Dive Brief:
- Fluor announced Friday it earned $206 million in the third quarter of 2023, compared to $22 million in profits a year ago, with strong activity from its energy and urban solution segments, according to the company’s Q3 earnings report.
- Revenue for the third quarter hit $3.96 billion compared to $3.61 billion a year ago, about a 9.7% increase, said Fluor CEO David Constable during the earnings call. Backlog reached $26 billion, a 2.3% jump from $25.4 billion in the third quarter of 2022.
- The Irving, Texas-based company reported its new awards for the third quarter reached $5 billion, a 48.7% drop from $9.74 billion a year ago, though still in line with company expectations, according to the report. “New awards for the quarter remain on track relative to our four-year plan,” said Constable during the call. “We continue to track a slate of prospects more than 15 times the size of our current backlog.”
Dive Insight:
One of those incoming project wins includes a contract to develop BHP Canada’s multibillion Jansen potash project, an underground potash mine, in Saskatchewan, Canada. Fluor expects to recognize this undisclosed reimbursable contract value in the fourth quarter of 2023.
That positive pipeline follows a relatively strong second quarter, where the company reported “positive momentum on legacy infrastructure projects.”
“This quarter’s results reflect our deliberate focus on driving profitability through improved project execution and our high-quality contract backlog,” said Constable. “Combined with our strengthened and simplified capital structure, Fluor is well positioned to support demand-driven growth and improved shareholder returns.”
New awards in the third quarter included a $250 million Bayer pharmaceutical plant in Berkeley, California. The 100,000-square-foot biopharmaceutical development and manufacturing facility will produce cell therapies for neurological degenerative disorders, according to Bayer.
Other wins were a semiconductor plant in the Pacific Northwest, an expansion facility in Denmark, life sciences projects and a contract extension for its existing Navy Nuclear Propulsion program, according to Fluor.
About 70% of new awards are reimbursable, an improvement from 58% a year ago. These types of contracts require the client to cover the cost of all completed work, meaning the final price is determined once the project is finished, reducing the risk for the contractor.
Takeaways from earnings
Fluor continues to recover from its murky first quarter earlier this year, when $80 million in charges from two legacy projects dragged on its results, said Andrew Wittmann, senior research analyst at Milwaukee-based financial services company Baird.
“Results came in ahead of expectations for the quarter,” said Wittmann in a research note. “While underlying profits are solid, the quarter’s profits appear aided by former ‘problem projects’ that took prior charges which have now flipped to positive revisions.”
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 initial recognition of cost recovery entitlements on several fixed-price projects, according to the release.
Urban Solutions reported a profit of $66 million in the third quarter compared to a $50 million loss in the third quarter of 2022. Those results include an incentive fee earned on a large mining project nearing completion, according to the release.
Constable also highlighted momentum on the much-watched Gordie Howe Bridge and work at Los Angeles International Airport.
“Gordie Howe is 65% complete and we’re getting great progress there. The LAX People Mover project out in Los Angeles I think is 80% complete as we speak,” said Constable. “These projects are in a very good place now and with good discussions with the clients where there is revenue recovery required. That allows us good confidence going forward.”
