Dive Brief:
- Irving, Texas-based multinational contractor Fluor announced last week that its third quarter revenues and backlog fell year over year.
- Third quarter revenue fell 10% year over year to $3.1 billion compared to $3.45 billion a year ago, due to lower revenue streams in its business units focused on government and infrastructure work. Backlog fell as well to $21 billion, down 21% from the $25.4 billion it recorded a year ago, but basically flat from what it showed in Q2 2021.
- "We believe our backlog will stabilize over the next several quarters as clients express enthusiasm around new opportunities in infrastructure, mining, government and energy transition," said David Constable, Fluor's CEO, on an earnings call with investors.
Dive Insight:
In its quarterly filing with the Securities and Exchange Commission, the firm noted that $2 billion of the drop in backlog was due to the cancellation of both a chemicals project and a steel project.
Despite those headwinds, the company raised its earnings guidance for 2021 from $0.60 to $0.80 to $0.85 to $1.00 per diluted share, based on the current trends it is seeing in the market.
The company announced operating cash flow for the third quarter had an outflow of $66 million, and expected full year operating cash flow to be neutral to slightly positive. Constable said the outflow was driven by the timing of cash inflows.
"If I take a look at that $66 million, there's a very small portion of that that is to service loss projects," said Joe Brennan, CFO of Fluor. "As we move into [the fourth quarter], I am very confident that we'll see those cash balances snap back to the positive range, and we will end the year in a positive cash flow position."
On Wednesday, contractor Tutor Perini noted on its own earnings call that it used $21 million in operating cash during the third quarter, at least partially attributable to government clients not paying their bills due to funding uncertainty over the infrastructure bill. The U.S. The House of Representatives since passed the bill on Nov. 5.
Fluor also announced the third quarter backlog contained $1.1 billion in legacy projects that are in a loss position. Around $900 million is related to the Gordie Howe International Bridge, a $4.5 billion project that will connect Detroit to Windsor, Ontario, Canada.
Other segments
In contrast to those challenges, Constable said the energy solutions segment, which focuses on energy transition, chemicals and traditional oil and gas opportunities, is "really going to pick up." He said the company is tracking more than $50 million EP, EPC, EPCM projects over the next 12 months and is "chasing $15 billion in mining projects in the next 12 months."
"We're really excited about the first half of 2022 and starting to book a healthy backlog with good margins," Constable said.
Third quarter new awards totaled $3 billion, up from around $1.2 billion last year.
The mission solutions group, which serves federal agencies across the U.S. government and in other countries, led all segments in new awards with $1.6 billion, including $789 million for a 12-month extension to the Department of Energy's Savannah River M&O contract and $495 million for Operation Allies Welcome at Holloman Air Force Base in New Mexico.
New awards for the third quarter in the urban solutions group, which focuses on mining, metals, advanced technologies, manufacturing, life sciences and infrastructure, reached around $781 million, including $316 million for the Texas DOT's I-35E Phase 2 expansion project in Dallas.
Near-term opportunities in this segment include roads, bridges and project management-only prospects, said Constable. He added "our infrastructure clients continue to express interest in the pending infrastructure bill."
"Overall, I'm very pleased with the speed and the direction we’re moving the company," said Constable. "We're well into creating an organization that aligns with the needs of our clients and the expectations of consistent returns for our stakeholders."
