Fluor Suffers a $33.3-Million Loss in 1st Quarter, Far Above Expectations

Fluor Corp. reported Tuesday a $33.3-million loss for the first fiscal quarter of 1987, far outstripping the losses anticipated by most Wall Street analysts.

The disappointing quarterly results were announced at the company’s annual shareholders meeting by Chairman David S. Tappan Jr., who acknowledged that the projected turnaround of the company, headquartered in Irvine, has been frustratingly slow.

The latest loss came on the heels of Fluor’s decision two weeks ago to suspend its quarterly 10-cent-per-share dividend and Moody’s Investors Service’s action last week to lower its rating of Fluor’s long-term debt below what is considered “investment grade.”

In the first quarter of 1986, the engineering, construction and natural resources company reported a $6.6-million profit. Revenue for the first quarter of fiscal 1987 totaled $978.3 million, down from $1.2 billion. Fluor lost $60 million for all of 1986 and $633 million in 1985.

Fluor laid the blame for the quarterly loss on its engineering and construction group. The operating results of its natural resources group were up slightly from a year ago, with both coal and gold mining showing a profit.

Despite the loss, Tappan stressed that the company’s operations in the first quarter showed an improvement over the last two quarters of fiscal 1986.

Tappan contended that Fluor’s efforts at internal restructuring and diversification into non-energy-related engineering and construction projects would eventually pull the company into the black. “We’ve taken a very large corporation and turned it into a trimmer and slimmer operation,” he said. But he declined to predict exactly when Fluor would become profitable.

“Recovery is going to continue to be uneven,” Tappan told reporters at a press conference after the shareholders meeting. He added: “We haven’t the slightest doubt this company is going to be returning to profitability. We can’t tell you what quarter it is going to be.”

Robert W. McCoy Jr., a securities analyst with New York investment firm of Kidder, Peabody & Co., said Fluor’s first-quarter loss was twice what he had expected.

But, like many industry analysts, McCoy predicted that Fluor has hit the bottom of its losses and will start seeing improvement over the rest of the year. He estimated that the company’s loss for all of fiscal 1987 could be as much as $40 million.

Expects Greater Profits

“Fluor is delivering on what it has been telling the investment community, but taking a lot longer than anticipated,” said Gerald Bryan Dutt, an analyst with Howard, Weil Financial Corp. of New Orleans. He estimated that Fluor’s loss this year will be between $45 million and $65 million and projected that the company will become profitable next year.

Tappan said that although Fluor’s backlog of engineering and construction contracts has declined 16% to $4 billion from $4.8 billion over the last year, those contracts are expected to generate 11% greater profits because of redirection of the company into markets with larger profit margins.

Fluor suffered severely last year from its Fluor Constructors subsidiary’s cost overruns. But Tappan said Tuesday that that problem has been rectified by a change in Fluor Constructor’s top management and a change in the kind of projects that the subsidiary is bidding on.