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ATCO Ltd. (ACLTF)

Q4 2018 Results Earnings Conference Call

April 25, 2019, 11:30 AM ET

Company Participants

Miles Dougan - Senior Manager, IR

Dennis DeChamplain - SVP and CFO

Conference Call Participants

Linda Ezergailis - TD Securities

Robert Kwan - RBC Capital Markets

Mark Jarvi - CIBC Capital Markets

Presentation

Operator

Thank you for standing by. This is the conference operator. Welcome to the ATCO First Quarter 2019 Results Conference Call and Webcast. As a reminder, all participants are in a 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. Miles Dougan, Senior Manager Investor Relations. Please go ahead, Mr. Dougan.

Miles Dougan

Thank you, Claudia. Good morning, everyone. I'm pleased you could join us for our first quarter 2019 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'll 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 Investor section under the heading Events and Presentations.

I'd like to remind you all 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, 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, Miles and good morning everyone. Thank you very much for joining us today on our first quarter 2019 conference call. ATCO announced higher adjusted earnings in the first quarter of 2019 of $112 million or $0.98 per share compared to $99 million or $0.87 per share in the first quarter of 2018.

Higher first quarter 2019 earnings were recorded in each of Structures & Logistics, Canadian Utilities, and Neltume Ports. Structures & Logistics stronger earnings benefited from the commencement of work on the LNG Canada workforce accommodation project.

In Canadian Utilities, increased Alberta power market prices and ongoing growth in the regulated rate base were major factors in higher earnings this quarter. And Neltume Ports had positive earnings contributions from our equity investment from last year's third quarter acquisition.

I won't say too much about Canadian Utilities' results as there is a separate conference call to discuss its quarterly results. Canadian Utilities did have a good quarter though and contributed $105 million in the first quarter of 2019 or $9 million in earnings growth compared to the first quarter last year.

Higher Structures & Logistics earnings were mainly due to higher space rental earnings, commencement of work on the LNG Canada workforce accommodation contract, and higher lodging occupancy at the BC Hydro Site C workforce housing camp. The Structures & Logistics business was also busy winning new contracts this quarter.

In the United States, Modular Structures was awarded a $70 million contract for the installation and rental of a 1,500-person camp for fire disaster relief in Chico, California. Frontec was also awarded $20 million contract for this camp's maintenance, including foodservices, housekeeping, and janitorial services.

In Australia, Modular Structures was awarded a $50 million contract for the relocation of 800 rooms from the Wheatstone LNG project in Northwestern Australia.

And here in Canada, Modular Structures and Frontec were awarded contracts for the total value of $15 million for Site C Clean Energy Project in British Columbia. Modular Structures will provide an additional 150 workforce housing accommodation rooms on rental contract, and Frontec will provide operations and maintenance services for these rooms on a 42-month contract.

Neltume Ports was also busy with another acquisition this quarter. In February, Neltume Ports acquired an additional 15% ownership in the TPA port, bringing its total ownership to 50%. This will allow Neltume Ports to exercise operational control and therefore, strength its sport operator role in the concession. TPA is a container port located in Northern Chile with the diversified cargo mix mainly servicing Bolivian trade. ATCO paid $9 million for its equity share in this investment.

All-in-all, ATCO had a very good first quarter of 2019. We achieved earnings growth in Structures & Logistics, Canadian Utilities, and Neltume Ports. We also added several new contracts in diversified geographies which will bolster the future earnings potential of the Structures & Logistics business.

That concludes my prepared remarks. I'll now turn the call back over to Miles.

Miles Dougan

Thank you, Dennis. And I'll turn the call over now to the conference coordinator for your questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

Our first question is from Linda Ezergailis with TD Securities. Please go ahead.

Linda Ezergailis

Thank you. Good morning. I was wondering if you could maybe give us an update on more broadly the dynamics at play in your Neltume Ports investment. You made a $9 million equity infusion in Q1. My understanding is the remaining performance-driven contingent consideration is about $6 million. How are you looking at future investments going forward, do you expect it to be beyond what I just cited as largely self-funding? Or do you think there's a chance of additional investments on top of that over the next couple of years?

Read the rest of this transcript on seekingalpha.com