The Fluor Corp. segment that handles nuclear cleanup work for the U.S. Energy Department reported a dip in profits for the third quarter of 2016, while the construction and energy giant overall took a massive earnings hit due to a charge on a petrochemical facility that has nothing to do with the company’s DOE nuclear business.
At Fluor’s Government segment, which conducts legacy nuclear cleanup work for DOE’s Office of Environmental Management, quarterly operating profit dropped more than 10 percent to $26 million, the company said. The drop was related to “reduced project execution activities” on an Army logistics contract.
For the nine months just ended, year-over-year segment operating profit was up more than 5 percent to nearly $70 million.
Quarterly revenue for the Government segment, meanwhile, rose about 3 percent year over year to just over $680 million, “primarily due to project execution activities for the recently awarded Idaho Cleanup Project Core Contract,” Fluor said. Revenue is up more than 5 percent so far this year, compared with the 2015-period, according to a quarterly earnings statement released after market close Thursday.
Fluor in February picked up the nearly $1.5 billion, five-year Idaho Cleanup Project Core Contract, which covers storage and stabilization of spent nuclear fuel and high-level waste, transuanic waste dispositioning, and other operations. The deal combines work previously handled under two now-expired contracts formerly held by CH2M-WG Idaho and the Idaho Treatment Group; neither partnership included Fluor. The win marked a major advancement into DOE liquid waste cleanup for the company.
The Idaho contract drove up backlog at the Government segment in the quarter by more than double, to $5.9 billion. The segment registered almost $1 billion in new awards in the quarter, including an unquantified gain related to DOE’s decision to extend the Savannah River Site’s management and operations contract, which is held by the Fluor-led Savannah River Nuclear Solutions conglomerate.
The Savannah River contract runs through July 31, 2018. Competition for a follow-on is underway, and Fluor is one of the companies said to be bidding as a prime, along with BWX Technologies and AECOM.
Company-wide, quarterly earnings at Fluor plummeted 97 percent to about $5 million from more than $175 million in the year-ago quarter. An after-tax charge of nearly $154 million in the company’s Energy, Chemicals & Mining segment was to blame. The charge is related to the CPChem ethane processing equipment for which Fluor is doing procurement and engineering work at an existing Chevron petrochemical facility on the U.S. Gulf Coast.
Excluding the approximately $1.10-a-share hit from the petrochemical facility, “it’s obviously otherwise a strong quarter,” Biggs Porter, Fluor’s chief financial officer, said on the company’s quarterly earnings call Thursday.
The market nevertheless punished Fluor for the big earnings miss, driving its stock down in trading Friday.
