“Persistent margin compression” remains the key challenge for Canadian mineral drilling contractor Major Drilling Group International, which posted record annual revenue of C$889.08 million for the 12 months to April 30 along with a lower full-year EBITDA margin on $102.72 million of EBITDA.
The latter was up 2% year-on-year.
Canadian investment firm Red Cloud Securities said the revenue result, 22% higher yoy, reflected slightly higher drill fleet utilisation rates (53%) and a demand backdrop that remained “strong with higher gold and copper prices translating to increased exploration activity, particularly in North America”.
“Record annual revenue continues to validate our thesis but persistent margin compression remains the key challenge,” Red Cloud said.
“We are expecting sustained revenue growth in FY2027, however, margin compression may linger in H1/27 as indicated by management.
“With strong metal prices, healthy junior financing activity and expanding exploration budgets from the majors we continue to like the Major Drilling story.”
The market broadly agrees, with Toronto-listed Major’s share price up circa-10% in the past month and 30% in the past six months. Its current market value is about $1.39 billion.
“Management reiterated that margin expansion is expected to lag revenue growth at the start of FY/27 as pricing catches up and outpaces initial cost increases,” Red Cloud said.
“Labour continues to be the key challenge amidst a tightening pool of experienced drillers. The company has scaled up trainee programs, which will continue to temporarily weigh on productivity and margins in the near term.”
Major is also guiding for higher capital expenditure in FY27 – c$75 million versus $61 million in FY26 – “to support fleet deployment ahead of what management expects will be a significantly busier year”.
