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Dive brief:
- Fluor announced Friday that it earned $206 million in the third quarter of 2023, compared with $22 million in profit a year ago, on strong activity from its energy and urban solutions segments, according to the third quarter results report of the company.
- Third-quarter revenue reached $3.96 billion compared with $3.61 billion a year ago, an increase of about 9.7 percent, Fluor CEO David Constable said during the earnings call . Backlog reached $26 billion, up 2.3% from $25.4 billion in Q3 2022.
- The Irving, Texas-based company reported that its new premiums for the third quarter reached $5 billion, down 48.7% from $9.74 billion a year ago, although remain in line with the company’s expectations, according to the report. “The new awards for the quarter are on track relative to our four-year plan,” Constable said on the call. “We continue to track a prospect list more than 15 times the size of our current portfolio.”
Diving knowledge:
One of those incoming project wins includes a contract to develop BHP Canada’s multibillion-dollar Jansen potash project, a underground potash mine, in Saskatchewan, Canada. Fluor expects to recognize this undisclosed reimbursable contract value during the fourth quarter of 2023.
This positive pipeline follows a relatively strong second quarter, where the company reported “positive momentum in legacy infrastructure projects.”
“This quarter’s results reflect our deliberate focus on driving profitability through improved project execution and our high-quality contract portfolio,” Constable said. “Combined with our strengthened and simplified capital structure, Fluor is well positioned to support demand-driven growth and improved shareholder returns.”
New awards for the third quarter include a $250 million Bayer pharmaceutical plant in Berkeley, California. The 100,000-square-foot biopharmaceutical development and manufacturing facility will produce cell therapies for neurodegenerative disorders, according to Bayer.
Other wins included a semiconductor plant in the Pacific Northwest, an expansion facility in Denmark, life sciences projects and a contract extension for its current ones. Navy Nuclear Propulsion Programaccording to Fluor.
About 70% of new awards are refundable, an improvement on 58% a year ago. These types of contracts require the client to cover the cost of all completed works, meaning the final price is determined after the project is completed, reducing risk for the contractor.
Contributions of earnings
Fluor continues to recover from his cloudy first quarter Earlier this year, when $80 million in charges from two legacy projects dragged down its results, said Andrew Wittmann, senior research analyst at Milwaukee-based financial services firm Baird.
“Results came in ahead of expectations for the quarter,” Wittmann said in a research note. “While underlying earnings are solid, earnings in the quarter appear to have been helped by former ‘problem projects’ that took previous charges that have now moved to positive reviews.”
Fluor’s Energy Solutions segment reported a profit of $177 million in the third quarter compared to $59 million in the third quarter of 2022, largely due to the early recognition of cost recovery rights on several projects at a fixed price, according to the release.
Urban Solutions reported a profit of $66 million in the third quarter compared to a loss of $50 million in the third quarter of 2022. These results include an incentive fee earned for a large mining project nearing completion, according to the statement
Constable also highlighted the boost of the highly viewed Gordie Howe Bridge and work at Los Angeles International Airport.
“Gordie Howe is 65% complete and we are making great progress there. The LAX People Mover project in Los Angeles I think is 80% complete as we speak,” Constable said. “These projects are in a very good place now and with good discussions with customers where revenue recovery is required. This It gives us good confidence in the future.”
