ATCO (TSE:ACO.X) reported higher third-quarter adjusted earnings as its modular construction and rental businesses grew, while executives outlined plans for the company that would remain after the proposed combination of Canadian Utilities and Emera.
Adjusted earnings rose approximately 9% from a year earlier to CAD 112 million, or CAD 1 per share, Chief Financial and Investment Officer Katie Patrick said on the company’s earnings call. Growth in space rentals and earnings from the Stibnite Gold Project contributed to the increase, alongside improved results at ATCO Gas Australia and rate-base growth at Alberta utilities.
Chair and CEO Nancy Southern said the planned transaction would give shareholders exposure to a larger utility and energy infrastructure company as well as a standalone ATCO focused on housing, defense services and investments.
Merger would reshape shareholder holdings
Under the announced transaction, ATCO shareholders would receive 0.865 of a share in the merged utility and energy infrastructure company and one share of the new ATCO entity for each ATCO share held, Southern said.
The combined company would have approximately CAD 45 billion in rate base and 12 regulated utilities, with Alberta and Florida expected to contribute about 80% of adjusted earnings, according to Southern. She said the merged company is expected to continue pursuing annual dividend growth and an improved dividend payout ratio.
ATCO shareholders are expected to receive approximately 20% higher dividend income through their ownership in the combined company, in addition to any dividend approved by the new ATCO board following the transaction’s close, Southern said.
New ATCO would retain ATCO Structures, defense services business ATCO Frontec and investments including Neltume Ports. Southern said separating those businesses from the utility interest would allow investors to assess their performance against peers in housing, defense and related industries.
Asked about capital allocation, Southern said she expects new ATCO’s dividend and payout ratio to be in line with peers and that, for the most part, its businesses would be able to fund their own investments.
Standalone businesses lift earnings
Excluding Canadian Utilities, ATCO’s portfolio generated 15% year-over-year earnings growth in the quarter, Patrick said.
ATCO Structures & Logistics reported adjusted earnings of CAD 40 million, up CAD 8 million from the third quarter of 2025. Patrick attributed the improvement to the Stibnite Gold Project, increased space rental activity and permanent modular construction sales. She also cited Frontec’s execution of a temporary base camp for 350 personnel in Resolute Bay, Nunavut, under a Defence Construction Canada contract.
Standalone ATCO businesses generated CAD 109 million in cash flow from operating activities, an increase of CAD 25 million year over year. Patrick said the increase reflected higher earnings from Stibnite, more rental activity and used fleet sales, as well as the timing of accounts receivable collections.
Manufacturing and defense opportunities
Southern said ATCO is assessing additional manufacturing capacity, particularly in the United States, where it sees opportunities tied to defense and critical-minerals projects. The company recently opened an expanded modular manufacturing facility in Grimsby, Ontario, which she said is 118% larger than the original building.
Southern also said several expected Canadian defense contracts for forward operating bases had been delayed by changes to federal agencies and procurement processes. She estimated the contracts could be imminent within approximately the next half year and said ATCO plans to pursue development and construction work associated with them.
In Europe, Southern identified potential demand for defense-related housing and facilities in countries adjacent to Ukraine, but said ATCO needed to see a curtailment of the war before having confidence to enter those markets. She said a rebuilding effort in Ukraine was unlikely in the immediate future.
Southern noted that increased northern infrastructure demand could support higher margins, but cautioned that labor shortages could also raise costs as projects get underway.
Port investments advance
Neltume Ports acquired an additional 50% interest in Puerto Coronel in southern Chile during the quarter, increasing its ownership to 75%, Southern said. Construction of its Vancouver Bulk Terminal in Washington state remained on schedule, with completion expected in the fourth quarter or very early in the new year.
Neltume also formed a joint venture with Chilean pulp and paper group CMPC to develop a pulp terminal at Brazil’s Port of Rio Grande. Southern said congestion at major ports has encouraged some shippers to use mid-sized facilities, creating opportunities to expand capacity and improve efficiency at Neltume’s existing ports.
About ATCO (TSE:ACO.X)
As a global enterprise, ATCO Ltd. and its subsidiary and affiliate companies have approximately 20,000 employees and assets of $28 billion. ATCO is focused on delivering essential solutions across the housing, energy and defence sectors, helping build, power and protect a future everyone can count on. ATCO Structures delivers innovative modular solutions that help communities address growing housing demand while supporting industry and economic growth. Canadian Utilities, an ATCO subsidiary, delivers safe and reliable energy services through its utilities, midstream and generation businesses.
