Engineering, construction, and procurement giant Fluor continues to experience rough waters a month after announcing plans to sell its government services branch, which includes its U.S. Department of Energy contracts.
For its third quarter ended Sept. 30, Fluor reported a net loss from continuing operations of $782 million, or $5.57 per diluted share, compared to net earnings of $69 million, or $0.49 per diluted share, a year ago.
Revenue stepped up slightly from $3.8 billion during the third quarter of 2018 to $3.9 billion in the latest quarter, according to a company press release. Fluor’s total revenue for the first nine months of 2019 was $10.6 billion, down from $11.2 billion during the same period of 2018.
The company’s numbers were affected in part by a $546 million non-cash charge connected with the valuation of deferred tax assets.
However, the operations of government contracting and the AMECO equipment rental business together posted positive numbers for the quarter. Fluor is listing these enterprises as “discontinued” for financial reporting purposes.
The businesses now up for sale posted a quarterly net profit of $40 million, or $0.28 per diluted share, compared to $9 million, or $0.06 per diluted share, a year ago. That was due in part to $30 million favorable settlement of litigation related to a previously divested business.
Fluor has suspended earnings guidance for the rest of the year due to the business sale and other austerity measures.
Executives expect the government contracting business to be divested within a year, probably by mid-2020. “We continue to act with urgency” in an effort to strengthen Fluor and reduce its risk, said CEO Carlos Hernandez in an early morning conference call on the earnings report.
The company announced Sept. 24 that it plans to sell its government contracting business, partly because it is financially healthy enough to attract interest on the marketplace. At the same time, providing services for the government does not offer the same growth potential as energy and other Fluor business lines.
“It is very early in the process,” but Fluor has “significant interest” in both government contracting and AMECO, Hernandez said. The chief executive said, in response to an analyst’s question, that he expects the government business to be sold off as a whole, rather than in segments.
The Fluor government business segment, including joint ventures, has roughly 28,000 employees and more than 40 current projects, including several jobs for the Energy Department.
New awards for the units being sold totaled $1.1 billion for the quarter, including a 14-month extension, through September 2020, of the Savannah River Site management and operation contract for Fluor-led Savannah River Nuclear Solutions. The joint venture has been operating Savannah River since August 2008 under a contract arrangement worth about $14.8 billion.
The materials that accompanied the earnings report also note the Dallas-area company is receiving a modification to a contract at the Idaho National Laboratory. Fluor spokesman Brian Mershon confirmed the revision applies to the $1.7 billion DOE cleanup contract there, but could provide no further details. The five-year INL remediation contract runs through May 2021.
A Fluor-BWX Technologies joint venture is in the final 30 months of its 10-year, $3.4 billion remediation contract at the DOE Portsmouth Site in Ohio.
The company is also an integrated subcontractor for Battelle-led Triad National Security, manager of the the Energy Department’s Los Alamos National Laboratory in New Mexico. The potential 10-year contract that could be worth $2.5 billion annually to the team.
Before the September announcement there was speculation that Jacobs might buy Fluor’s government contracting unit. Since the announcement, the industry chatter has centered on a potential purchase by a financial house. The latter scenario gained traction after fellow DOE contractor AECOM revealed plans earlier this month to sell its government business to two New York investment groups for about $2.4 billion.
