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Dive brief:
- WSP’s earnings, revenue and backlog increased in the third quarter, according to its earnings report released on Wednesday. Revenue grew in all reportable segments and the company is benefiting from various government stimulus efforts, CEO Alexandre L’Heureux said on an earnings call Thursday. The company reaffirmed in 2023 the financial perspectives that he had raised in the second quarter.
- The Montreal-based engineering and design giant posted revenue of C$3.6 billion ($2.6 billion), up 24.2% from the same period last year. Its profits stood at CA$156.2 million, up 22.5% year-on-year, while its backlog stood at CA$14.3 million, up 7.5% from to the period last year.
- Heureux said the company’s third-quarter performance “demonstrates the continued momentum and high demand for our services,” particularly clean energy, water, data center and transportation projects.
Diving knowledge:
While high interest rates are dampening overall market activity, the company is still well positioned to take advantage of opportunities as it has a strong balance sheet, according to WSP CFO Alain Michaud. The WSP board declared a dividend of $0.375 per share, payable in January 2024.
The firm’s environmental and water businesses continue to go from strength to strength: they represented less than 10% of the company’s top line in 2018 and now stand at more than 30%. WSP purchase of the environment and infrastructure business of John Wood Groupwhich completed September 2022, was the main driver of acquisitions growth of 15.3%.
WSP has also focused on permitting, social acceptability studies and planning. Getting involved in projects early in their planning stage presents an opportunity to cross-sell its other services, L’Heureux said, and WSP also markets its environmental work in its construction, transportation and energy sectors.
Heureux highlighted three green transition trends the company is focusing on:
- Electric vehicle transition: L’Heureux sees a rapid acceleration of activity and opportunities related to electric vehicles. The US and Canada are expected to invest $12 trillion in renewable energy and grid infrastructure by 2050, and battery plants are proliferating. WSP has seen a ‘robust’ electric vehicle project win last year and offers a range of services supporting this sector. The company has recently published a report on the Rapid increase in US electric vehicle investments.
- Water and clean energy transition: L’Heureux highlighted the strong market momentum in these sectors and said the company is well positioned to take advantage. WSP recently won a role in the Mersey Tidal Power Projectthe largest publicly led renewable energy and resilience effort in the UK that could power 1 million homes.
- Decarbonization and resilience: As extreme weather continues to affect infrastructure and the world moves toward decarbonization, L’Heureux said the outlook for climate-related projects is bright. For example, the company mapped out a decarbonization roadmap for health care for nine facilities on six continents, L’Heureux said, and recently secured a role in the New Zealand’s North Auckland Line Repair Projecta railroad that was damaged by Hurricane Gabriel.
WSP is seeing strong demand for its services worldwide, except for China with its weak real estate sector, L’Heureux said. The company has “minimal exposure” to China and has continued to shrink its presence in the past 12 months to fewer than 500 people, he said.
US Infrastructure Outlook
While federal infrastructure investment is creating many green transition opportunities, the vast majority financing of the Law of Employment and Investments in Infrastructures is for roads, bridges and other traditional transportation projects, and WSP is well positioned to take advantage of those opportunities, L’Heureux said.
The company continues to take a hit from the IIJA as expected, and L’Heureux said its “earnings rate is up compared to a year or two ago.” While the 2024 U.S. presidential election could bring a change in leadership, he didn’t think that would stop federal infrastructure funding.
“These were all bipartisan infrastructure funding, so both sides of the aisle, both Republicans and Democrats, were in favor of the infrastructure bill, the Inflation Reduction Act, the CHIPs Act, so I don’t think it’s a big part of it. affected,” L’Heureux said. “$270 billion of the bipartisan infrastructure law has already been deployed on 36,000 projects, and I think that’s a ship that’s now sailing.”
