Fluor Reports $52.6-Million Loss for 2nd Quarter
Fluor Corp., finding its road to recovery riddled with obstacles, Wednesday announced a second-quarter loss of $52.6 million--bringing the Irvine engineering and construction company’s total losses in the last 2 1/2 years to $780 million.
The company attributed the latest losses to continued poor performance of its lead and zinc mining operations and ongoing cost overruns at several projects under development by its Fluor Constructors subsidiary.
For the same period last year, the company lost $11.6 million.
Because Fluor Constructors’ cost overruns are expected to continue, a spokesman said the company set aside a reserve of nearly $19 million in the second quarter “to stop future bleeding.” The reserve was included in the company’s total quarterly loss.
Revenue for the second quarter ended April 30 was $979 million, down 30% from the year-ago period.
For the first half of 1987, Fluor posted a net loss of $85.9 million, compared to a $5-million loss in the year-ago period. For all of fiscal 1986, the company lost $60.4 million. Revenue for the first six months was $2 billion, down 20% from $2.5 billion for the same period in 1986.
Despite the disappointing second-quarter performance, the spokesman said the company was not caught by surprise.
“We had expected an uneven recovery,” he said. “We expect a strong performance in the rest of the year.”
Trying to Restructure
For the last 2 1/2 years, Fluor has been trying to restructure its operations to reduce its dependence on its now much-depressed traditional line of business: the construction of oil refineries and other energy-related projects.
However, the strategy has not always worked. For example, in 1985, the company ventured into the construction of municipal waste water treatment plants in several U.S. communities in an effort to broaden its activity beyond energy projects.
Those projects, won in bidding competition against smaller companies with lower operational costs, are the major reason for the continuing losses at Fluor Constructors.
As part of the restructuring, the company said it is actively negotiating with Shell Oil Co. to divide the assets of their jointly owned A. T. Massey Coal Co. and expects to conclude “other restructuring actions” before Oct. 31, the end of the company’s fiscal year.
Although voicing disappointment with the quarter’s results, Fluor Chairman and Chief Executive David Tappan said the outlook for the company is improving.
He said the company received $1.1 billion in new orders in the second quarter, compared to $975 million a year ago, and the company’s backlog was $4.4 billion, up from $4 billion three months prior.
