What North American Construction Group (NOA) Said on Its Q3 Earnings Call

North American Construction Group (NYSE:NOA) raised its 2026 revenue outlook but lowered its adjusted EBITDA forecast after operational challenges in Australia and a substantial loss on its Fargo joint venture project weighed on third-quarter results.

The company reported combined revenue of CAD 438 million for the quarter ended September 30, up CAD 47 million from a year earlier, and EBITDA of CAD 100 million, consistent with the prior-year period. Adjusted earnings per share were CAD 0.25, Chief Financial Officer Jason Veenstra said on the earnings call.

IMC, acquired in the second quarter, contributed CAD 74 million in revenue and drove the year-over-year increase. Excluding IMC, Australian revenue grew organically by 5%, while Canadian revenue increased more than 20% on a like-for-like basis, supported by improved equipment availability and demand in the oil sands, Veenstra said.

Fargo Loss and Australian Costs

The company recorded an approximately CAD 50 million pretax impact from the Fargo project after receiving a revised forecast in early October that increased total project costs by 9%, Veenstra said. The impact comprised a CAD 30 million increase in general and administrative costs and a CAD 20 million equity loss.

Veenstra said the project is in a contract loss position, requiring the full loss to be recorded. He said the project is approaching physical completion and that the estimate received was not expected to be revised further downward. The company excluded the loss from adjusted results because it considers the project non-core.

President and CEO Barry Palmer attributed the loss to delayed completion, schedule impacts, rework and late increases in the cost to complete the project. Veenstra said the company plans to enter future joint venture arrangements only where it has operational control.

In Australia, gross profit margin fell to 11.9% from 14% in the second quarter, below the company’s expected range of 15% to 20%. Veenstra cited approximately CAD 10 million in additional parts and labor costs at a major Queensland site and inefficiencies following a pit wall failure at a Western Australia site.

Palmer said the Queensland maintenance costs were likely to continue through year-end. Veenstra said the updated guidance implies an Australian gross margin of about 13.5% in the fourth quarter, with a return to the 15% to 20% range expected in 2027.

Canada’s gross profit margin improved to 10.5% from 7% in the second quarter, reflecting better maintenance capability, lower repair costs and fleet efficiency initiatives, Veenstra said. He indicated that fourth-quarter guidance assumes a Canadian margin of 12%.

Updated Outlook and Cash Flow

North American Construction Group increased its full-year combined revenue forecast to CAD 1.7 billion to CAD 1.8 billion, raising the midpoint to CAD 1.75 billion from CAD 1.7 billion. It narrowed adjusted EBITDA guidance to CAD 370 million to CAD 400 million, lowering the midpoint to CAD 385 million from CAD 400 million.

Palmer said the EBITDA revision reflects third-quarter operational challenges while retaining expectations for a strong fourth quarter. The outlook depends on improvements including the IMC ramp-up, stronger Australian margins, oil sands utilization and fleet expansion in Nunavut.

The company generated CAD 52 million of operating cash flow before working capital in the quarter. Free cash flow was an outflow of CAD 28 million, which Veenstra attributed to planned capital investment in Canada and an approximately CAD 24 million impact from changes in core-business working capital.

Veenstra expects total 2026 capital spending of CAD 225 million to CAD 230 million, including lease-financed additions. For 2027, he expects spending to be similar to depreciation, which he put at a run rate of 15% to 16% of combined revenue.

Debt Reduction and Growth Pipeline

Net debt remained at CAD 1.1 billion, with trailing 12-month net debt leverage of 3.0 times. Veenstra said that figure does not yet benefit from a full year of IMC EBITDA; based on the third-quarter run rate, he put leverage at 2.8 times.

The company is committed to directing free cash flow toward debt reduction, Veenstra said. Its goal is to move leverage into the low twos and reach 2.0 times over the medium term. He said the leverage impact of new opportunities is the company’s primary screening criterion.

Contractual backlog stood at approximately CAD 3.2 billion at September 30, while the bid pipeline exceeded CAD 15 billion, including about CAD 4.5 billion in active tender and procurement. Veenstra said pipeline strength was coming primarily from Australia, with momentum also in the oil sands.

In Northern Canada, Palmer said Nuna secured an additional Ontario award extending work into the second quarter of 2027, a multi-year project extension in Nunavut and a new Yukon project. Nuna is also pursuing larger infrastructure opportunities that remain subject to procurement and other processes.

Veenstra said he expects roughly 10% organic revenue growth in 2027, excluding the Fargo impact and without major step-change contract wins. He expects the company to issue formal 2027 guidance potentially early in the year.

Leadership Transition

Brad Rogers will become president, CEO and a director on December 1. Palmer, who said the call was his last as president and CEO, described the transition as focused on continuity in strategy, customer relationships and capital allocation.

About North American Construction Group (NYSE:NOA)

North American Construction Group Inc is a Canadian heavy civil construction and contract mining company serving the resource and infrastructure sectors. The company provides large-scale earthmoving, site development, mine-support and construction services for customers primarily in western Canada.

Its services include contract mining, overburden removal, mine development, heavy civil construction, roadbuilding, reclamation and site preparation. North American Construction Group also provides equipment maintenance, repair and rebuild services, and operates a large fleet of heavy construction and mining equipment to support its projects.

Founded in 1953, the company has developed long-standing expertise in the Canadian oil sands and other resource projects.