third quarter of 2015 and operating profit of $43.1 million decreased from $55.4 million period over period for the third quarter. The reduction in Adjusted EBITDA and operating profit was caused by a combination of lower revenue and gross profit margin, as well as higher MG&A costs, in the third quarter of 2016, due primarily to particularly strong performance in all three of those areas in the third quarter of last year. In 2016, stronger performance in revenue, Adjusted EBITDA, and operating profit has been more consistently realized over the year to date period, on a like for like basis excluding Aecon's previous ownership of IST and investment in the Quito airport concession for the first nine months of 2015.

New contract awards of $500 million and $3,658 million were booked in the third quarter and first nine months of 2016, respectively, compared to $1,681 million and $2,785 million in the same periods of 2015. 

Backlog as at September 30, 2016 of $4.6 billion is 34 per cent higher than the $3.4 billion backlog as at the same time last year.  Not included in backlog, but important to Aecon's prospects due to the significant volume involved, is the expected recurring revenue from alliances and supplier-of-choice arrangements where the amount and/or value of work to be carried out is not specified. 

The sale of IST in April 2015 and Aecon's investment in the Quito airport concession in December 2015, including the classification of the Quito airport concession as "held for sale" from June 8, 2015, have impacted Aecon's results for the nine months ended September 30, 2016 when compared to the same period in the prior year.  A summary of these impacts is included below:

REPORTING SEGMENTS 

Aecon reports its financial performance on the basis of four segments: Infrastructure, Energy, Mining, and Concessions. 

INFRASTRUCTURE SEGMENT

The Infrastructure segment includes all aspects of the construction of both public and private infrastructure, primarily in Canada, and on a selected basis, internationally. The Infrastructure segment focuses primarily on the transportation, heavy civil, and water and wastewater treatment markets.

In the third quarter of 2016, revenue in the Infrastructure segment of $322 million was $2 million, or 1 per cent, lower than the same period last year. Revenue was higher in transportation operations due to a higher volume of work in Ontario.  This increase was offset by lower revenue in water operations, due to less mechanical work in Western Canada, and lower revenue in heavy civil operations.

Operating profit in the Infrastructure segment of $20.8 million in the third quarter decreased by $8.2 million compared to an operating profit of $29.0 million in the same period in 2015. Most of the decrease resulted from lower margin and higher bidding costs in transportation operations in the quarter.

Infrastructure backlog at September 30, 2016 was $1,876 million, which is $442 million lower than the same time last year. The year-over-year decrease in backlog occurred primarily in transportation and heavy civil operations and reflects the work-off of projects over the past twelve months.

New contract awards totalled $78 million in the third quarter of 2016 and $427 million year-to-date, compared to $1,348 million and $1,721 million, respectively, in the prior year.  The year-over-year decrease in new awards is due in large part to the Eglinton Crosstown LRT project award in the third quarter of 2015 to a consortium in which Aecon has a 25 per cent interest.

ENERGY SEGMENT

The Energy segment encompasses a full suite of service offerings to the energy market including industrial construction and manufacturing activities such as in-plant construction, site construction and fabrication and module assembly. The Energy segment focuses primarily on the following sectors: power generation, oil and gas, pipelines, utilities, and energy support services.

Revenue in the third quarter of 2016 of $325 million in the Energy segment was $16 million, or 5 per cent, lower than the same period in 2015, driven by lower industrial revenue, partially offset by higher activity in utilities operations.    

In the third quarter of 2016, operating profit of $12.8 million decreased by $4.9 million when compared to the same period last year. In industrial operations, higher operating profit in Eastern Canada from higher volume was largely offset by a decline in operating profit in Western Canada due to lower volume. Operating profit in utilities operations declined as a result of lower gross profit margin.

Backlog at September 30, 2016 of $2,475 million was $1,717 million higher than the same time last year, with increases in both industrial operations and utilities operations.  Backlog was higher in industrial operations in Eastern Canada due to new awards in the gas distribution and power generation sectors, including the execution phase of the Darlington nuclear refurbishment project, which was awarded in 2016 to a joint venture in which Aecon has a 50 per cent interest.  This increase was partially offset by lower fabrication and site construction backlog from industrial operations in Western Canada. 

New contract awards of $259 million in the third quarter of 2016 were $27 million lower than in the same period in 2015, and new awards of $2,769 million for the first nine months of 2016 were $2,077 million higher than the previous year.  

MINING SEGMENT

The Mining segment offers turnkey services consolidating Aecon's mining capabilities and services across Canada, including both mine site installations and contract mining.  This segment offers construction services that span the scope of a project's life cycle: from overburden removal and resource extraction, to processing and environmental reclamation.

Revenue of $209 million in the Mining segment for the three months ended September 30, 2016 was $5 million, or 2 per cent, lower compared to revenue of $214 million during the same period in 2015. This decrease was driven by lower volume from civil and foundations work related to mining projects in Western Canada and from lower revenue in contract mining operations which continued to be impacted to some extent by the after effects of the wildfires in Alberta in the prior quarter. These decreases were largely offset by higher volume of site construction work in the commodity mining sector.

In the third quarter of 2016, operating profit of $17.5 million decreased by $0.7 million when compared to $18.2 million in the same period in 2015. Similar to the quarterly revenue changes for the three months ended September 30, 2016, a volume driven increase in operating profit in the commodity mining sector was offset by lower operating profit from contract mining and civil and foundations work.

Mining segment backlog at September 30, 2016 of $200 million was $118 million lower than the same time last year. Backlog decreased in the commodity mining sector primarily as the work-off of existing site installation work outpaced new awards in the sector.  Civil and foundations backlog also decreased largely due to the work off of backlog related to mining projects in Ontario and Alberta.  Backlog in the contract mining sector also decreased compared to the same time in 2015 primarily due to the substantial completion of site development projects in Alberta.

New contract awards of $181 million in the third quarter of 2016 were $131 million higher than in the same period in 2015, and new awards of $488 million for the first nine months of 2016 were $106 million higher than the same period in 2015.

CONCESSIONS SEGMENT

The Concessions segment includes the development, financing, design, construction and operation of infrastructure projects by way of build-operate-transfer, build-own-operate-transfer and other Public-Private Partnership contract structures. 

Revenue reported in the Concessions segment for the three months ended September 30, 2016 and 2015, was $0.8 million and $1.2 million, respectively.

For the three months ended September 30, 2016, operating loss of $0.1 million compared to an operating profit of $0.9 million in the same period last year.  The lower operating profit in the quarter was largely due to higher bid costs.      

Aecon does not include in its reported backlog expected revenue from concession agreements.  As such, while Aecon expects future revenue from its concession assets, no concession backlog is reported.

OUTLOOK

"Aecon's balance sheet and financial capacity remain key advantages as we expect to benefit from the opportunities to bid on larger projects associated with increased infrastructure investment across Canada.  The overall outlook for the fourth quarter of 2016 and through 2017 remains generally positive with our diverse and resilient business model continuing to position Aecon well, as we expect to see areas of strength in Aecon's business outweighing the impacts of softness in certain markets," said Teri McKibbon. 

CONSOLIDATED RESULTS
The consolidated results for the three and nine months ended September 30, 2016 and 2015 are available at the end of this news release.

BALANCE SHEET HIGHLIGHTS

CONFERENCE CALL

A conference call has been scheduled for Wednesday, November 2, 2016 at 10:00 a.m. (ET) to discuss Aecon's second quarter 2016 financial results. Participants should dial 416-359-3130 or 1-800-685-3601 at least 10 minutes prior to the conference time. The reservation number is 21818065.  For those unable to attend the call, a replay will be available after 12:30 p.m. at 1-800-558-5253 or 416-626-4100 until midnight on November 9, 2016.
 

ABOUT AECON

Aecon Group Inc. (TSX: ARE) is a Canadian leader and partner-of-choice in construction and infrastructure development.  Aecon provides integrated turnkey services to private and public sector clients in the Infrastructure, Energy and Mining sectors and provides project management, financing and development services through its Concessions segment. Aecon is also pleased to be consistently recognized as one of the Best Employers in Canada. For more information, please visit www.aecon.com and follow us on Twitter at @AeconGroup.

STATEMENT ON FORWARD-LOOKING INFORMATION

The information in this press release includes certain forward-looking statements. These forward-looking statements are based on currently available competitive, financial and economic data and operating plans but are subject to risks and uncertainties.  In addition to events beyond Aecon's control, there are factors which could cause actual or future results, performance or achievements to differ materially from those expressed or inferred herein including, but not limited to: interest and foreign exchange rates, global equity and capital markets, business competition and operational and reputational risks, including Large Project Risk and Contractual Factors.  Readers are referred to the specific risk factors relating to and affecting Aecon's business and operations as filed by Aecon pursuant to applicable securities laws.  Forward-looking statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, ongoing objectives, strategies and outlook for Aecon.  Forward-looking statements, may in some cases be identified by words such as "will," "plans," "believes," "expects," "anticipates," "estimates," "projects," "intends," "should" or the negative of these terms, or similar expressions.  Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Aecon undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE Aecon Group Inc.