North American Construction Group Ltd. (NYSE:NOA) Q2 2022 Results Conference Call July 28, 2022 9:00 AM ET

Company Participants

Joe Lambert - President and CEO

Jason Veenstra - EVP and CFO

Conference Call Participants

Yuri Lynk - Canaccord

Jacob Bout - CIBC

Bryan Fast - Raymond James

Aaron MacNeil - TD Securities

Maxim Sytchev - National Bank Financial

Operator

Good morning, ladies and gentlemen. Welcome to the North American Construction Group Earnings Call for the Second Quarter Ended June 30, 2022. [Operator Instructions]

This company wishes to confirm that today’s comments contain forward-looking information and that actual results could differ materially from a conclusion, forecast or projection contained in that forward-looking information. Certain material factors and assumptions were applied in drawing conclusions or in making forecasts actions or projections that are reflected in the forward-looking information. Additional information about those material factors is containing the company’s most recent management’s discussion and analysis, which is available on SEDAR and EDGAR as well as on the company’s website at nacg.ca.

I will now turn the conference over to Joe Lambert, President and CEO.

Joe Lambert

Thanks, Sergio. Good morning, everyone, and thanks for joining our call today. I’m going to start with the Q2 2022 operational performance before handing it over to Jason for the financial overview, and then I will conclude with the operational priorities and outlook for 2022, before taking your questions.

In today’s Q2 operational review, I want to give listeners some clarity on the issues affecting our business, what areas of the business are being affected, what we are doing about it, what progress we have made, and lastly, when we expect to have the issues resolved?

On Slide 3, our Q2 total recordable rate of 0.51 was a 40% improvement to our Q1 stand-alone results. But the trailing 12-month remains above our industry-leading target frequency of 0.5, and we will continue focusing our efforts on further developing our green hand new hire training programs, reducing hand and lifting incidents and prevention of high potential injury events.

On Slide 4, we show the 3 major issues affecting our business. The first is a good issue to have, high demand. I will speak more directly to this when we get to Slide 6, where we highlight fleet utilization. The second issue, inflationary pressures, is due to parts and labor price increases from key suppliers and vendors, which are at historical highs. These inflationary pressures are immediately increasing equipment costs, which are not yet being captured in the contract escalation clauses, which use lagging indices. Third on the list is the skilled labor shortage, which impacts our ability to promptly repair equipment. The skilled labor shortage in oil sands, in particular, has also driven a wage escalation of almost 30% for mechanics as competition for their services increases.