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Foraco International - Fourth Quarter 2016 Report

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TORONTO and MARSEILLES, France, March 2, 2017

Agreement reached with existing and new Lenders

TORONTO and MARSEILLES, France, March 2, 2017 /CNW/ - Foraco International SA (TSX:FAR) (the "Company" or "Foraco"), a leading global provider of mineral drilling services, today reported unaudited financial results for its fourth quarter 2016. All figures are reported in US Dollars (US$), unless otherwise indicated.

"Before I comment on the fourth quarter 2016 activity, I am pleased to announce that we reached an agreement with our existing and new lenders. This agreement which is in the process of being formalized allows us to ⁽ⁱ⁾ raise new long-term money with new lenders, ⁽ⁱⁱ⁾postpone installments of most of our long-term financing facilities and ⁽ⁱⁱⁱ⁾ secure new bank guarantee lines with our existing lenders," said Daniel Simoncini, Chairman and co-CEO of Foraco. "During the fourth quarter of 2016, the environment continued to be challenging as our performance was again affected by the postponement of certain contracts. We note, however, a relatively stronger commercial activity, particularly in North America and Brazil, and a significant increase in the duration of the contracts opened for bidding. At year-end, our level of order backlog to be executed in 2017 was slightly above that of last year with a more dynamic phasing of activity in the first part of the year. We believe that we have reached the turning point in terms of pressure on prices and margin. We remain cautious awaiting the expected firming up of the industry global utilization rates."

"Despite the adverse market conditions, the Company maintained a positive EBITDA in the fourth quarter as well as for the whole year of 2016. However, in Q4 2016, our cash flow from operations was penalized by the increased payment terms of certain clients" commented Jean-Pierre Charmensat, co-CEO and Chief Financial Officer. "As Daniel mentioned, we have agreed the main terms of our future financing. This agreement will provide for a new money injection of €23 million (US$ 24 million) in the form of bonds with a 5 years term, including €18 million (US$ 19 million) available at closing, and the postponement of the installment of most of our existing long-term financing also for a period of 5 years. This new debt arrangement includes standard covenants. Under the proposed structure, the cost of our debt will represent an average effective interest rate of approximately 5%. No dilutive instruments will be issued as part of these negotiations. The Company is then funded for the long term, getting ready for the upturn and in a good position to benefit from the recovery in the mining industry."

Three months Q4 2016 Highlights

Revenue

Q4 2016 revenue amounted to US$ 28.7 million compared to US$ 29.5 million in Q4 2015, a decrease of 3%. Mining activity increased by 6%, whereas the water activity decreased by 38%. Some long-terms contracts in the water segment were completed during the last quarter of 2016.
The utilization rate was 35% in Q4 2016 (compared to 30% in Q4 2015). The revenue has not increased proportionally due to a change in geographic mix.

Profitability

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The Q4 2016 gross margin including depreciation within cost of sales was US$ 3.1 million compared to US$ 5.0 million in Q4 2015, this reduction can mainly be explained by continued pressure on prices in the current challenging environment and by a change in geographic mix.
SG&A costs were stable at US$ 4.1 million for the quarter.
EBIT amounted to US$ (1.3) million in Q4 2016 compared to US$ 0.9 million in Q4 2015.
During the quarter, EBITDA amounted to US$ 3.5 million compared to US$ 6.2 million for the same quarter last year.

Net Debt

The net debt was US$ 103.3 million as at December 31, 2016 compared to US$ 89.3 million as at December 31, 2015. The positive cash generated by operations was more than offset by the working capital requirements and the Capex.
On February 28, 2017, the Company reached an agreement with its lenders. This agreement will allow to raise new long term money with new lenders, postpone installments of most of the Company's long-term financing facilities and secure new bank guarantee lines with existing lenders.

YTD Q4 2016 Highlights

Revenue

FY 2016 revenue amounted to US$ 115.2 million compared to US$ 137.7 million in FY 2015, a decrease of 16%. This decrease is mainly linked to the reduced activity in the first semester of 2016. During the second semester, the revenue decreased by 3% compared to last year.

Profitability

FY 2016 gross margin including depreciation within cost of sales was US$ 4.5 million compared to US$ 11.6 million in FY 2015, this decrease can mainly be explained by the decrease in activity and continued pressure on prices in the current challenging environment.
SG&A costs reduced by US$ 1.0 million between FY 2015 and FY 2016 as a result of certain additional savings and the reversal of an unused provision for doubtful debt (US$ 0.4 million) recorded during the first quarter 2016.
Capital expenditure was US$ 6.9 million in FY 2016 compared to US$ 9.8 million in FY 2015.

Financial results

Revenue

(In thousands of US$) - (unaudited)	Q4 2016	% change	Q4 2015	FY 2016	% change	FY 2015
Reporting segment
Mining	25,089	6%	23,708	102,910	-14%	119,358
Water	3,633	-38%	5,820	12,254	-33%	18,326
*Total revenue*	28,722	-3%	29,528	115,164	-16%	137,684

Geographic region
Europe, Middle East and Africa	9,152	-19%	11,232	38,602	-14%	44,943
South America	8,863	84%	4,821	30,046	-4%	31,376
North America	5,593	-3%	5,757	26,115	-12%	29,619
Asia Pacific	5,114	-34%	7,718	20,401	-36%	31,746
*Total revenue*	28,722	-3%	29,528	115,164	-16%	137,684

Q4 2016

Q4 2016 revenue amounted to US$ 28.7 million compared to US$ 29.5 million in Q4 2015, a decrease of 3%.

In EMEA, revenue decreased by 19%, from US$ 11.2 million in Q4 2015 to US$ 9.2 million in Q4 2016, as a result of the decreased activity in Russia and in the Water segment in Africa, partially compensated by a higher level of activity in the Mining segment in Africa and in France.

Revenue in South America amounted to US$ 8.9 million in Q4 2016 (US$ 4.8 million in Q4 2015), an increase of 84%. Both Brazil and Chile contributed to this increase.

Revenue in North America was almost stable at -3%.

In Asia Pacific, Q4 2016 revenue amounted to US$ 5.1 million, a decrease of 34% mainly due to certain reductions of drilling programs in Australia and some weather issues in New Caledonia.

FY 2016

FY 2016 revenue amounted to US$ 115.2 million compared to US$ 137.7 million in FY 2015.

In EMEA, revenue decreased by 14% (from US$ 44.9 million in FY 2015 to US$ 38.6 million in FY 2016) as a result of the decreased activity in Russia and in the Water segment in Africa, partially compensated by a higher level of activity in the Mining segment in Africa and in France.

Revenue in South America amounted to US$ 30.0 million in FY 2016 (US$ 31.4 million in FY 2015), a decrease of 4%. The increased activity in Brazil (+12% in local currency) was more than offset by the reduced activity in Chile and lack of activity in Argentina.

Revenue in North America was US$ 26.1 million compared to US$ 29.6 million, a decrease of 12% mainly due to the reduction of volumes and the postponement of certain ongoing contracts.

In Asia Pacific, FY 2016 revenue amounted to US$ 20.4 million, a decrease of 36% mainly due to the reduction of drilling programs in Australia and in New Caledonia.

Gross margin

(In thousands of US$) - (unaudited)

Q4 2016

% change

Q4 2015

FY 2016

% change

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