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ADF Group Inc. — Management Reports 2025
Jun 10, 2025
44820_rns_2025-06-10_d659b098-2038-4811-8b08-dc8db6f349b9.pdf
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ADF Group Inc.
ADF Group Inc.
Interim MD&A Report
of the Financial Position and Operating Results
- Three-Month Period Ended April 30, 2025
Toronto Stock Exchange : TSX / DRX
TABLE OF CONTENTS
ADF Group Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND OPERATING RESULTS
- GENERAL ...1
- FORWARD-LOOKING STATEMENTS ...1
- GENERAL OVERVIEW ...1
- COMMERCIAL POSITIONING ...1
- MARKET TRENDS ...2
- SIGNIFICANT EVENTS OF THE THREE-MONTH PERIOD ENDED APRIL 30, 2025 ...2
- SIGNIFICANT EVENTS THAT OCCURRED SINCE APRIL 30, 2025 ...2
- EXCHANGE RATE ...3
- U.S. TARIFFS ...3
- NON-IFRS FINANCIAL MEASURES AND OTHER FINANCIAL MEASURES ...3
- ANALYSIS OF OPERATING RESULTS FOR THE THREE-MONTH PERIOD ENDED APRIL 30, 2025 ...5
- COMPARATIVE INFORMATION FOR THE LAST EIGHT QUARTERS ...7
- CASH FLOW AND FINANCIAL POSITION ...8
- CAPITAL STOCK ...9
- DIVIDEND ...9
- ORDER BACKLOG ...9
- FINANCIAL POSITION ...10
- CURRENT ECONOMIC ENVIRONMENT ...10
- EXTERNAL FACTORS TO WHICH THE CORPORATION'S PERFORMANCE IS EXPOSED ...10
- FINANCIAL INSTRUMENTS ...11
- CONTROLS AND PROCEDURES ...11
- MATERIAL ACCOUNTING POLICIES, UNCERTAINTY RELATING TO ESTIMATES AND CRITICAL ACCOUNTING JUDGMENTS ...11
- ENVIRONMENT ...11
- SUSTAINABLE DEVELOPMENT ...12
- HUMAN RESOURCES ...12
- OUTLOOK ...12
- ADDITIONAL INFORMATION ...13
Forward-Looking Statements
Management of ADF Group Inc. wishes to inform the reader that this document contains forward-looking statements within the meaning of applicable securities laws, in which Management's expectations regarding ADF Group Inc.'s future performance may be discussed. These forward-looking statements include information concerning ADF Group's probable or foreseeable future operating results and financial position and involve certain risks and uncertainties regarding their future realization. These forward-looking statements are based on currently available data regarding competition, financial position, economic conditions and operating plans.
The principal risks and uncertainties that could affect ADF Group Inc.'s results, such that those results could differ materially from those expressed in any forward-looking statements, are presented in Sections "Current Economic Environment" and "External Factors to Which the Corporation's Performance is Exposed" of the Management's Discussion and Analysis of the Financial Position and Operating Results (hereinafter "MD&A Report") for the fiscal year ended January 31, 2025.
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ADF Group Inc.
Three-Month Period Ended April 30, 2025
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND OPERATING RESULTS
1. GENERAL
The purpose of this Management's Discussion and Analysis of the Financial Position and Operating Results (hereinafter "MD&A Report") is to provide the reader with an overview of the changes in the financial position of ADF Group Inc. ("ADF", "ADF Group" or "the Corporation") between February 1, 2025, and April 30, 2025. It also compares the operating results and cash flows for the three-month period ended April 30, 2025, to those of the same period of the previous fiscal year. This MD&A Report covers all major events that occurred between February 1, 2025, and June 9, 2025, on which date ADF Group Inc.'s Board of Directors approved the unaudited interim condensed consolidated financial statements, as well as the MD&A Report for the Three-Month Period Ended April 30, 2025.
This MD&A Report should be read in conjunction with the Corporation's Unaudited Interim Condensed Consolidated Financial Statements and the notes thereto for the three-month period ended April 30, 2025, as well with the Audited Consolidated Financial Statement and Management's Discussion and Analysis of the Financial Position and Operating Results Report for the Fiscal Year Ended January 31, 2025.
The unaudited interim condensed consolidated financial statements and the comparative information for the 3-month period ended April 30, 2025, have been prepared in accordance with the International Financial Reporting Standard issued by the International Accounting Standards Board ("IFRS Accounting Standards") and applicable to interim financial reports, including International Accounting Standard 34 Interim Financial Reporting. The material accounting policies applied by the Corporation in accordance with IFRS are presented in Note 2 to the Unaudited Interim Condensed Consolidated Financial Statements for the Three-Month Period Ended April 30, 2025.
The Corporation reports its results in Canadian dollars. All amounts in this MD&A Report are expressed in Canadian dollars, except where otherwise indicated.
2. FORWARD-LOOKING STATEMENTS
In order to provide shareholders and potential investors with additional information regarding ADF, in particular Management's assessment of future plans and operations, certain statements in this MD&A Report are forward-looking statements subject to risks, uncertainties and other important factors that could cause the Corporation's actual performance to differ from those expressed in or implied by these forward-looking statements.
Such factors include, but are not limited to the impact of economic conditions in Canada and the United States; industry conditions including amendments in laws and regulations; increased competition; potential shortfall of qualified personnel or managers; availability and fluctuations in commodity prices; foreign exchange or interest rate fluctuations; stock market volatility; and the impact of accounting policies issued by Canadian, U.S. and international standard setters. Some of these factors are further discussed under Section 19 "External Factors to Which the Corporation's Performance is Exposed" in this MD&A Report. It should be noted that the list of factors that may affect future growth, results and performance, provided in this MD&A Report, is not exhaustive. The reader should not place undue reliance on forward-looking statements.
The expectations expressed by the forward-looking statements are based on information available to the Corporation on the date such statements were made. However, there can be no assurance that such estimates will prove to be correct. All subsequent forward-looking statements made, whether written or verbally, by the Corporation or persons acting on its behalf, are expressly qualified in their entirety by the caveats referred to above. Unless otherwise required by applicable securities legislation, the Corporation expressly disclaims any intention, and assumes no obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
3. GENERAL OVERVIEW
From a blacksmith shop founded in 1956, ADF Group has become over the years a North American leader in the design and engineering of connections, fabrication, including industrial coating, and installation of complex steel structures, heavy steel built-ups, as well as miscellaneous and architectural metalwork. The Corporation's products and services are intended for the following five principal segments of the non-residential construction industry: office towers and high-rises, commercial and recreational buildings, airport facilities, industrial complexes, and transport infrastructure. The Corporation uses the latest technologies in its industry and operates two state-of-the-art fabrication plants and two cutting-edge paint shops. ADF Group's complex located in Canada houses the Corporation's head office, the 58,530-square-metre (630,000-square-foot) fabrication plant, which includes the 3,900 square-meter (42,000 square feet) paint shop. ADF's complex in the United-States is home to the 9,290-square-metre (100,000 square feet) fabrication plant, the 60-acre pre-assembly yard and the 4,460-square-meter (48,000 square feet) dual-purpose building, adjacent to the fabrication plant, housing a 2,323-square-meter (25,000 square feet) paint and blast zone, and a 2,137-square-meter (23,000 square feet) area for preparation and detailing work.
A pioneer in the development and implementation of innovative solutions, the Corporation is recognized for its engineering expertise, its project management, its important fabrication capacity and its skills in two specialized market niches: the fabrication of steel superstructures with a high level of architectural and geometric complexity, and projects subject to fast-track schedules. ADF Group's commitment to deliver every project in accordance with the industry's highest quality standards constitutes a core aspect of the Corporation's mission.
4. COMMERCIAL POSITIONING
ADF Group serves a diversified client base in the non-residential construction market in Canada and the United States, including general contractors, project owners, engineering firms and project architects, structural steel erectors, and other steel structure fabricators.
The non-residential construction industry includes the products and services related to the construction of commercial, institutional and industrial buildings, such as office towers, commercial buildings, hotels, sports complexes, museums, recreational complexes, as well as manufacturing plants and other industrial facilities. This sector also encompasses public works, including the construction and renovation of infrastructure and buildings, notably, hydroelectric dams, airports, bridges and overpasses. It should be noted that the demand in this sector is related to business cycles. Generally, there are more private projects in a bull cycle, whereas government projects take over in a bear cycle.
According to Management, approximately half of the non-residential projects use structural steel as a structural component, while the other half primarily uses concrete. Generally, structural steel accounts for about 10% to 20% of a project's total cost, depending on the project's nature. Structural steel offers a number of advantages when compared to other materials, which explains its increasing use in the construction of complex structures. These advantages include durability, speed of installation, greater flexibility in fast-track projects, lower installation and maintenance costs, as well as its high strength/weight ratio as a result of improved alloys.
Generally, there are more complex steel structure projects in the United States than in Canada, which can result in a certain dependence of the Corporation on the U.S. market.
The announcement of U.S. tariffs, and Canada's counter-tariffs on steel, among others, kept the business community on the edge of their seats for several weeks, before coming into effect in Canada in March 2025, during the Corporation's first quarter ended April 30, 2025. This new economic climate has created an immediate level of uncertainty for many of the Corporation's U.S. clients. Faced with the unknown impact of these tariffs on their projects, some clients have reacted either by delaying their decision to award contracts, or by changing their choice of partners, to turn to U.S. companies that are not subject to these tariffs.
While the rules and exemptions that govern these tariffs on both sides of the border have since been clarified, they, however, continue to raise concerns for some U.S. customers. This situation resulted in a loss of certain business opportunities for the Corporation in the first quarter ended April 30, 2025, resulting from the imposition of such tariffs.
The topic about tariffs obviously remains a top story and can still change. Management is closely monitoring any new developments regarding this issue (see Section 9 "US tariffs" in this MD&A Report).
The markets and business sectors served by the Corporation remain buoyant and offer interesting business opportunities in the coming quarters. The Corporation continues to consolidate its presence with its current and potential customers across its markets, where ADF has built a strong reputation in highly complex projects, continues its marketing efforts, and is still very active in promoting the capabilities and quality of its two fabrication complexes that the Corporation operates in Canada and the United States.
6. SIGNIFICANT EVENTS OF THE THREE-MONTH PERIOD ENDED APRIL 30, 2025
6.1. Impact from New U.S. Tariffs
After the close of the Corporation's fiscal year ended January 31, 2025, the President of the United States issued executive orders directing the United States to impose new tariffs on imports from Canada, Mexico, China and other countries. At that time, it was unclear whether and when the changes to the current tariffs would be applied and whether other factors would allow all or part of the tariffs to be recovered from the market (see Section 9 "U.S. Tariffs" in this MD&A Report).
6.2. Dividend
On April 9, 2025, the Corporation's Board of Directors approved a semi-annual dividend of $0.02 per share, paid on May 15, 2025, to Shareholders of Record as at April 24, 2025.
6.3. New Contracts
On February 26, 2025, the Corporation announced a series of new orders in Quebec and the United States for a total value of $120.0 million. The largest of this series of new orders called for the fabrication and installation of steel structures and heavy steel components as part of a major renovation program for a sports complex in the Western U.S.A. This series of new orders also included contracts for various steel structures in the recreational sector also in the Western U.S.A. as well as in Quebec for a major client for which ADF has completed various other contracts in recent months and years.
7. SIGNIFICANT EVENTS THAT OCCURRED SINCE APRIL 30, 2025
7.1. Normal Course Issuer Bid (NCIB)
During the month of May 2025, after the close of the first quarter ended April 30, 2025, the Corporation repurchased and cancelled an additional 350,485 Subordinate Voting Shares, thus reaching the authorized limit for the NCIB, for a total repurchase of 1,770,707 shares. As a reminder, with the approval of the Toronto Stock Exchange and the Autorité des marchés financiers (AMF), the Corporation's Board of Directors authorized the Corporation in December 2024 to implement an NCIB to repurchase Subordinate Voting Shares in the normal course of business. The Corporation planned to repurchase for cancellation, between December 16, 2024 and December 15, 2025, up to 1,770,707 Subordinate Voting Shares, representing approximately 10% of the shares held by the public as at December 2, 2024.
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Interim MD&A Report - Three-Month Period Ended April 30, 2025
ADF Group Inc.
8. EXCHANGE RATE
The Corporation is subject to foreign currency fluctuations from the translation of revenues, expenses, assets and liabilities of its foreign operations and from commercial transactions denominated in foreign currencies. Average monthly rates (considered a reasonable approximation to actual rates at the date of transactions) are used to translate revenues (except for foreign exchange forward contracts) and expenses for the periods mentioned, while closing rates translate assets and liabilities.
During the 3-month period ended April 30, 2025, and during each of the four quarters of the previous fiscal year, the Corporation used the following exchange rates between the Canadian and U.S. dollars:
| (CAS/ US$) | Consolidated Statements of Income and Comprehensive Income | Consolidated Statements of Financial Position |
|---|---|---|
| First quarter (April 30, 2024) | 1.3575 | 1.3746 |
| Second quarter (July 31, 2024) | 1.3696 | 1.3809 |
| Third quarter (October 31, 2024) | 1.3656 | 1.3916 |
| Fourth quarter (January 31, 2025) | 1.4208 | 1.4484 |
| First quarter (April 30, 2025) | 1.4213 | 1.3812 |
The Canadian dollar lost value against the U.S. dollar during the periods analyzed, mainly when comparing the average rates for the first quarters ended April 30, 2025, and 2024. However, the trend in the last few days preceding the close of the first quarter shows an improvement in the Canadian dollar against its U.S. counterpart as evidenced by the closing rate which, at 1.3812, represented a $4.6\%$ improvement when compared to its value on January 31, 2025.
Although the Corporation enters into foreign exchange contracts from time to time and according to its internal policy in order to hedge the foreign exchange risk, these exchange rate variations have had a favorable impact of $2.3 million on the gross margin for the 3-month period ended April 30, 2025, and generated a$ 2.9 million foreign exchange gain on the Consolidated Statement of Income for the same period.
9. U.S. TARIFFS
In recent months, the tariff measures put in place by the US authorities have been marked by frequent and sometimes unpredictable developments. In this context, and now that the official documents have been published and interpreted by the Corporation's customs experts, Management has a clearer view of the different impacts of these tariffs, including the impact of the most recent announcements.
The products exported by ADF comply with the requirements of the Canada-United States-Mexico Agreement (USMCA). As a result, they are only subject to the specific steel tariffs, set at $25\%$ by U.S. Government Proclamation 10896. These duties only apply if the raw materials used are not smelted and poured in the United States. However, ADF generally obtains steel from mills located in the United States and has done so for several years. Thus, when this condition is met, ADF's exports are exempt from these duties, allowing the Corporation to maintain its competitiveness in the U.S. market.
As such, ADF's recent decline in revenues is mainly due to the disruptions caused by the rates announcement and implementation process, which have had wide-ranging effects across the industry.
At the same time, the Canadian government introduced countermeasures in the form of surtaxes on steel imports from the United States. However, these surcharges are recoverable upon exports. To facilitate the management of these costs for manufacturers, a remission order has been issued, allowing for immediate relief from these surtaxes at the time of import.
Finally, these tariffs have an indirect impact on our Corporation's fabrication costs, which are due to the increase in steel prices. This increase has and will naturally have an impact on ADF's gross margins. On the other hand, all steel fabricators, like ADF, are and will be subject to these same cost increases.
10. NON-IFRS FINANCIAL MEASURES AND OTHER FINANCIAL MEASURES
This MD&A Report is based on results prepared in accordance with IFRS Accounting Standards and includes non-IFRS financial measures and other financial measures. Non-IFRS financial measures provide useful additional information, but do not have standardized meanings established in accordance with IFRS. Readers should be careful not to confuse or substitute them with performance measures prepared in accordance with IFRS. In addition, readers should avoid comparing these non-IFRS financial measures to similarly titled measures provided or used by other issuers. When such indicators are presented, they are defined, and the reader is notified.
The Corporation uses the following indicators to measure its operating performance and the achievement of objectives:
| Three-Month Periods Ended April 30, | 2025 | 2024 |
|---|---|---|
| Non-IFRS financial measures | ||
| Adjusted earnings before interest, tax, depreciation and amortization (Adjusted EBITDA) (in thousands of dollars) | $10,395 | $23,099 |
| Adjusted EBITDA margin (as a percentage of revenues) | 18.7% | 21.5% |
| Supplementary financial measures | ||
| Gross margin (as a percentage of revenues) | 22.0% | 29.2% |
ADF Group Inc.
Interim MD&A Report – Three-Month Period Ended April 30, 2025
Page 4 of 13
| As at | April 30, 2025 | January 31, 2025 |
|---|---|---|
| Supplementary financial measures | ||
| Working capital (in thousands of dollars) | $108,645 | $109,194 |
| Working capital ratio | 2.45 :1 | 2.36 :1 |
| Order backlog (in thousands of dollars) | $330,435 | $293,105 |
10.1. Adjusted EBITDA and Adjusted EBITDA Margin
The adjusted EBITDA and the adjusted EBITDA margin show the extent to which the Corporation generates profits from operations, without considering the following items:
- Net financial expenses;
- Income taxes expense;
- Foreign exchange gain or loss, and
- Depreciation and amortization of property, plant and equipment, intangible assets and right-of-use assets.
Net income is reconciled with adjusted EBITDA in the table below:
| Three-Month Periods Ended April 30, | 2025 | 2024 |
|---|---|---|
| (In thousands of dollars) | $ | $ |
| Net income | 8,746 | 15,265 |
| Income taxes expense | 2,986 | 5,993 |
| Net financial expenses | 17 | 398 |
| Amortization | 1,589 | 1,489 |
| Foreign exchange gain | (2,943) | (46) |
| Adjusted EBITDA | 10,395 | 23,099 |
| — As a % of revenues (1) | 18.7% | 21.5% |
(1) The adjusted EBITDA margin results from dividing adjusted EBITDA by revenues.
When compared to the same period ended a year earlier, adjusted EBITDA for the 3-month period ended April 30, 2025, decreased by $12.7 million. This decrease is mainly attributable to the decline in net income and income taxes expense. These variations will be explained in more detail in the next sections.
10.2. Gross Margin as a Percentage of Revenues
The gross margin as a percentage of revenue indicator is used by the Corporation to assess the level of profitability for a given period based on the project mix for that same period. This indicator is subject to fluctuations in project prices and also in the operational efficiency of the Corporation. The indicator of gross margin as a percentage of revenues results from dividing gross margin by revenues.
In general, the Corporation aims to improve this indicator but recognizes that its fluctuation depends on the type of project signed and several other factors, including the economic context.
10.3. Working Capital and Working Capital Ratio
The working capital indicator is used by the Corporation to assess whether current assets are sufficient to meet current liabilities. Working capital is equal to current assets, less current liabilities, whereas the working capital ratio is calculated by dividing current assets by current liabilities.
Generally, Management's goal is to achieve a working capital ratio of at least 2.0:1. As at April 30, 2025 and January 31, 2025, this ratio has exceeded this goal. The Corporation establishes the achievement of this goal on the pursuit of its strategy focusing on the execution of contracts generating positive cash flows throughout their execution.
However, the Corporation also recognizes that the growth of its order backlog adds some pressure on working capital, thus explaining the level of this ratio in relation to the Corporation's long-term objective. It should be noted that the drawing up and/or revision of this corporate goal depends on a number of factors, such as the economic context and development projects that might materialize.
10.4. Order Backlog
The order backlog is a measure used by the Corporation to assess future revenue levels. The order backlog includes firm orders obtained by the Corporation, either through a firm contract or a formal notice to proceed confirmed by the client. The order backlog disclosed by the Corporation therefore includes the portion of confirmed contracts that have not been put into production.
In general, the Corporation aims to improve this indicator but recognizes that its fluctuation is dependent on several factors, including the economic context.
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Interim MD&A Report – Three-Month Period Ended April 30, 2025
ADF Group Inc.
11. ANALYSIS OF OPERATING RESULTS FOR THE THREE-MONTH PERIOD ENDED APRIL 30, 2025
11.1. Revenues and Gross Margin
| Three-Month Periods Ended April 30, | 2025 | 2024 | Changes 2025/2024 | |
|---|---|---|---|---|
| (In thousands of dollars and in percentage) | $ | $ | $ | % |
| Revenues | 55,523 | 107,400 | (51,877) | (48.3) |
| Cost of goods sold | 43,334 | 76,088 | (32,754) | (43.0) |
| Gross margin | 12,189 | 31,312 | (19,123) | (61.1) |
| — As a % of revenues (1) | 22.0% | 29.2% | (7.2) |
(1) Gross margin as a percentage of revenues is a supplementary financial measure. Refer to the Section 10 "Non-IFRS Financial Measures and Other Financial Measures" of this MD&A Report, for definition of this metric.
a) Revenues
Revenues during the 3-month period ended April 30, 2025, totalled $55.0 million, representing a decrease of $51.9 million compared with the same period ended April 30, 2024.
Revenues are recognized progressively based on costs incurred to date relative to the total estimated costs at completion on the various projects executed by the Corporation during the periods concerned.
The variation in revenues was mainly due to the uncertainty related to U.S. tariffs, as explained in Section 9 "U.S. Tariffs" of this MD&A Report. Although the Corporation's order backlog is more than adequate, exceeding $300 million as at April 30, 2025, the uncertainty surrounding the implementation and functioning of these tariffs has caused a non-recoverable delay in fabrication hours, mainly at ADF's Terrebonne plant, in Quebec.
This said, the change in the exchange rate during the 3-month period ended April 30, 2025, had a favorable impact of $4.1 million on the revenue level.
In terms of economic dependency, 75% of the Corporation's revenues during the 3-month period ended April 30, 2025, were realized with one (1) client (94% of the Corporation's revenues, were realized with four (4) clients for the quarter ended April 30, 2024), having represented 10% or more of the Corporation's revenues.
The following table presents the breakdown of revenues for each of these clients:
| Three-Month Periods Ended April 30, | 2025 | 2024 |
|---|---|---|
| (In thousands of dollars) | $ | $ |
| Client A (2) | 41,801 | 42,259 |
| Client B (2) | — | 27,843 |
| Client C (2) | — | 18,897 |
| Client D (1) | — | 12,196 |
| 41,801 | 101,195 |
(1) From Canada (2) From United States
Although the Corporation attempts to limit the concentration of its revenues, given the nature of its activities and market, its revenues are likely to remain concentrated among a restricted number of clients in upcoming quarters.
b) Gross Margin
The gross margin, in dollar value, decreased by $19.1 million during the 3-month period ended April 30, 2025, compared with the same period of the previous fiscal year. Gross margin as a percentage of revenues (1) went from 29.2% during the 3-month period ended April 30, 2024, to 22.0% during the same period ended April 30, 2025.
The decrease in margins is in line with the revenue decrease and is also explained by the impact of US tariffs. The revenue decrease forced ADF to take contingency measures and implement a work-sharing program at its Terrebonne plant. This program has allowed the Corporation to mitigate the negative impacts of the decline in fabrication hours, as previously explained, but not entirely. Tariffs also had an indirect negative impact on the Corporation's margins, caused by an increase in the price of steel set by U.S. steel mills.
Finally, given the exemptions in place and the fact that the Corporation was able to pass on the negative impact of a significant portion of the tariffs to its customers, the tariffs had a limited direct impact on the Corporation's margins for the quarter ended April 30, 2025.
As described in Section 16 "Order Backlog", the fabrication hours are not only the Corporation's core activity but are also its most value-added activity. To that effect, the revenues during the 3-month period ended April 30, 2025, were comprised of 37% of fabrication hours, compared with 28% of revenues for the 3-month period ended April 30, 2024.
(1) Gross margin as a percentage of revenues is a supplementary financial measure. Refer to the Section 10 "Non-IFRS Financial Measures and Other Financial Measures" of this MD&A Report, for definition of this metric.
ADF Group Inc.
Interim MD&A Report – Three-Month Period Ended April 30, 2025
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Increases or decreases in raw material (mainly steel) for projects that are already included in the order backlog, prices do not generally have a material impact on the gross margin since in some of the contracts in hand, the clients supply the steel to be transformed by ADF, whereas protection clauses with regard to price changes are usually included in contracts where ADF supplies the steel. In addition, the natural hedge attributable to revenues and the purchase of raw materials in U.S. dollars mitigates the impact of exchange rate fluctuations.
11.2. Selling and Administrative Expenses
| Three-Month Periods Ended April 30, | 2025 | 2024 | Changes 2025/2024 | |
|---|---|---|---|---|
| (In thousands of dollars and in percentage) | $ | $ | $ | % |
| Selling and administrative expenses | 3,383 | 9,702 | (6,319) | (65.1) |
| — As a % of revenues | 6.1% | 9.0% | (2.9) |
For the 3-month period ended April 30, 2025, selling and administrative expenses amounted to $3.4 million, posting a $6.3 million decrease compared with the same period ended April 30, 2024. This variation is mostly explained by the adjustment in the market value of Deferred Share Units (DSU) and in Performance Share Units (PSU), in line with the Corporation’s share price during the analyzed periods.
Selling and administrative expenses as a percentage of revenues for the 3-month period ended April 30, 2025, are at 6.1%, compared to 9.0% a year earlier.
11.3. Amortization
In accordance with IFRS Accounting Standards, amortization expense is included in cost of goods sold and selling and administrative expenses. However, Management considers it appropriate to continue separately commenting on the trend in amortization expense since it is considered a significant, although non-cash, component in the analysis of the Corporation’s profit margins.
| Three-Month Periods Ended April 30, | 2025 | 2024 | Changes 2025/2024 | |
|---|---|---|---|---|
| (In thousands of dollars and in percentage) | $ | $ | $ | % |
| Amortization | 1,589 | 1,489 | 100 | 6.7 |
| — As a % of revenues | 2.9% | 1.4% | 1.5 |
The amortization expense for the 3-month period ended April 30, 2025, stood at $1.6 million compared with $1.5 million for the 3-month period ended April 30, 2024. This variation is in line with the addition of capital assets during the fiscal year.
The amortization expense for the analysed periods was distributed as follows:
| Three-Month Periods Ended April 30, | 2025 | 2024 | Changes 2025/2024 | |
|---|---|---|---|---|
| (In thousands of dollars and in percentage) | $ | $ | $ | % |
| Amortization expense included in cost of goods sold | 1,232 | 1,178 | 54 | 4.6 |
| Amortization expense included in selling and administrative expenses | 357 | 311 | 46 | 14.8 |
| Total amortization | 1,589 | 1,489 | 100 | 6.7 |
11.4. Net Financial Expenses
| Three-Month Periods Ended April 30, | 2025 | 2024 | Changes 2025/2024 | |
|---|---|---|---|---|
| (In thousands of dollars and in percentage) | $ | $ | $ | % |
| Net financial expenses | 17 | 398 | (381) | Neg. |
| — As a % of revenues | 0.0% | 0.4% | (0.4) |
Net financial expenses for the 3-month period ended April 30, 2025, totaling $17,000, are $0.4 million lower than for the corresponding quarter a year earlier, in line with the average debt balance during the respective periods, net of the interest income from the Corporation’s excess liquidities.
11.5. Foreign Exchange Gain
| Three-Month Periods Ended April 30, | 2025 | 2024 | Changes 2025/2024 | |
|---|---|---|---|---|
| (In thousands of dollars and in percentages) | $ | $ | $ | % |
| Foreign exchange gain | (2,943) | (46) | (2,897) | Neg. |
| — As a % of revenues | 5.3% | (0.0)% | 5.3 |
The foreign exchange gain recorded during the quarter ended April 30, 2025, includes a $3.9 million foreign exchange loss on ongoing operations and a foreign exchange gain of $6.8 million relating to the fair value of financial derivatives. During the 3-month period ended April 30, 2025, a $4.8 million foreign exchange loss on the translation of foreign subsidiaries was recorded in Comprehensive Income.
The foreign exchange gain recorded during the quarter ended April 30, 2024, includes a $1.8 million foreign exchange gain on ongoing operations and a foreign exchange loss of $1.7 million relating to the fair value of financial derivatives. During the 3-month period ended April 30, 2024, a $1.9 million foreign exchange gain on the translation of foreign subsidiaries was recorded in Comprehensive Income.
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Interim MD&A Report - Three-Month Period Ended April 30, 2025
ADF Group Inc.
The Corporation is exposed to exchange rate fluctuations between the Canadian and U.S. dollars since a significant portion of its revenues is generally recorded in U.S. dollars.
During the 3-month periods ended April 30, 2025, and 2024, the portion of revenues realized in U.S. dollars was $87\%$ and $81\%$ respectively. Considering the improvement in U.S. markets and our facilities in Great Falls, Montana, the Corporation expects that the percentage of its revenues in U.S. dollars should remain at a fairly high level in the fiscal year ending January 31, 2026.
11.6. Income Taxes Expense
| Three-Month Periods Ended April 30, | 2025 | 2024 | Changes 2025/2024 |
|---|---|---|---|
| (In thousands of dollars and in percentages) | $ | $ | % % |
| Income taxes expense | 2,986 | 5,993 | (3,007) (50.2) |
| — As a % of revenues | 5.4% | 5.6% | (0.2) |
The effective tax rates for the 3-month periods ended April 30, 2025, and 2024 were $25.5\%$ and $28.2\%$ respectively, compared with the Corporation's Canadian effective rate, which is $27\%$ . These effective rates come mainly from the mix of profits or losses from ADF's different subsidiaries, according to their legal and tax jurisdictions.
11.7. Net Income, Basic and Diluted Earnings per Share
| Three-Month Periods Ended April 30, | 2025 | 2024 |
|---|---|---|
| (In thousands of dollars and in dollars per share) | $ | $ |
| Total net income | 8,746 | 15,265 |
| — As a % of revenues | 15.8% | 14.2% |
| Total basic and diluted earnings per share | 0.30 | 0.47 |
The change in net income during the quarter ended April 30, 2025, compared with the same period a year ago, is for the most part explained by the elements previously mentioned.
12. COMPARATIVE INFORMATION FOR THE LAST EIGHT QUARTERS
The trends observed in the analysis of quarterly results do not necessarily represent those of the future results of the Corporation. ADF's fabrication activities are not, as such, subject to seasonal fluctuations. However, the non-residential construction market in which the Corporation is active goes through upward and downward cycles.
Overall, quarterly fluctuations in the following indicators result mainly from the changes in the revenue mix and accrued costs within different projects and for every given period, together with the lags between the recognition of costs and revenues, where appropriate, that could result from the use of estimates based on the percentage-of-completion method.
More specifically and considering the results for the last eight (8) quarters presented hereinafter, these quarterly fluctuations are mostly explained by the fabrication schedules of the different projects that are underway. Considering that revenues are recognized progressively based on costs incurred to date relative to the total estimated costs at completion on the various projects executed by the Corporation during the fiscal year, these revenues, as well as operating results, can differ significantly from quarter to quarter because of these execution schedules.
| Fiscal Years | 2026 | 2025 | 2024 | |||||
|---|---|---|---|---|---|---|---|---|
| 3-Month Periods Ended | 1stQuarter(30.04.2025) | 4thQuarter(01.31.2025) | 3rdQuarter(10.31.2024) | 2ndQuarter(07.31.2024) | 1stQuarter(04.30.2024) | 4thQuarter(01.31.2024) | 3rdQuarter(10.31.2023) | 2ndQuarter(07.31.2023) |
| (In thousands of dollars and in dollars per share) | $ | $ | $ | $ | $ | $ | $ | $ |
| Revenues | 55,523 | 77,399 | 79,952 | 74,881 | 107,400 | 88,394 | 82,143 | 80,215 |
| Gross margin | 12,189 | 23,997 | 24,307 | 27,625 | 31,312 | 21,620 | 20,072 | 17,779 |
| — As a % of revenues(1) | 22% | 31% | 30% | 37% | 29% | 24% | 24% | 22% |
| Adjusted EBITDA(2) | 10,395 | 19,244 | 24,032 | 24,914 | 23,099 | 15,495 | 17,769 | 12,644 |
| — As a % of revenues(2) | 19% | 25% | 30% | 33% | 22% | 18% | 22% | 16% |
| Income before income tax expense | 11,732 | 13,132 | 21,791 | 22,226 | 21,258 | 14,255 | 13,277 | 10,949 |
| Net income | 8,746 | 9,093 | 16,432 | 16,000 | 15,265 | 10,511 | 11,198 | 10,542 |
| — Basic and diluted per share | 0.30 | 0.31 | 0.55 | 0.51 | 0.47 | 0.32 | 0.34 | 0.32 |
(1) Gross margin as a percentage of revenues is a supplementary financial measure. Refer to the Section 10 "Non-IFRS Financial Measures and Other Financial Measures" of this MD&A Report, for definition of this metric.
(2) Adjusted EBITDA and adjusted EBITDA margin (as a percentage of revenues) are non-IFRS financial measures. A non-IFRS financial measure is not a standardized financial measure under the financial reporting framework used to prepare the Corporation's financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Section 10 "Non-IFRS Financial Measures and Other Financial Measures" of this MD&A Report, for definition of these metrics and the reconciliation to the most comparable IFRS Accounting Standards.
ADF Group Inc.
Interim MD&A Report – Three-Month Period Ended April 30, 2025
Page 8 of 13
13. CASH FLOW AND FINANCIAL POSITION
The Corporation has a sound financial position and is on a solid footing to address its financial needs. Taking into account its cash and cash equivalents position, its credit facility and the level of planned capital spending, the Corporation does not expect any liquidity risk in a foreseeable future.
On April 30, 2025, cash and cash equivalents totalled $75.3 million, up by $15.3 million compared with January 31, 2025. In addition, the Corporation did not use its credit facility during both periods analyzed, being as at April 30, 2025, and January 31, 2025.
The Corporation believes that the available cash will significantly exceed the amounts required to support the growth and execution of its order backlog on hand as at April 30, 2025, and to meet its financial covenants planned for fiscal 2026.
13.1. Operating Activities
The Corporation’s operating activities are summarized as follows:
| Three-Month Periods Ended April 30, | 2025 | 2024 |
|---|---|---|
| (In thousands of dollars) | $ | $ |
| Net income adjusted for non-cash items | 7,096 | 29,038 |
| Changes in non-cash operating working capital items: | ||
| Accounts receivable | 24,952 | (41,799) |
| Contract assets | (7,333) | 15,350 |
| Inventories | (788) | (1,866) |
| Prepaid expenses and other current assets | 438 | 150 |
| Accounts payable and other current liabilities | 1,868 | 7,446 |
| Contract liabilities | (926) | (30,637) |
| Others | (2) | (3) |
| 18,209 | (51,359) | |
| Cash flows from (used in) operating activities | 25,305 | (22,321) |
Net income adjusted for non-cash items totalled $7.1 million during the 3-month period ended April 30, 2025, which is $21.9 million lower than for the 3-month period ended April 30, 2024. This variance is for the most part explained by the change in net income, gain on derivative financial instruments and income taxes expense.
The change in non-cash working capital items generated liquidities of $18.2 million during the 3-month period ended April 30, 2025. This cash inflow is mainly explained by the decrease in accounts receivable ($25.0 million), and the increase in contract assets ($7.3 million).
These variations reflect the level of activity at the close of the analyzed periods.
The change in non-cash working capital items required liquidities of $51.4 million during the 3-month period ended April 30, 2024. This cash outflow is mainly explained by the increase in accounts receivable ($41.8 million), the decrease in contract liabilities ($30.6 million), net of the decrease in contract assets ($15.4 million). These variations reflect the level of activity at the close of the analyzed periods.
13.2. Investing Activities
The Corporation’s investing activities are summarized as follows:
| Three-Month Periods Ended April 30, | 2025 | 2024 |
|---|---|---|
| (In thousands of dollars) | $ | $ |
| Acquisition of property, plant and equipment | (1,049) | (1,155) |
| Acquisition of intangible assets | (504) | (215) |
| Others | 82 | 239 |
| Cash flows used in investing activities | (1,471) | (1,131) |
During the 3-month period ended April 30, 2025, liquidities of $1.5 million were required primarily for the addition of property, plant and equipment and intangible assets, including the redesign of the Corporation’s integrated ERP software package, which will take place over the next three fiscal years.
During the 3-month period ended April 30, 2024, liquidities of $1.1 million were required primarily for the addition of property, plant and equipment and intangible assets.
The Corporation estimates total capital expenditures to reach approximately $8.0 million for the 2026 fiscal year, which will be committed primarily to maintaining production equipment current at ADF’s fabrication facilities in Terrebonne, Quebec, and Great Falls, Montana, USA, as well as the redesign of the Corporation’s integrated ERP software package.
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Interim MD&A Report - Three-Month Period Ended April 30, 2025
ADF Group Inc.
13.3. Financing Activities
The Corporation's financing activities were as follows:
| Three-Month Periods Ended April 30, | 2025 | 2024 |
|---|---|---|
| (In thousands of dollars) | $ | $ |
| Repayment of long-term debt | (991) | (673) |
| Payment of lease liabilities | (173) | (171) |
| Share buyback | (5,083) | — |
| Interest paid | (515) | (758) |
| Cash flow used in financing activities | (6,762) | (1,602) |
During the quarter ended April 30, 2025, financing activities required liquidities of $6.8 million, compared with an outflow of$ 1.6 million during the same period the previous fiscal year, including $5.1 million for the buyback and cancellation of shares (for more detail, see Section 14 "Capital Stock").
13.4. Debt Covenants
As at April 30, 2025, the Corporation met all covenants with its lenders and still did at the date hereof. Management expects it will continue to respect its commitments during the fiscal year 2026.
13.5. Contractual Obligations
No significant change has occurred in contractual obligations since the publication of the tables summarizing the information relating to contractual obligations in Section 13.6 of the annual MD&A Report for the fiscal year ended January 31, 2025.
14. CAPITAL STOCK
Information on the outstanding shares:
| Subordinate Voting Shares | Multiple Voting Shares (1) | Total Outstanding Shares | ||||
|---|---|---|---|---|---|---|
| (In thousands of dollars and in number of shares) | Number | $ | Number | $ | Number | $ |
| On January 31, 2025 | 17,075,797 | 48,291 | 12,076,820 | 13,463 | 29,152,617 | 61,754 |
| Share buyback and cancellation | (698,920) | (1,936) | — | — | (698,920) | (1,936) |
| On April 30, 2025 | 16,376,877 | 46,355 | 12,076,820 | 13,463 | 28,453,697 | 59,818 |
(1) These shares carry 10 votes per share.
On December 11, 2024, with the approval of the Toronto Stock Exchange and the Autorités des marches financiers, the Board of Directors authorized the Corporation to put in place the NCIB to repurchase Subordinate Voting Shares in the normal course of its business. The Corporation planned to repurchase, for cancellation, between December 16, 2024, and December 15, 2025, up to 1,770,707 Subordinate Voting Shares, representing approximately $10\%$ of the securities held by the public as at December 2, 2024.
Durind the 3-month period ended April 30, 2025, the Corporation repurchased a total of 698,920 Subordinate Voting Shares for a cash consideration of $5.2 million. In addition to the$ 1.9 million impact on capital stock, the total consideration had an impact of $0.1 million on contributed surplus and $3.2 million on retained income, including $0.1 million related to the 2% tax on this share repurchase.
As of the date hereof, the number of shares outstanding was 28,103,212, following the buyback for cancellation of 350,485 Subordinate Voting Shares since May 1, 2025, through its NCIB.
15. DIVIDEND
On April 9, 2025, the Corporation's Board of Directors approved the payment of a semi-annual dividend of $0.02 per share, paid on May 15, 2025, to Shareholders of Record as at April 24, 2025.
16. ORDER BACKLOG
ADF Group's order backlog (1) totalled $330.4 million on April 30, 2025, compared with$ 427.5 million on the same date a year earlier and $293.1 million on January 31, 2025. The variation is mainly attributable to the execution of contracts, net of contractual changes and the foreign exchange impact.
As at April 30, 2025, $50\%$ of the order backlog consisted of fabrication hours – the Corporation's core business and most value-added activity – compared with $30\%$ as at January 31, 2025. Most of the contracts on hand as at April 30, 2025, will be progressively executed between now and the end of the fiscal year ending January 31, 2027.
ADF Group Inc.
Interim MD&A Report – Three-Month Period Ended April 30, 2025
Page 10 of 13
17. FINANCIAL POSITION
As at April 30, 2025, the Corporation had a more than adequate financial position. The Corporation's solid consolidated statement of financial position allowed it to obtain, when required, the necessary bonding for the award of large-scale contracts. This represents a major advantage for ADF within its markets.
The following table provides details on the major changes in the Consolidated Statement of Financial Position between January 31, 2025 and April 30, 2025.
| Sections | Changes
(In millions of dollars) | Explanatory Notes |
| --- | --- | --- |
| Cash and cash equivalents | 15.3 | See Section 13 "Cash Flows and Financial Position" of this MD&A Report. |
| Accounts receivable | (27.7) | Variation of billing level in line with activity level and work progress schedules. |
| Contract assets, net of contract liabilities | 7.9 | Net variance between the work progress and progressive revenue billing; the difference reflecting the progress schedule. These variations do not include any adjustment, being either a change in the work progress or change in the price estimate. |
| Property, plant and equipment, intangible assets and right-of-use assets | (2.4) | Net change from acquisition of property, plant and equipment and intangible assets ($1.6 million), net of foreign exchange impact ($2.4 million), and of amortization ($1.6 million). |
| Accounts payable and other current liabilities | 0.4 | Change in line with the level of activity at the respective closing dates. |
| Long-term debt and lease liabilities
(including current portions) | (1.1) | Change from the reimbursement of long-term debts ($1.0 million) and lease liabilities ($0.2 million) net of foreign exchange impact and other miscellaneous items ($0.1 million). |
| Deferred income tax assets net of deferred income tax liabilities | (4.8) | Variations in timing differences between tax and accounting of certain items. |
18. CURRENT ECONOMIC ENVIRONMENT
Although the trends in certain markets served by the Corporation are good, certain external elements could lead to uncertainty regarding the economic context. In times of economic uncertainty, the Corporation is faced with the following challenges:
- Its business segment is strongly dependent on project owners' capacity to finance their projects. For lack of financing, certain projects can be delayed or simply abandoned. Although the Corporation strives to mitigate this risk by focusing its marketing efforts on projects whose financing is most likely to materialize, it has no control over financial market trends, and
- Certain project owners who secured financing on the start-up of projects could be forced to cease the work pursuant to the withdrawal of financing, due to a lack of capital of either the project lender or the owner. The Corporation mitigates this risk by ensuring that amounts due are diligently collected and, insofar as possible, maintaining at all times a positive cash flow for every project. Moreover, the Corporation does business with owners who are financially solid. At the date hereof, no project of the Corporation is subject to such constraints.
Additionally, over the past few months, the direct and indirect impacts of US tariffs have created a degree of uncertainty in the day-to-day management of our business. This situation is evolving almost daily and will be closely monitored by the Corporation.
From a financing point of view, the Corporation has a sound financial position and currently respects all its financial covenants. It expects it will continue to do so during the next 12 months. While the investment program in previous years represents a greater investment, capital expenditures are closely monitored by Management. The Corporation does not anticipate any liquidity problems, in particular since its credit facility is issued by a Canadian chartered bank with a solid credit rating, and the Corporation's major clients are leaders in their respective fields. Based on the foregoing, the Corporation maintains its short-term prospects (see Section 26 "Outlook") and does not currently foresee any short-term elements that could compromise its course of business.
That being said, the Corporation will continue to use caution and will closely monitor the situation (see Sections 19 "External Factors to Which the Corporation's Performance is Exposed" and 26 "Outlook").
19. EXTERNAL FACTORS TO WHICH THE CORPORATION'S PERFORMANCE IS EXPOSED
19.1. Global Pandemic
A pandemic outbreak, as COVID-19 demonstrates, must now be considered in external factors that may influence ADF's performance. Although the type of pandemic or future variant is innumerable, and the impacts of these pandemics on the sector in which our Corporation operates can be multiple, the Corporation will now have to monitor this new risk. The measures taken by ADF to minimize the impacts of COVID-19 on all operations will serve as the basis for future years and will need to be adjusted, if necessary, according to the potential impacts of future pandemics.
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Interim MD&A Report – Three-Month Period Ended April 30, 2025
ADF Group Inc.
19.2. Exchange Rate
The exchange rate fluctuation between the Canadian and U.S. dollars has an impact on the Corporation's results. Thus, a $2.9 million foreign exchange gain was recorded for the 3-month period ended April 30, 2025, compared with a $46,000 foreign exchange gain for 3-month period ended April 30, 2024.
In order to minimize the impact of exchange rate fluctuations on its results, the Corporation implemented the following protective measures:
- Issuance of debts in U.S. dollars;
- When advantageous, the raw material (steel) and welding products required for fabrication are purchased in U.S. dollars, and
- A foreign exchange policy to protect a portion of the net exchange risk between cash inflows and outflows denominated in U.S. dollars.
19.3. Operating Risks and Uncertainties
ADF's markets are subject to several risk and uncertainty factors, which could have an impact on its business, financial position and operating results. These risks and uncertainties include, but are not limited to the following factors, which are further detailed in the Section 21 "External Factors to Which the Corporation's Performance is Exposed" in the MD&A Report for the fiscal year ended January 31, 2025:
- Uncertainties relating to the world economy including the impact of customs tariffs or conflicts on it;
- Bonding capacity and irrevocable letters of credit, and
- Operational risks and uncertainties that could have an impact on the Corporation's financial position and operating results.
20. FINANCIAL INSTRUMENTS
A significant number of items in the Corporation's Consolidated Statement of Financial Position include financial instruments. The Corporation's financial assets consist of cash, cash equivalents, accounts receivable, contract assets, as well as derivative financial instruments, whose fair market value is positive. Financial liabilities include credit facility, accounts payable and other current liabilities, contract liabilities, long-term debt and derivative financial instruments, whose fair market value is negative.
As at April 30, 2025, the carrying amount of these financial instruments did not significantly differ from the fair market value, either because of their forthcoming maturity date (in the case of cash, cash equivalents, accounts receivable, contract assets and liabilities, credit facility, and accounts payable and other current liabilities), or because the Corporation believed it could obtain similar conditions and schedules in the case of the long-term debt (excluding the lease liabilities) or since they are re-evaluated at their fair value at the end of every period (in the case of derivative financial instruments) (see Note 5 "Financial Instruments" in the Unaudited Interim Condensed Consolidated Financial Statements for the Three-Month Period Ended April 30, 2025).
Derivative financial instruments are typically used to manage the Corporation's foreign exchange and interest rate risk exposure. They are generally comprised of foreign exchange forward contracts and interest rate swap.
The Corporation is mostly exposed to credit, liquidity and market risks, including exchange rate and interest rate risks, when using financial instruments. A description of how the Corporation manages these risks is included in Note 23 "Financial Risk Management" in the Corporation's Audited Consolidated Financial Statements for the Fiscal Year Ended January 31, 2025, and has remained unchanged for the interim period ended April 30, 2025.
21. CONTROLS AND PROCEDURES
In accordance with National Instrument 52-109, Certification of Disclosure in Issuers' Annual and Interim Filings, disclosure controls and procedures have been designed to provide reasonable assurance that the information that must be presented in Corporation's interim and annual reports is accumulated and communicated to management on a timely basis, including the Chief Executive Officer and the Chief Financial Officer, so that appropriate decisions can be made regarding disclosure.
Internal control over financial reporting has also been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS Accounting Standards.
During the quarter ended April 30, 2025, no changes were made to internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal controls and procedures.
22. MATERIAL ACCOUNTING POLICIES, UNCERTAINTY RELATING TO ESTIMATES AND CRITICAL ACCOUNTING JUDGMENTS
The unaudited interim condensed consolidated financial statements have been prepared using the same accounting policies as the ones used in the preparation of the Corporation's audited consolidated financial statements for the fiscal year ended January 31, 2025.
Refer the Corporation's Audited Consolidated Financial Statements for the Fiscal Year Ended January 31, 2025, and the Unaudited Interim Condensed Consolidated Financial Statements for the Three-Month Period Ended April 30, 2025, for more information about the material accounting policies, uncertainty relating to estimates, as well as the critical accounting judgements used to prepare the financial statements.
23. ENVIRONMENT
ADF's operations are subject to various laws and regulations adopted by federal, provincial, state and local governments pertaining to environmental protection.
ADF Group Inc.
Interim MD&A Report – Three-Month Period Ended April 30, 2025
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The Corporation’s Terrebonne and Great Falls facilities were built on vacant lands. The operations that could have a potential impact on the environment are welding, which generates smoke, and equipment maintenance, which generates waste oil, and industrial coating, which generate fumes and vapours. ADF has installed appropriate pollution control equipment in order to comply with the existing laws and regulations and ensures to perform in the normal course of business, the investments required to meet the highest standards.
Waste oil is recuperated by specialized firms. The Corporation has the necessary environmental certificates of authorization for its facilities and for all expansion phases subsequently carried out.
Moreover, as part of the construction of its new paint shop in Terrebonne, the Corporation updated its environmental certificate of authorization for all its operations located in Terrebonne, including its fabrication plant. Following these investments, ADF Group’s facilities in Terrebonne meet the highest environmental standards. During the fiscal year ended January 31, 2022, as part of the new financing that the Corporation obtained, the Corporation conducted environmental assessments at its Terrebonne, Quebec site, which did not identify any deficiencies or contaminants requiring corrective action in accordance with applicable environmental standards.
Finally, in December 2024, the Corporation obtained its ISO 14001 certification for its plant in Terrebonne, Quebec.
For the 3-month periods ended April 30, 2025, and 2024, and considering what precedes, the requirements with regard to environmental protection did not have a significant financial or operational impact on the Corporation’s capital expenditures, net income and competitive position. The Corporation does not expect to incur any costs outside the normal course of business to comply with environmental requirements.
24. SUSTAINABLE DEVELOPMENT
During the fiscal year ended January 31, 2024, the Corporation began a process to adopt a Sustainable Development Policy. Established around the three ESG axes (environment, social and governance), ADF will identify in the coming months the key objectives for each of these three axes while endowing itself with targets and means to achieve these targets.
We have since implemented several initiatives that will allow us to move forward in this process, including setting up a Sustainable Transition committee. This committee, which is made up of ADF employees, will allow the Corporation to keep its employees up to date with the latest developments, while allowing ADF Management to have ongoing feedback.
The Corporation has also retained the services of an external firm to assess how ADF manages its energy, and measures its Scope 1, 2 and 3 greenhouse gas (GHG) emissions, water and residual materials for all ADF Group facilities, both in Canada and in the United States. The results of this assessment (scopes 1 and 2) were presented in the Corporation’s Sustainable Development reports published with its other disclosure documents dated January 31, 2025, and 2024. Management is continuing to analyze this information including finalizing the data for Scope 3, which will allow to incorporate the Corporation’s targets into the sustainable development objectives that it will adopt in the coming quarters.
During the fiscal year ended January 31, 2025, the Corporation also published its Report on Forced Labor and Child Labor in Supply Chains, its Confidentiality and Protection of Personal Information Policy, Environmental Policy, as well as its Suppliers’ Code of Conduct. All of these documents are available on the Corporation’s website at www.adfgroup.com.
Several other initiatives, including the recycling and composting of waste generated by ADF’s operation have been set in motion. The Corporation will continue to provide regular quarterly update in its MD&A Reports, including the findings of the report on energy and scope 1, 2 and 3 GHG, water and residual materials, and possible solution and objectives to improve its overall performance.
25. HUMAN RESOURCES
As at April 30, 2025, the Corporation employed a total of 517 people across its head office, fabrication complex and paint shop in Terrebonne, Quebec, Canada, and its office, fabrication plant and paint shop in Great Falls, Montana, U.S.A., and as well as various construction sites in United States.
26. OUTLOOK
Given the circumstances, and more particularly the uncertainty related to U.S. tariffs, we are pleased with the results of the first quarter of our current fiscal year, which ended on April 30, 2025. It is important to remember that the same quarter that ended a year ago on April 30, 2024 was our best quarter of the previous fiscal year, in terms of revenue and gross margins, making the comparison all the more penalizing. Notwithstanding, we were able to generate cash, all the while continuing our NCIB program, which we have even completed since the close of the first quarter.
We closed our first quarter with an order backlog of $330.4 million, allowing us to expect an increase in revenue and profitability for the second half of our fiscal year ending January 31, 2026.
As previously explained herein, the uncertainty related to tariffs remains, but we have better visibility on the rules and exemptions governing these tariffs, which also allows us to have a more assertive approach when negotiating new projects.
Therefore, we will continue our proven approach of growing our order backlog, always ensuring that we limit the risks, while maintaining the operational excellence that sets us apart from the competition, and that allows us to generate long-term growth for shareholders.
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Interim MD&A Report – Three-Month Period Ended April 30, 2025
ADF Group Inc.
27. ADDITIONAL INFORMATION
The Corporation regularly discloses information through press releases, quarterly and annual reports and the Annual Information Form, available on the Corporation's website at www.adfgroup.com and the SEDAR+ (System for Electronic Document Analysis and Retrieval) website at www.sedarplus.ca.
Mr. Jean-Francois Boursier, CPA
Ms. Marise Paschini
/Signé/
Chief Financial Officer
Terrebonne, Quebec, Canada, June 9, 2025
/Signé/
Executive Vice-President, Treasurer and Corporate Secretary
adF Group Inc.
INTERIM MD&A REPORT
Three-Month Period Ended April 30, 2025
The electronic version of this document is also available at www.adfgroup.com and at www.sedarplus.ca
Ce document est également disponible en français.
ADF GROUP INC.
300 Henry-Bessemer, Terrebonne, Quebec, Canada J6Y 1T3
T. (450) 965-1911 / 1 (800) 263-7560
[email protected] / www.adfgroup.com
Toronto Stock Exchange: TSX | DRX