The government sector was one of the few bright spots early this year in what Fluor Chairman and CEO David Seaton described Thursday as “a disastrous quarter.”
“I think we have a good brand in that market and are continuing to bid those projects and being successful,” Seaton said of the company’s business with the Department of Energy.
Seaton cited DOE’s recent one-year extension of the contract, to July 2019, for the Fluor-led team that manages the Savannah River Site in South Carolina. Seaton indicated Fluor plans to stay on the job, but did not offers specifics on whether that would be with the current Savannah River Nuclear Solutions team or another configuration.
“If you’re not doing a good job, they don’t extend you, which is evidenced by the Savannah River Plant extending us for a year to get them ready for the rebid, which I feel good that we’ll be successful in that rebid,” Seaton said.
The Energy Department announced the extension in April. Fluor is partnered with Stoller Newport News Nuclear and Honeywell on the contract, which was originally worth $9.5 billion over 10 years.
The competition for a follow-on contract has not yet been launched. Seaton did not discuss any other DOE opportunities during the call.
On the whole, it was a quarter Fluor would like to forget. The Dallas-based engineering and construction company suffered a first-quarter net loss of $18 million, or $0.13 per diluted share, compared to net earnings of $61 million, or $0.43 per diluted share, for the first three months of 2017.
First-quarter revenue of $4.8 billion was relatively unchanged from last year. Fluor’s company-wide business segment profit for the quarter was $52 million, far down from $133 million a year ago.
The primary culprit for the bad numbers was the foundering market for construction of new natural gas power plants, Seaton said. In general, the current income from building these power plants does not usually justify the risk, he noted. The quarter’s results included an after-tax charge of $96 million, or $0.69 per diluted share, for downward forecast revisions on a gas-fired power project in Florida.
As a result of the gas power plant situation, Fluor significantly reduced its earnings guidance for 2018. The company now forecasts a range of $2.10 to $2.50 per diluted share, down from the previous range of $3.10 to $3.50 for the year.
The Government segment, which includes Fluor’s Energy Department business, reported profit of $72 million, up from $29 million in the same period of 2017. Revenue for the segment increased 73 percent to $1.3 billion, from $765 million a year ago. That earnings spike was based on Fluor basically completing a U.S. Army Corps of Engineers contract for power restoration in Puerto Rico.
The April breach of several drums of radioactive waste at DOE’s Idaho Cleanup Project did not garner a mention during the hourlong earnings call. Two years ago, Fluor Idaho became the remediation contractor at the Idaho Site under a five-year agreement worth $1.4 billion.
