Earnings Call Transcript - NOA Q4 2024

Operator, Operator

Good morning, ladies and gentlemen. Welcome to the North American Construction Group Conference Call regarding the fourth quarter ended December 31, 2024. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, there will be an opportunity for analysts, shareholders and bondholders to ask questions. The media may monitor this call in listen-only mode. They are free to quote any member of management, but they are asked not to quote remarks from any other participant without that participant’s permission. The 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 or assumptions were applied in drawing conclusions or in making forecasts or projections that are reflected in the forward-looking information. Additional information about those material factors is contained in 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 call over to Joe Lambert, President and CEO.

Joe Lambert, President and CEO

Thanks, Jenny. Good morning, everyone, and thanks for joining our call today. I'm going to start with our operational performance in the fourth quarter of 2024 before handing it over to Jason for the financial overview, and then I'll conclude with the operational priorities, bid pipeline, backlog expectations for 2025 and our continued path for increased growth and diversification before taking your questions. On Slide 3, our Q4 trailing 12-month total recordable rate of 0.39 was a continuation of the improvement seen in Q3, and these full year 2024 results remain below our industry-leading target frequency of 0.5. Key safety initiatives in the fourth quarter included implementing inspection and observation programs in Australia, improving heavy equipment operator mentorship programs, developing new field level risk assessment tools, expanding the green hand training program and launching a new safety leadership survey to increase management awareness and provide gap analysis for further areas for continued safety improvement. Rest assured that from the front line to our boardroom, we are always looking to improve our safety and we will relentlessly pursue our principal cultural value to get everyone home safe. On Slide 4, we highlight some of the major operational and financial improvements in 2024. In 2024, we achieved record annual revenue, fueled by strong growth in Australia and in Q4 saw MacKellar Group achieve its highest revenue quarter ever. Our major Fargo infrastructure project achieved peak annual revenue of over $150 million and progressed past the 60% completion mark with over 20% being completed in the second half of 2024 after rain-impacted first half. The year ended with record backlog of $3.5 billion after major contract wins, including a four-year $500 million regional contract extension in the Canadian oil sands, $100 million mining and site development project for a New South Wales copper producer and a two-year $125 million heavy civil construction contract in the Canadian oil sands. As I mentioned in my letter to shareholders, I was particularly pleased to see the win at the New South Wales copper mine as our MacKellar team not only increased our geographic and commodity diversity, but also demonstrated we can compete and win unit rate contracts, which are typical in the markets where we see significant growth opportunity in other resource-rich Australian states. Slide 5 highlights the year one achievements of our MacKellar acquisition. Growth, diversification, high utilization driving high returns on capital and providing opportunity to place underperforming assets from Canada are just a few areas where our Australian business has exceeded expectations. We see this Australian contractor market as second to none and believe we can continue this positive trend for many years to come. On Slide 6, our Australian acquisition was a major driver in our 2024 growth and will continue being a primary contributor going forward. But our overall five-year growth trend and 20% annual growth rate demonstrate consistent improvements in a business culture always looking to improve. During this time frame, we won and commenced our Fargo flood diversion project, which was the largest infrastructure project in company history, commenced and completed our joint venture with Nuna at the Ontario Gold Mine, which was the largest project in Nuna history, we acquired DGI in Australia, ML Northern in Canada, expanded our in-house maintenance capabilities, including about $100 million worth of second life rebuilds of our largest assets and added to our technology with tools such as our equipment telematics and real-time machine health and production monitoring. This five-year trend demonstrates not only can we replace work as completed, but we can win more than we consume and consistently improve profitability. I will talk more about this later with details on our outlook and future expectations. Moving on to Slide 7. Our Australian equipment fleet, which in Q4 now includes a couple dozen assets shipped from Canada and about 20 growth assets required for contract wins earlier in the year, maintained a consistent monthly utilization over 80% and total Q4 utilization of 82%, which keeps us right on track to achieve our target range of 85% in Australia early in 2025. Our Canadian fleet utilization improved to 54%, building up the Q3 achievement of 51% and the Q2 low of 42%. The Canadian fleet utilization achieved monthly utilization of 60% during the quarter, and we expect to be back into the 60s through our busy Q1 winter season and achieve our target range of 75% by the end of 2025. Achieving Canadian utilization targets will require continuing to build off our project wins and with the increased revenue in Q4 and expect to further increase here in Q1 of 2025, and we're working diligently to achieve these project wins for the latter half of the year. With that, I'll hand it over to Jason for the Q4 financials.

Jason Veenstra, CFO

Thanks, Joe, and good morning, everyone. Starting with Slide 9, the headline EBITDA numbers of $104 million and 27.8% margin were driven by both a fifth consecutive successful quarter from Australia since the change of control on October 1, 2023, but also a strong operational quarter in the oil sands. I'll get to it on the next slide, but operations posted combined gross profit margin of 20%, which requires effective operations in both Australia and Canada. We included a comment here about our Oil Sands business, which, although down from last year's top line revenue, is posting more consistent quarter-to-quarter results than in the recent past and generated an over 10% increase from the third quarter on continued improved site conditions and steady usage of the equipment. The improved consistency is due to the nature of the contracts in the oil sands, which are now focused on more steady time and material and rental arrangements. Moving to Slide 10 and our combined revenue and gross profit and for the first time, now has MacKellar quarter-over-quarter in the results. MacKellar and DGI, which we combine as Australia in our results, were up $31 million on a quarter which was impacted by rains in December, but during which MacKellar posted another impressive utilization number at 82%. This top line positive variance was offset by lower revenue quarter-over-quarter in the oil sands, but as previously mentioned, was importantly up from the third quarter by 13%. Our share of revenue generated in the fourth quarter by joint ventures was down from last year as consistent scopes at the Fargo-Moorhead project were offset by lower scopes being completed within the Nuna Group of companies. Our reported combined gross profit margin of 14.6% was significantly impacted by two items, which we have adjusted for in the adjusted EBITDA margins. First was a claim that we extinguished as part of our four-year regional contract and second was the expensing of certain shipping and logistics costs in the quarter for the equipment that was sent to Australia. Excluding these items, combined gross profit of 19.7%, which reflects the strong underlying operational quarter we had. Margins benefited both from the operations in Australia, which were 22% in the quarter and the Canadian operational personnel and fleet posting solid margins of 18% as they benefited from consistent and stable operating conditions. Moving to Slide 11. Q4 EBITDA of $104 million beat last year. As mentioned, the 27.8% margin we achieved reflects an effective operating quarter and was almost 3% higher than last year's margin. This margin level is indicative of where we see our business operating at with cumulative EBITDA margin since the MacKellar acquisition now at 27.0%, which covers over $1.8 billion in revenue and an eventful 15-month time frame. Included in EBITDA is general and administrative expenses of $13.7 million in the quarter and equivalent to 4.5% of reported revenue, which is slightly above the 4% target we set for ourselves. G&A costs in Canada, in particular, have been lowered in light of lower revenue being generated in the oil sands. Going from EBITDA to EBIT, we expensed depreciation equivalent to 14.0% of combined revenue, which is consistent with the third quarter and reflects the depreciation rate of our entire business. When looking at just the wholly owned entities of our heavy equipment in Australia and Canada, the depreciation percentage for the quarter was also 14.0% of revenue and reflects the lower percentage of the Australian fleet as well as the fourth quarter operations in the oil sands, which require high idle time during the cold weather. Adjusted earnings per share for the quarter of $1 reflects all the positive factors mentioned with interest and taxes generally consistent with last year. The average cash interest rate for Q3 was 6.7%. Moving to Slide 12. I'll briefly summarize our cash flow. Net cash provided by operations prior to working capital of $62 million was generated by the business, reflecting EBITDA performance and net of cash interest paid. Free cash flow of $50 million was driven by the strong EBITDA quarter, offset by the typically lighter capital spending in the fourth quarter. Moving to Slide 13. Net debt levels ended the quarter at $856 million, a decrease of $26 million in the quarter as free cash flow was directed to both growth assets and debt reduction. Of the $856 million, $448 million or roughly half is denominated in Australian dollars and is naturally hedged with the heavy equipment we own in Australia. Net debt and senior secured debt leverage ended at 2.2 times and 1.7 times, respectively, which decreased in Q4 on free cash flow. Of note, of course, is that subsequent to year-end, we had $73 million of convertible debentures convert into shares, which when applied to the December 31st balances, result in net debt of $783 million and net debt leverage of 2.0 times. With that, I'll pass the call back to Joe.

Joe Lambert, President and CEO

Thanks, Jason. Looking at Slide 15. This slide summarizes our priorities for 2025. In 2025, the company will prioritize enhancing safety systems with a focus on consistency and training for frontline leaders. Key objectives include increasing equipment utilization, advancing telematics, including a rollout in Australia and maintaining a strong focus on customer satisfaction to secure contract extensions and expansions. On Slide 23 in the supplemental information, you'll see a Texas thermal coal mine contract and the Queensland thermal coal mine contract that ended in 2025. Both contracts are being retendered with the Texas contract award in the second half of the year and the Queensland contract, which includes both an extension of potential expansions of services being awarded in the first half of the year. We're confident in our ability to retain and expand these contracts because of our incumbency, our positive client relationships and our safe low-cost provider status. Additionally, the company plans to diversify geographically in terms of resources beyond Queensland and Alberta, optimize business processes and reduce costs through the ERP system in Australia and expand external maintenance component rebuild services for third-party customers. On Slide 16, the bid pipeline remains over $10 billion with continuing and consistent strong demand in Australia and modestly increasing demand in Canadian mining projects. The oil sands region is expected to see consistent project demand driven by higher projected barrel production, while infrastructure opportunities are also on the rise, especially in the United States. As I mentioned in my letter, we see infrastructure works growing to about a quarter of our business over the next several years. And with that strategic focus, we will be adding some more infrastructure talent and experience to our team to bid, win and execute these projected projects. Moving to Slide 17. The company is a record-setting contractual backlog of $3.5 billion with strategic partnerships in the mining, resource and civil sectors such as those with the Mikisew Cree First Nation, Kitikmeot Inuit Association, Red River Valley Alliance and ASN Constructors. Despite over $1.1 billion of work being executed in 2024, new additions of $1.7 billion have further strengthened the backlog and continue to demonstrate not only our ability to win work, but to grow our backlog and continue to diversify both geographically and by commodity. On Slide 18, we've provided our outlook for 2025. The 2025 outlook remains aligned with previous expectations, driven by existing contracts in Australia and Canada. The per share metrics have been adjusted to the new share count after a recent debt conversion and the growth capital adjusted for deferred growth asset deliveries and project scheduling in Australia. Key financial metrics for 2025 include combined revenue of $1.4 billion to $1.6 billion, adjusted EBITDA of $415 million to $445 million, adjusted EPS of $3.70 to $4.00, sustaining capital of $180 million to $200 million and free cash flow of $130 million to $150 million and growth capital of $65 million to $75 million with a net debt leverage target of 1.7, down from the 1.8 after the previously mentioned debt conversion and growth spending. Half-year and quarterly splits of EBITDA are expected to be weighted slightly towards the second half of the year with Q1 contributing slightly less than Q2 and Q3 being the largest quarter as our typical high Q1 in oil sands has less influence on the overall business. Our Australian business having typical high Q1 weather impact and not achieving the full benefits of the growth capital additions until the second half of the year and our Nuna and infrastructure construction works, which achieved typical peaks in Q3. Our half-year and quarterly splits in EPS are expected to follow the same trends with increased weighting towards the second half of over 55%, Q1 contributing about 20% with Q3 again the largest quarter. The difference in the weighting on EPS from EBITDA is due to the front-loaded equipment repair costs and increased depreciation in our Canadian business unit from high Q1 equipment demand and increased equipment idling during cold weather. On Slide 19, the company's diversification journey continues with Australian operations expected to generate 60% of earnings before interest and tax in 2025. The earnings composition by contract type includes 65% from time and material, 20% from unit rate, 10% from equipment rental, and 5% from fixed-price contracts. Mining services make up 80% of the revenue with civil construction contributing 15% and equipment and component sales 5%. Geographically, 60% of the earnings came from Australia, 30% from Canada and 10% from the US. The Canadian oil sands region is expected to contribute about 25%. In future quarterly decks, we plan to provide longer-term projections and insights into how we expect to continue to grow and diversify our business, including our target to grow our infrastructure business to 25% of earnings and our continued commodity and geographic diversification in Australia. Lastly, regarding capital allocation, we remain committed to paying down debt and further strengthening our balance sheet. We believe our free cash flow will provide ample opportunity to continue to invest in shareholder-friendly ways while still being able to pay down debt and pursue acquisition and expansion opportunities when those returns warrant investment. In closing, and as I said in my letter to shareholders, we have great expectations for our business in 2025 and going forward and believe we're in the best position we have ever been to continue to grow and diversify with improving profitability and with positive free cash flow to drive increased shareholder benefits. With that, I'll open up to any questions you may have.

Operator, Operator

Your first question is from Yuri Lynk from Canaccord Genuity. Your line is now open.

Yuri Lynk, Analyst

Hey, good morning, guys.

Joe Lambert, President and CEO

Good morning, Yuri.

Yuri Lynk, Analyst

Just want to dig in on the 2025 outlook in Canada. Utilization is still struggling. So wondering what you need to win to hit your numbers? Or do you feel you've got that in the backlog already? And kind of related to that, 12, 18 months ago, I thought the outlook for non-oil sand mining awards in Canada was pretty bright, but we continue to wait for some success there. Can you just update us on kind of the bid funnel as it pertains to commodities outside of the oil sands?

Joe Lambert, President and CEO

Yeah. I think as far as our guidance, Yuri, we expect the utilization to stay similar to what it was last year with a little bit of increased demand in oil sands, drops off in the second half of the year a bit. To get to our 75%, which would put us over guidance, I would say, in Canada. That would mean winning some work outside. We still have active tenders in Ontario, in particular. Or the worst-case scenario, we would prioritize our work in Canada, additional work in Australia where we would have shipping, but that wouldn't necessarily affect 2025. And our final resolution, and this is predominantly a smaller equipment would be to sell them if they're underutilized and we can't place them.

Yuri Lynk, Analyst

What can you tell us about the significant decline in your oil sands business? Is it due to deferred projects, work being assigned to competitors, or work being done internally? Could you provide some insights into what's happening in that market?

Joe Lambert, President and CEO

I can hypothesize, Yuri. It dropped about 30% last year. We're right about the same levels this year as last year. We look at that as the consistent level we'll project going forward. As far as the 30% drop and whether it was in-house or deferred, it's very difficult to say. It could be a combination of both. It's a very long cycle. These are long-life mines. There could be deferral for four or five years. we're just going to plan on being where it is, and it's very strong demand on the big truck side. It's still low demand on the civil construction works from small trucks, and those are the ones we look to take out of oil sands and place somewhere else. But we just take the demand as it is. And if there's an upside in the future with increased production, the barrel production in oil sands projected to go up significantly year-on-year, then we just see it as an opportunity.

Yuri Lynk, Analyst

Okay. Last one for me. Just the two adjustments you made out of gross margin. I guess the shipping costs are self-explanatory, a bit much higher than I thought it was going to be. But what happened with the claim? And has that been put to bed?

Joe Lambert, President and CEO

Yeah. It was just negotiated as part of our four-year contract extension. So we resolved it with that. And so we dropped the claim and we negotiated it into our contract.

Yuri Lynk, Analyst

I'll turn it over. Thanks, guys.

Joe Lambert, President and CEO

You bet, Yuri. Thank you.

Operator, Operator

Thank you. Your next question is from Aaron MacNeil from TD Cowen. Your line is now open.

Aaron MacNeil, Analyst

Hey, good morning, all. Thanks for taking my question.

Joe Lambert, President and CEO

Good morning, Aaron.

Aaron MacNeil, Analyst

It seems you've initiated a significant project in Australia that is now in the active procurement phase, and overall, things appear to be progressing well there. Can you provide additional details on how you plan to mobilize equipment if you secure additional contracts? In Australia, you're approaching the 85% utilization target, whereas Canada’s utilization remains below that. Is there interest in further asset transfers, or is the remaining equipment in Canada too limited to be effectively used for that work?

Joe Lambert, President and CEO

The work in Australia aligns well with our fleet in Canada, and we don't have long-term commitments on much of that fleet, whether large or small. The smaller assets are suitable for many of the opportunities we see in Western Australia. Recently, we secured a contract at a copper mine in New South Wales that involved 100-ton trucks, and we've also deployed some 240-ton trucks at a coal mine there. You made a good point, Aaron; if we can achieve 85% utilization on five-year committed contracts, that would yield a strong return on our assets. I believe we'll continue to transfer assets from Canada to Australia as we secure contracts like this, which is beneficial for our capital returns. While there is some short-term inconvenience due to shipping times, we would prefer to engage in long-term contracts closer to avoid delays when moving between jobs. However, with the equipment we've sent there and the renewal of contracts, pursuing more of these opportunities seems to make a lot of sense for our business, both in terms of capital return and long-term stability.

Aaron MacNeil, Analyst

Would it be better to lease or buy new equipment to source that work, or should we continue to transfer underutilized equipment?

Joe Lambert, President and CEO

I believe it would be more beneficial to transfer underutilized assets to areas where they can achieve high utilization with long-term commitments. If there is a need for newer assets, we can take our existing ones and upgrade them to meet new standards. Therefore, we would prioritize using our current assets before considering purchasing any new growth assets.

Aaron MacNeil, Analyst

Got you. And then maybe one for Jason. You outlined the diversification journey on Slide 19. Can you speak to any progress, if applicable, on how you might be thinking about North American's GICS code and maybe more superficially about the corporate name, just given that the GICS code and the name don't really reflect the business fundamentals anymore?

Jason Veenstra, CFO

Yeah. With the filing of yesterday, we will be engaging in a GICS review. We feel on Slide 19, that does show a pretty diversified business, and we will be making the argument for a re-categorization to reflect that. So, I'm looking forward to that actually next week, we are scheduled to have those conversations. So having this trailing 12 audit was an important milestone. And so that is done effective yesterday. And so those conversations will start next week. And Joe can comment as well, but we continue to debate the name change. It's one of those decisions that's tricky. We clearly have a name that doesn't fit our 60% Australia-generating business. But I would say stay tuned for that.

Aaron MacNeil, Analyst

Got you. Thanks, both. Happy to turn it back.

Operator, Operator

Thank you. Your next question is from Maxim Sytchev from National Bank Financial. Your line is now open.

Maxim Sytchev, Analyst

Hi, good morning, gentlemen.

Joe Lambert, President and CEO

Good morning, Max.

Maxim Sytchev, Analyst

Joe, I'm curious if you could provide any updates regarding the recent inclement weather in Australia and how it might affect our outlook for Q1. Specifically, I would like to know how Q1 is trending in relation to that.

Joe Lambert, President and CEO

As I mentioned earlier, the first quarter accounts for only about 20% of our annual financial performance. This is quite different compared to the past when we primarily focused on oil sands, which used to represent a significant portion of our business during Q1. The main factor for this change is that Q1 is now the quarter most affected by weather, being the only significant weather-impacted period aside from the end of Q4 in Australia. We are also seeing effects from extreme cold in Alberta. While the first quarter remains busy in the oil sands, it now represents only 25% of our operations. Furthermore, in the second half of the year, we will start to see the impact of the growth assets we acquired last year, although we won’t have a full-year contribution from them as they ramp up. This means we can expect greater influences from these growth assets later in the year. Additionally, our summer seasonal projects, like the Nuna work up north and the Fargo-Moorhead project, will peak in Q3. Thus, our financial performance shifts from a low 20% in the first quarter, peaks in Q3, and then dips slightly in Q4.

Maxim Sytchev, Analyst

Yeah. Okay. Makes sense. And then your comments around 25% of the business to be infrastructure levered over time, how should we think about the capital intensity of the business? Is that still going to be very similar? And we should be thinking about kind of Fargo-type projects? Or I guess, any thoughts on that would be helpful.

Joe Lambert, President and CEO

My expectation is that it will be very capital-light, which is one reason we appreciate the business. The Fargo project operates independently in terms of its fleet requirements, and we have not allocated any assets to it. It requires minimal capital and generates positive cash flow quickly. This aligns well with what makes that marketplace appealing. Additionally, I believe there is an increasing demand for our practical construction approach, particularly for the types of contracts involving progressive design-build and construction management at risk, which align well with our operational management style. Overall, we observe strong demand for infrastructure projects, especially those that relate to climate resiliency. The low capital intensity is precisely why we are more eager to pursue these projects.

Maxim Sytchev, Analyst

Yeah. And I guess, is it going to be both Canada, Australia? Or is there sort of more focus on a specific geography?

Joe Lambert, President and CEO

Yeah, predominantly US and Australia, but certainly some in Canada. But I think the biggest market is the US, and I think Australia is just after that.

Maxim Sytchev, Analyst

Okay. That’s helpful. And then maybe just one quick question for Jason, if I may. In terms of Fargo, because correct me if I'm wrong, it was peak revenue generation in 2024. So how should we think about kind of the curvature of that normalization as the year progresses in 2025?

Jason Veenstra, CFO

It's about 10% down from 2024. So it's still a big strong year in 2025. We might not get to $150 million, but $140 million type of top line we expect out of Fargo this year.

Maxim Sytchev, Analyst

Okay. Very helpful. And then for my last question, can you share any additional thoughts on the timing and triggers for the NCIB quantum? Anything you can add? Thanks.

Joe Lambert, President and CEO

We've been active in the NCIB. I think we'll continue to be at these share prices. I would expect we're kind of at a low level of activity. And as our cash flow improves and depending on where share price is, I would expect it to increase if we're staying the same as it is now as our cash flow improves during the year.

Maxim Sytchev, Analyst

Okay. That's great. That's it for me. Thank you so much gentlemen.

Operator, Operator

Your next question is from Adam Thalhimer from Thompson Davis. Your line is open.

Adam Thalhimer, Analyst

Hey, good morning, guys.

Joe Lambert, President and CEO

Good morning, Adam.

Adam Thalhimer, Analyst

One of my questions was about the Fargo decrease from $153 million to $140 million. Do you think there might be some offset at Nuna or elsewhere within the joint venture that could contribute to revenue growth this year?

Joe Lambert, President and CEO

I believe there is some modest potential for an increase there. They are currently bidding actively for a lot of summer work. We will have a clearer perspective on that after the first quarter ends and as we move into the second quarter.

Adam Thalhimer, Analyst

Got it. And then I'm just curious, high level, kind of what you've learned from Fargo and what types of projects you'd be looking for in the US going forward?

Joe Lambert, President and CEO

No, I think we've learned how important good partners are. We've had some strong partners in place and gained valuable experience in executing our work and interacting with authorities in the US, particularly in permitting and regulatory matters. The project was significant because it spans across a river, two different states, two counties, and two cities, which provided us with a thorough understanding of the regulatory landscape from local municipalities to federal levels. We've also had more exposure and discussions with others in the US infrastructure sector, making us feel more confident in taking on similar projects. We still seek opportunities in earthworks and civil construction that align with our past experiences. However, we would not hesitate to explore other areas if we have the right partner and the necessary experience, though we're not looking to undertake skyscraper construction. Our past experience with roadworks means that projects involving concrete wouldn't significantly stretch our capabilities. Therefore, most infrastructure work, excluding vertical construction, would suit us well.

Adam Thalhimer, Analyst

Got it. Okay. And just last one for me. Curious how you see backlog trending this year because it looked like your larger bids were more concentrated in early '26.

Joe Lambert, President and CEO

That's the start date of those projects. So we would still look to win those in 2025, but they'd be in backlog before then. So I think we've got some good opportunities to continue the growth with some potential expansions, predominantly in Australia and extensions, early extensions of contracts and some civil and mining opportunities, in particular in Ontario right now. Yeah, I think there's good opportunities to continue to build on that.

Adam Thalhimer, Analyst

Great. Thank you, Joe.

Joe Lambert, President and CEO

You bet. Thank you, Adam.

Operator, Operator

Thank you. Your next question is from Wil Wutherich from Wutherich Company. Your line is now open.

Wil Wutherich, Analyst

Hi, guys. So the one word I have not heard this whole call is tariffs, which is kind of the topic of discussion on virtually every other conference call. So address that. I mean, I presume some heavy equipment purchasing or moving thereof might be faced with this. But anyhow, if you can sort of put together any potential impacts you might see from tariffs?

Joe Lambert, President and CEO

Currently, we haven't noticed much impact, and while that may change in the future, most of the assets we need have either been rebuilt by us or ordered and are on their way. We don't anticipate significant asset purchases from the US in the upcoming year. Australia, which accounts for over 60% of our business, remains unaffected, and our US operations have not shown any signs of disruption. Regarding Canada and the oil tariffs, the difference is 10% versus 25%, and we haven't observed any significant changes in plans from our clients and producers. While we can't claim complete immunity, it does not seem like there will be a material impact on us at this time. We'll have a clearer picture by April 2.

Wil Wutherich, Analyst

Right. And the other question I have is Australia. You referred to the first quarter as being a weaker quarter, in particular, because of a usual pattern in Australia. How about this year in particular? How has the first quarter weather in Australia looked overall? And what might this impact be?

Joe Lambert, President and CEO

We recently experienced cyclone Alfred, which significantly affected our operations, especially on the corporate side. In February, we had rains that impacted our operating sites more than cyclone Alfred did. The first quarter is typically our weakest due to rain impacts. Generally, the rest of the year is unaffected by weather, aside from potential early cyclones in late November or early December. Our cold weather, similar to Northern Alberta, usually occurs in January and February, and the significant rains in Australia also tend to happen during those months. This is why Q1 is the most impacted. Additionally, we are continuing to receive growth assets, and we have just initiated our project at the copper mine in New South Wales, with those assets ramping up. This is why we expect higher performance in the later quarters, particularly in the second half of the year.

Wil Wutherich, Analyst

Thank you.

Joe Lambert, President and CEO

No worries. Thanks, Wil.

Operator, Operator

And your next question is from Sean Jack from Raymond James. Your line is now open.

Sean Jack, Analyst

Hey, good morning, guys.

Joe Lambert, President and CEO

Good morning, Sea.

Sean Jack, Analyst

So just one for me. It's important to note that there's been some new opportunities in Australia in the bid pipeline. I just wanted to check in and see how you're seeing the competition level for bids there. And I expect to know, but has there been any change in sentiment there with some of the noise in the global markets right now?

Joe Lambert, President and CEO

We continue to see very strong demand. There is significant competition, but it is very disciplined competition. We're pleased to have won the copper mine in New South Wales and to have that project underway. This success will help us enter areas like Western Australia, where unit rate work is more favorable. There is strong demand, and while competition exists, it is not desperate. With our safe, low-cost structure, we believe we have a great opportunity to secure more work. We are also observing early potential renewals. For instance, the bid pipeline indicates an early extension opportunity, which shows that we continue to see contracts with early renewals, expansion potential, and long-term commitments. The marketplace remains robust, and our relationships with clients, as well as our ability to expand geographically and diversify our commodities, are strengths. I truly believe we are in the best position we've ever been.

Sean Jack, Analyst

Great to hear it. That's all from me, guys.

Joe Lambert, President and CEO

Thanks.

Operator, Operator

Thank you. There are no further questions at this time. This concludes the Q&A section of the call. And I will pass the call over to Joe Lambert, President and CEO, for closing comments.

Joe Lambert, President and CEO

Thanks, Jenny. Thanks again, everyone, for joining us today. We look forward to providing the next update upon closing of our Q1 2025 results.

Operator, Operator

Thank you. This concludes the North American Construction Group conference call on fourth quarter 2024. The conference call has now ended. You may all disconnect your lines.