Fluor Corp. Records Yet Another Quarterly Profit
Fluor Corp. posted a profit of $9 million in the three-month period ended Jan. 31, its second profitable quarter after two years of heavy losses and a further sign of a turnaround at the overhauled company.
The Irvine engineering and construction concern lost $33.3 million in the same quarter a year earlier. Revenue for the first quarter of Fluor’s 1988 fiscal year was $1.04 billion, up from $903 million.
Fluor’s upbeat first-quarter report follows a fourth quarter that produced a $145.5-million profit but was clouded by numerous one-time gains and losses, according to securities analysts.
All of Fluor’s business segments, including coal, lead and engineering and construction were profitable in the first quarter. But the company gave most of the credit for its increased profitability to Fluor Daniel, its principal engineering and construction arm.
Industry analysts have commended Fluor for having sold money-losing mineral operations last year and for refocusing on its primary engineering and construction business. Fluor has worked hard to diversify beyond the big refinery and petrochemical projects that were its mainstays in the late 1970s and early 1980s before the plunge in oil prices.
Some analysts have said that Fluor has a bright future, citing the company’s growing backlog of construction and engineering orders with high profit margins. Fluor obtained $1.3 billion in new construction and engineering contracts in its latest quarter, up 36% from the first quarter of 1987.
Fluor also has benefited from broad trends in the economy. Since January, 1987, U.S. manufacturers have boosted their capital spending by about 17%, according to the U.S. Department of Commerce.
Also, industry observers say, manufacturing plants are operating at fuller capacity, especially in sectors such as paper, pulp and chemical processing. As a result, the services of companies such as Fluor, which build industrial plants, are expected to be in greater demand.
More Profitable
Fluor spokesman Rick Maslin said the newer Fluor contracts are more profitable because they include more full service contracts, providing maintenance, engineering and technical services as well as Fluor’s traditional project and construction management.
“I think that this is only the beginning,” said Mark Altman, an analyst with PaineWebber in New York, of the quarterly profit. He said PaineWebber estimates that Fluor will earn between $45 million and $50 million for the year.
Robert W. McCoy Jr., an analyst with Kidder Peabody & Co. in New York, said Fluor’s growth is outpacing the overall rise in industrial construction. He said he believes that Fluor’s efforts to adjust to the decline in the petrochemical industry took longer and were more difficult than the company had expected, but have finally paid off.
McCoy said Kidder Peabody projects that Fluor will post a $44-million profit for fiscal 1988, followed by an $80 million profit in fiscal 1989.
Although Fluor is gathering strength, McCoy said the company has “a long way to go” before it approaches the $225-million profit it posted in 1981 at the height of its involvement in petrochemical projects.
