Fluor Predicts Profit Decline of $100 Million

By E. SCOTT RECKARD

Nov. 4, 1997 12 AM PT

TIMES STAFF WRITER

IRVINE —

Socked by competition and financial turmoil in East Asia, Fluor Corp. said Monday that operating profits will fall $100 million below expectations in the coming year for its global engineering and construction businesses.

Those profits would be about 30% below analysts’ expectations, and news of the decline sent Fluor’s already battered stock price down 9.4%.

Analysts had predicted profit from its core Fluor Daniel construction unit in the $325-million to $350-million range in the 1998 fiscal year, which began this month.

James Rollans, Fluor’s senior vice president, said that even before the recent turmoil in Asian financial markets, the company was considering cutting back its bids on projects in the hotly competitive Pacific Rim countries.

Uncertainties stemming from Asian stock markets’ decline have made business prospects in that region and elsewhere in the world even less clear, he said. At the very least, many projects will be delayed past the end of this fiscal year, Rollans said.

The news was the latest in a series of negative announcements this year by the Irvine-based company, which has acknowledged it let internal controls slip while on an expansion boom.

Fluor shares fell as much as 14% during trading Monday, to $35.50 on the New York Stock Exchange. They recovered to $37.25 a share in late trading, down $3.88 a share.

The stock is now selling at less than half the $75 it reached in February, before the disclosures of bad news began.

The lower earnings could trim 75 cents to $1 from analysts’ estimates for 1998 earnings, which an IBES International Inc. consensus had put at $3.54 per share, Fluor Chief Executive Leslie McCraw said.

Fluor just finished a reorganization that included 600 layoffs, which is intended to cut its operating budget by $100 million a year. It said Monday that it is looking for additional cuts to save more money, but investors knocked the stock price down sharply anyway.

“Sometimes patience is a virtue, but right now they need to show us why we should continue to have confidence,” said James Christensen, a senior vice president at Jurika & Voyles LP, which manages more than 1 million Fluor shares.

About 20% of Fluor’s contracts are in the Asia-Pacific region, spokeswoman Lisa Boyette said. None of those projects has been placed on hold or canceled, she said.

But McCraw said that volatile international markets are causing customers, even those outside the Pacific-Asia region, to delay future projects.

The Hong Kong stock market’s Hang Seng index, for example, is down 31% from its August high and has seen swings of up to 13% in a single day.

If that is a harbinger of markedly slower growth in Asia, businesses and lenders all over the world will cut back on projects in the Asia-Pacific region and in other regions whose economies are linked to it, Rollans said.

Fluor hasn’t yet released its results for the 1997 fiscal year.

For the first nine months, Fluor earned $58.1 million, or 69 cents per share, on revenue of $10.3 billion. That was down 69% from $189.2 million, or $2.24 a share, a year earlier on revenue of $7.7 billion.

Bloomberg News contributed to this report.

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Fluor Predicts Problem

Fluor Corp. announced that economic problems in Asia will affect its earnings next year. Sales and income for most recent periods, in millions:

Net Sales

Fiscal 1996

1st qtr. $2,402.4

2nd qtr. 2,582.2

3rd qtr. 2,702.8

4th qtr. 3,327.7

Fiscal 1997

1st qtr. 3,434.1