Jacobs Engineering 3Q15 Earnings Call Notes

Steven Demetriou – President and Chief Executive Officer


“I want to welcome all of you to our 2015 fiscal year end and fourth quarter earnings call, my first since joining Jacobs.”

It’s clear that there are a lot of ways to improve Jacobs

“What has also been exciting to learn during my initial months of engaging with employees and customers are the numerous opportunities to improve and grow Jacobs. First it’s clear the company impressively grew over the past several decades as a result of numerous organic and inorganic initiatives.”

Continue to see adverse market conditions in multiple sectors

“We continue to see adverse market conditions in multiple sectors, particularly in oil and mining commodity markets and these were major contributors to the year-over-year decline in both the fourth quarter and total fiscal year. We also faced competitive pricing pressures and cyclical economic patterns in certain key markets which negatively impacted our revenue mix and unit margins.”

Believe we are near the bottom in energy capex

“we do believe we are near the bottom and demand will stabilize in this new fiscal year.”

Chemicals sector is strongest for us

“The strongest part of our process segment is in the chemicals sector. We are in the mix for several interesting growth prospects across the globe. In fact we were just informed of a major win with one of the largest petrochemical companies which we will provide further information about later in the first quarter.”

Strong growth in Pharma bio space

“In the pharma-bio space we’re clearly experiencing a strong growth and our backlog has significant increased from a year ago. Increased M&A consolidations are occurring driving select opportunities for Jacobs to help clients with portfolio consolidation and optimization.”

Pulp and paper companies expanding offshore

“Several of our pulp and paper clients are expanding offshore and we’re leveraging our strong domestic position to follow these customers in their overseas expansions. We’re increasing focus on consumer products globally.”

Government business is picking up momentum

“Our national government business is picking up momentum and is positively positioned in 2016. While challenges exist with reductions in government spending and delayed award cycles, we’re continuing to gain market shares to offset these dynamics and believe that the recent federal budget deal provides stability over the next few years.”

We do think our industrial clients have hit or are close to bottom

“when we report altogether for fiscal year 2016 we believe we will continue to face a very challenging global environment with uncertainty and limited visibility in several of our markets. It is clear that in petroleum and mining and general industrial commodity markets our clients are waiting to decide when and how to spend their cash.

We do believe that the clients in some of these end markets have either hit or are close to bottom. On the flip side, we believe that our buildings, infrastructure, pharma and federal work will provide growth opportunities in 2016, thus balancing and demonstrating the strength of our diversity which provides the ability to deliver stable earnings in uneven market conditions.”

There’s still integration work that can be done on acquisitions that were done years ago

“The company was very focused on aggressive growth. Frankly, as we all, the leadership team looked back at the acquisitions we feel like they were excellent strategic acquisitions, and but we could probably have done better on the integration side and driving the full benefits of cost synergies. ”

When we say we’re close to a bottom it’s mostly because we’re focused on refining and chemicals

“That’s a good question and my comments on hitting the bottom and stabilizing is more from a Jacobs position in that industry and what gives me confidence that we are near bottom of and should see stable profile and in fact may be some momentum by the second half is that most of our activity is focused on refining and chemicals.”

Kevin Berryman – EVP and Chief Financial Officer

Constant currency revenue growth despite economic headwinds

“While we continue to see macroeconomic headwinds and continued commodity weakness that has impacted certain of our end markets this quarter, it is important to note that on a constant currency basis our revenues actually grew at a rate of 2%. ”

Gary Mandel – President, Petroleum & Chemicals

Andy Kremer – President, Industrial

Robust nuclear new build programs in the UK

“The nuclear new build programs particularly in the UK are robust. We are heavily involved in all of the major programs that are taking place there primarily in the civil structural side of this, but certainly in the planning and the support areas those projects and we’ve been involved in those for the past year and a half or so.”

Phil Stassi – President, Buildings & Infrastructure