Fluor 2Q14 Earnings Call Notes

posted in: Notes | 0

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

After today’s 2% drop hopefully you’re not on a ledge

“After today’s market performance, I hope you’re not joining us from a ledge somewhere, and those of you that are, I know who you are.”

Revenue down because mining weak

“Consolidated revenue for the quarter was $5.3 billion, which was down from our $7.2 billion a year ago, mainly due to a significantly lower revenue base in Mining business line.”

Backlog up though

“New awards for the quarter were $5.9 billion, including $3.1 billion in government, $1.5 billion in oil and gas, $1.2 billion in Industrial & Infrastructure bookings. Consolidated backlog for the quarter rose to $40.3 billion, which is up 9% from $37 billion a year ago.’

Mining showing some signs of return

” the Mining & Metals business line is showing some signs of return, and we could see modest awards for projects later this year, as well as into next year. ”

Customers want integrated solution not just services

“Fluor’s always been known as a company that can build large complex projects for our clients anywhere in the world. The execution of these projects under the typical EPCM model has served us well. What we see today, however, is an increasing demand for our firm to partner with our customers and provide an integrated solution, not just services.”

Analyst comment: seems like some E&Cs have done well, some haven’t

“there’s been mixed messages about the cycle. I’m listening to your competitors, which I’m sure you’ve heard. Some guys have done well; some guys, maybe not so much”

Not that much has changed from customers

“We really haven’t seen, aside from mining, any change in the decision-making process of our customers over the last little while. Some things are moving quarter — like this quarter to next quarter and next quarter to fourth quarter. But FID decisions are still being made in pretty much the timely manner that we anticipated.”

Our reorganization has flattened the business to help us be more responsive to customers

“what we did is we flattened the organization. And we’ve put some really talented people in business lines that are closer to our markets, closer to our customers and in a better position to be more fleet of foot and answer — be more responsive to our customers. And I think that’s resonating. And I think that’s — that, by and large, is the reason why we’re seeing the win rates that we are because we’re listening better. And we’re tailoring those offerings specifically to what the clients need. But I think rapid response to those customer needs is really what’s driving the success.”

Old business got too siloed

“I think if you look at the older organization, which frankly, I was an architect of with my predecessor and frankly, created some silos that weren’t healthy.”

willing to partner with competitors

“in some cases, we’re actively partnering with many of the competitors that we’ve talked about in the past, and we’re finding out how best to utilize their supply chain, how to better utilize some of their abilities around technologies. And again, I think case in point is the Kuwait project that was awarded in the first quarter where you see us team with 2 Korean companies there. So I feel really good about the value proposition that we’re developing and the ability for us to articulate such that our customers choose us over the competition.”

Mining projects might start to come back middle of next year

” think that we are seeing a pickup. I think I talked about last quarter and again this quarter about increased study work and FEED work in mining, which is encouraging. But if you just stay on those normal schedules, you’re kind of middle of next year before you start to see the EPC projects come back.’

Light at the end of the tunnel

“I think we’re starting to see the light at the end of the tunnel, if you will, relative to mining.”

Tough to see a boom in construction by utilities

“I think that even if you look at the EPA rules, it’s still 20 years before they have to comply, give or take, completely. And I think they’re still going to take time to kind of rationalize what they have. Most of our customers have to deal with a rate base, and going back to the rate base for additional money isn’t something that they relish. So I think they’re going to be very measured in how they go forward relative to not only the coal cleanup fees but also in terms of gas. I do think that we’ve got the potential to maybe surprise a little bit, a little bit, in power as we go into next year.”

Kitimat still getting done even without Apache

“I still think that, that project, from a business model perspective, from a regulatory perspective, is still very solid.”

Competition has always been fierce in this business

“look guys, I mean, there’s no time in my history in this company where I’ve seen the competition not fierce. And I think you will always be fierce in this business. And that’s just incumbent upon us to continue to improve and continue to be cost-effective, but at the same time, make sure that we’re demanding the profitability that we need to return to the shareholders as they expect.”