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Atco Ltd. (ACLTF)

Q4 2018 Earnings Conference Call

February, 2019, 11:30 AM ET

Company Participants

Myles Dougan - Senior Manager, IR

Dennis DeChamplain - SVP and CFO

Conference Call Participants

Mark Jarvi - CIBC Capital Markets

Presentation

Operator

Welcome to the ATCO Limited Year-End 2018 Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions [Operator Instructions].

I would now like to turn the conference over to Mr. Myles Dougan, Senior Manager, Investor Relations. Please go ahead, Mr. Dougan.

Myles Dougan

Thank you, Savvis. Good morning, everyone. We're pleased you could join us for our year-end 2018 conference call. With me today are Senior Vice President and Chief Financial Officer, Dennis DeChamplain; Senior Financial Officer and Controller, Derek Cook and Vice President, Finance and Risk, Katie Patrick. Dennis will begin today with some opening comments on our financial results and recent company developments. Following his prepared remarks, we will take questions from the investment community.

Please note that a replay of the conference call and a transcript will be available on our website at atco.com, and can be found in the Investors section under the heading, Events and Presentations.

I'd like to remind you that our remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by ATCO with Canadian Securities Regulators.

And finally, I'd also like to point out that during this presentation we may refer to certain non-GAAP measures such as adjusted earnings, adjusted earnings per share, funds generated by operations and capital investment. These measures do not have any standardized meaning under IFRS and as a result, they may not be comparable to similar measures presented in other entities. And now I'll turn the call over to Dennis for his opening remarks.

Dennis DeChamplain

Thanks, Myles, and good morning, everyone. Thank you for joining us today on our year-end 2018 conference call.

ATCO recorded higher adjusted earnings in 2018 of $355 million or $3.10 per share compared to $335 million or $2.93 per share in 2017. ATCO had higher fourth quarter 2018 adjusted earnings of $108 million or $0.94 per share compared to $96 million or $0.84 per share in the fourth quarter of 2017. Higher fourth quarter 2018 earnings were due to strong results in all business segments.

Strong 2018 earnings were driven by our non-regulated businesses, mainly due to improved profit margins and demand for Structures & Logistics workforce housing products, strong results in electricity generation, Alberta PowerLine, commercial real estate and earnings from a new investment in Neltume Ports, a leading port operator and developer in South America.

Structures & Logistics recorded $9 million in higher earnings in 2018. This was mainly due to higher space rental activity, higher trade sales, particularly in Permanent Modular Construction and higher lodging occupancy at the BC Hydro Site C workforce housing camp.

Structures & Logistics had a busy 2018. In December, we entered into a joint venture with Bird Construction to design, engineer and construct a 4,500-person workforce accommodation centre. The facility will be built to house workers involved in the construction of LNG Canada's natural gas, liquefaction and export facility.

Design and engineering for the project is currently underway with construction expected to begin in the spring of 2019. The project is one of the largest accommodation facilities ever built in Canada.

We also signed a contract for workforce housing and operational support services for three camps in the Haisla traditional territory to support the construction of the Coastal GasLink pipeline in British Columbia. The three camps are proposed to commence operations in phases starting in March 2019 and continue until August of 2022. Further afield, we acquired a majority ownership position in ATCO Espaciomovil, a leading modular building manufacturer in Mexico.

With a 182,000 square foot manufacturing plant and approximately 1,300 modular rental units in operation, ATCO is now the largest manufacturer of modular products in the Mexican market with the second largest fleet of modular rental assets in the country. Fleet is currently 80% utilized on existing contracts. ATCO Espaciomovil serves a diverse customer base across Mexico and Central America.

In Chile, we constructed a new 118,000 square foot modular structures manufacturing facility in Santiago. This new manufacturing facility further solidifies our foothold in South America. Construction on this facility was completed in the second quarter of 2018.

In Australia, we opened a custom built 330,000 square foot manufacturing facility near the city of Brisbane on the eastern seaboard, which will complement an existing manufacturing plant in the city of Perth in Western Australia. The new facility in Brisbane will meet the growing demand in traditional markets such as mining and construction and also serve emerging permanent modular construction markets within the health, education, justice and commercial sectors.

In 2018, we completed several trade sales for permanent modular construction projects, including classrooms for the State of Victoria, Australia and community centers, hotels and apartment complexes in North America. We will continue to pursue these diversification opportunities going forward. And in the Frontec business, we secured two new operating and services maintenance contracts in 2018. So altogether, Structures & Logistics had a very busy year, expanded its presence globally and set the stage for continued growth going forward.

Read the rest of this transcript on seekingalpha.com