December 10, 2009 / 5:49 PM / 9 years ago

UPDATE 2-ADF Group Q3 profit falls; says backlog strong

* EPS C$0.04 vs C$0.18 yr-ago

* Revenue falls 39 pct on contract delays

* Says backlog up 19 pct

* Shares fall as much as 7 pct (Recasts, adds details, analyst, CFO comments, share movement)

By Amit Kumar

BANGALORE, Dec 10 (Reuters) - Canada’s ADF Group Inc (DRX.TO), which makes steel superstructures for building constructions, posted a 78 percent drop in third-quarter profit, hurt by contract delays, but said it has a strong backlog and a healthy cash position.

The company said the contract delays should be recovered in the upcoming quarters and help revenue as a C$77 million North American contract started at the end of third quarter.

With the market improving and work having started on existing projects, ADF does not expect any delay in execution of its current contracts, said Louis Potvin, chief financial officer of ADF Group.

“The market in North America is ramping up for us, we see more bidding, especially on the industrial side,” Potvin told Reuters.

About 80 percent of the company’s projects are industrial projects, while the commercial projects constitute the rest.

Analyst Yuri Lynk of Canaccord Adams said ADF’s results were “solid” and there was nothing to worry about the lower profits.

With work starting on the C$77 million contract, along with the work on the World Trade Centre towers 1 and 4, the results in the coming quarter are likely to improve, analyst Lynk said.


The company said its backlog rose 19 percent to C$137 million at the end of the third quarter, from a year ago.

“The engineering and construction group backlog have started to tick up since the second calendar quarter this year,” Lynk, who has a “buy” rating on ADF stock, said.

“Eighteen months of backlog is a very good situation to be in ... we are bidding on contracts that are in the C$20 million to C$50 million range. So if we swing one or two, we can improve backlog by 40-50 percent,” Potvin said.

ADF Group said net income fell to C$1.4 million, or 4 Canadian cents a share, compared with net income of C$6.5 million, or 18 Canadian cents a share, a year ago, which benefited from a C$3.9 million net foreign exchange gain, before taxes.

Revenue fell 39 percent to C$15.8 million.

Analysts had expected earnings of 8 Canadian cents a share, before items, on revenue of C$ 24.3 million, according to Thomson Reuters I/B/E/S.

Shares of the Terrebonne, Quebec-based company fell as much as 7 percent in morning trade Thursday, before pairing some of the losses, and were down 12 Canadian cents at C$2.55 in afternoon trade on the Toronto Stock Exchange. (Reporting by Amit Kumar; Editing by Jarshad Kakkrakandy and Gopakumar Warrier)

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