Aecon Group Inc. Q3 2024 Financial Results

In the third quarter of 2024, Aecon Group Inc. (ARE.TO), a prominent construction and infrastructure development company, reported a revenue increase to $1.3 billion, marking a 3% rise from the previous year. Despite this growth, operating profit saw a decline to $81 million from the previous year's $140 million. The company's adjusted EBITDA improved significantly to $127 million, representing a 10% margin, compared to $32 million and a 2.6% margin in Q3 2023. Aecon's current backlog is valued at $6 billion, with new contract awards totaling $1.1 billion, indicating a strong pipeline for future revenue.

Key Takeaways

• Aecon Group's revenue increased by 3% to $1.3 billion in Q3 2024.
• Adjusted EBITDA rose significantly to $127 million, a 10% margin.
• Operating profit declined to $81 million from $140 million in the previous year.
• The company's backlog stands at $6 billion, with new contract awards totaling $1.1 billion.
• Aecon plans to diversify its portfolio, focusing on decarbonization and energy transition opportunities.
• A definitive agreement to acquire United Engineers & Constructors Inc. for US$33 million was announced.
• Revenue growth is expected to commence in 2025, with a focus on strong project execution and selective bidding.

Company Outlook

• Aecon aims to double its backlog by 2025-2026 through strategic project selection and execution.
• The company anticipates revenue growth starting in 2025, driven by projects moving into construction.
• Aecon's focus on decarbonization and energy transition is expected to open new opportunities.

Bearish Highlights

• Aecon's operating profit declined due to last year's legacy project losses and a major divestiture gain.
• The backlog decreased slightly from $6.2 billion at the end of 2023 to $6 billion as of September 30, 2024.

Bullish Highlights

• New contract awards surged to $1.1 billion, up from $591 million in the same quarter of the previous year.
• The Construction segment's revenue was bolstered by nuclear operations and utility work.
• Aecon's acquisition of United Engineers & Constructors Inc. enhances its nuclear sector capabilities and facilitates expansion into the U.S. market.

Misses

• Revenue in 2024 will be affected by the sale of assets and the completion of significant projects.

Q&A Highlights

• No write-downs were reported this quarter after a $110 million reserve last quarter for legacy projects.
• Revenue growth is expected in 2025, with a cautious approach in construction due to market volatility.
• Concessions EBITDA contributions may face headwinds during the transition from construction to operations.
• Aecon maintains a goal of an 8% EBITDA margin and a balanced approach to project bidding.
• A strong cash position of $197 million was reported at the end of Q3, with typical cash flow cadence expected to return in 2025.
• Management discussed the potential for future share buybacks and a stable leverage ratio while considering M&A opportunities.

Aecon Group Inc. has demonstrated resilience in its Q3 2024 financial performance, with strategic acquisitions and a focus on diversifying its portfolio to navigate future market conditions. The company's commitment to safety and operational effectiveness positions it well for anticipated growth in the coming years.