Chicago Bridge & Iron (CBI) Q1 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Chicago Bridge & Iron (CBI) CEO Philip Asherman said customers aren’t canceling already existing energy infrastructure projects but are delaying future commitments 

 
Now year-to-date, we’ve already seen improvement in new work bookings early in the second quarter, countering what is at a continuing delay and final capital decision most of our markets. We’re not seeing cancellations but the continuing weakness in commodity prices is delaying commitments.”
A minority of their construction projects product a majority of the company’s profits
 
I think, again, although we focus some on the fabrication jobs, in their entirety, they’re fairly – they’re much smaller in terms of how they move the needle, as you could imagine, but certainly important. So it’s always important to remember, as you so readily point out, that we’re kind of an 80/20 company where 20% of our backlog drives about 80% of our profitability. So obviously, how these jobs are performing, particularly Freeport and Cameron, are absolutely critical. They’re progressing well. We’re right on plan for the completion dates.”
You’ve got to be selective about the counter parties you’re working with
 
While there’s instability in the oil and gas prices, companies like ours are going to be have to be very careful and very selective in terms of where they are working and what kind of terms they are willing to accept.  And it’s not just a fixed price versus reimbursable because reimbursable is subject to margin compression and fixed price is a very competitive environment out there as well. So, I think all companies in our industry – as well as other suppliers, I mean it affects us just like it affects GE. So, all the suppliers are feeling this pressure and are being very careful I think in terms of what they commit to going forward.”
The percentage of coal fired power plants will continue to decrease 
 
As we all know, not long ago, coal was accounted for over 40% of our baseload capacity in the U.S.  Today, that number is probably closer to 30% and all projections have a going to 20% over the next five years. So that baseload has to get replaced with something and I think the common belief is majority of that replacement is going to come from natural gas with the balance coming from alternative sources.”