The steel structure experts at ADF Group (TSX:DRX) opened the week on a positive note with the announcement of major contracts coming from the United States. The Terrebonne, Quebec-based company, which has fabrication and paint shops in its hometown and Great Falls, Montana, USA, said the two contracts have a combined value of $102 million.
The first contract relates to the construction of infrastructure for a new public transport in the Western U.S. ADF will be responsible for the design and engineering of connections and fabrication - including the procurement of raw material (steel) and industrial coating - as well as the installation of complex steel structures and heavy steel components for the project. The Montana plant will handle this project, with work expected to start during Q1 of the fiscal year beginning February 1, 2019 and continue for roughly 2-1/2 years.
Separately, ADF also won a contract to construct a new recreational structure in the Southeast U.S. In additional to erecting the structure, ADF will provide its skill set to assist in design and engineering methodology. No timeline was provided for this job, nor were the revenue values of the individual projects disclosed.
The new work brings ADF's backlog of work to approximately $243 million. The company said that backlog at the end of July was $141 million.
ADF carries a market capitalization of about $58.7 million. Shares have been under pressure this year, in part because the company has fallen into the red. During the three months ended July 31, 2018 and first six months of the fiscal year, ADF reported a net loss of $532,000 and $1.44 million, respectively. That compared to net profit of $1.93 million in the three months in the year prior and $2.28 million for the first half of the previous fiscal year.
The company made it clear that they have been "tinged" with the uncertainty surrounding customs tariffs. Earlier this year, U.S. President Donald Trump implemented a series of 25 percent tariffs on steel imports from most countries. Many countries have retaliated with similar duties.
Shares of DRX are surging on low volume following this morning's news. The stock price has climbed to $1.80 for a gain of 32.4% in the first hour of trading, marking the highest for the stock since June 13, albeit on just 3,400 changing hands so far.
