Fluor’s Quarter Earnings Dip 8.5% to $25.8 Million : Engineering: The Irvine-based construction firm says its lead-mining business was hurt by recession-retarded auto sales and reduced demand for car batteries.
Fluor Corp., hurt by its slumping lead-mining business, said Thursday that its quarterly earnings fell 8.5%, despite improved operating profits from its core engineering and construction business.
Irvine-based Fluor posted net earnings of $25.8 million for its first fiscal quarter ended Jan. 31, down from $28.2 million for the year-ago period. Revenue was $1.9 billion, down 6% from $1.8 billion a year earlier.
The news did not discourage investors, who have bid up Fluor’s stock in anticipation that the company will get lucrative contracts to help rebuild postwar Kuwait. Fluor stock closed Thursday at $51.75 a share, up 87.5 cents on the New York Stock Exchange.
Fluor had warned industry analysts of possible lower earnings because the recession has hurt automobile sales and cut demand for car batteries, the major users of lead. The nation’s mild winter also reduced demand for replacement batteries, the company said.
Last year Fluor completed the purchase of the remaining 42.5% interest in the Doe Run Co. for $125 million, making it the sole owner of North America’s largest lead-producing firm.
The average price of lead fell from 40.41 cents a pound in the fourth quarter of Fluor’s last fiscal year to below 30 cents a pound in the first quarter of the current year. That decline cut into Fluor’s profits from its lead business, which made up less than 5% of Fluor’s $6 billion in sales last year.
The Irvine firm said operating profits from Fluor Daniel, its primary engineering and construction unit, were up in the first quarter, as the unit’s contract backlog grew 11%, to $9.7 billion from $8.7 billion at the same time last year. But new engineering and construction awards slipped to $1.82 billion, from $1.85 billion a year ago.
Les McCraw, Fluor’s chairman and chief executive, said first-quarter bookings “were tempered by our continuing conservative approach to recording longer-term hydrocarbon contracts in Saudi Arabia.”
Last year, Fluor landed a management contract for building oil facilities in Saudi Arabia that some estimate may be worth up to $6 billion over the next 10 years. So far, none of that work has been recorded in the company’s backlog.
In addition, the company is expected to play a large role in the postwar reconstruction of Kuwait, including the repair of refineries and oil fields.
Fluor has been winning new orders worldwide for engineering and construction projects related to modernizing old refineries and building new ones--projects delayed in the mid-1980s because of plummeting oil prices.
During the past year, Fluor spokeswoman Deborah Land said, the hydrocarbon component has grown to represent the largest share of Fluor’s work backlog because the recession has eroded business in the general industrial sector.
Several analysts expressed little concern that Fluor’s lead business will drag down earnings over the long term. “It is just not important to the story right now,” said Mark Altman, an analyst for PaineWebber Inc. in New York, who likes the company’s prospects.
Now that Fluor owns Doe Run, some analysts have speculated that the Irvine firm may plan to sell the company. In recent years, Fluor has shed other minerals businesses to focus its attention on engineering and construction.
Herb Hart, an analyst with S.G. Warburg & Co., a San Francisco investment firm, said: “They would get rid of it (Doe Run) over time if they get the right price. They don’t consider it part of their core operations.”
Analysts said Fluor is unlikely to sell the unit until lead prices rebound.
But Land said Fluor has no plans to sell Doe Run: “We are not trying to sell Doe Run. It is a well-managed, valuable property.”
FLUOR’S FIRST QUARTER
Fluor’s lead-mining business, hurt by slower demand for automotive batteries as sales of new cars slipped, pushed net earnings down 8.5% in the quarter ended Jan. 31. However, the company reported operating profits from its primary engineering and construction unit had increased, and its contract backlog grew 11%.
(Dollars in thousands, except per-share data)
Percent 1991 1990 Change Total revenue $1,758.2 $1,876.2 -6.3 Net earnings $25.8 $28.2 -8.5 Earnings per share $.32 $.35 -8.6
Source: Fluor Corp.
