Profit Shows Fluor’s Efforts Are Paying Off
Fluor Corp. on Wednesday posted a profit of $54.3 million, or 67 cents a share, for the second quarter, surpassing analysts’ predictions and providing further indication that a yearlong effort to slash costs and refocus the company is on track.
A year ago, the Irvine-based international construction services and coal mining company lost $70.1 million, or 84 cents a share.
Wall Street had expected Fluor to report a profit of about 61 cents a share. “This is all very encouraging,” said industry analyst Robert Toomey of the Piper Jaffray Inc. brokerage.
Revenue for the three months ended April 30 totaled $3.3 billion, up slightly from $3.2 billion.
Investors welcomed the report, as Fluor’s stock rose 88 cents Wednesday to close at $46.81 a share on the New York Stock Exchange.
Fluor’s profit for the first half of its fiscal 1999 rose to $109.1 million, or $1.33 per share, from the prior year’s first-half loss of $8.1 million, or 10 cents a share. Revenue rose to $6.7 billion from $6.6 billion last year.
Operating profits for the company’s engineering and construction services arm, Fluor Daniel, were $58 million in the second quarter compared with an operating loss of $110 million a year ago.
Fluor’s other major operating unit, the A.T. Massey low-sulfur coal mining unit, increased its second-quarter operating profits by 10% to $40 million. Warm weather caused a decline in sales and prices of coal used for heating and power generation, but the decline was more than offset by reduced production costs and increased sales of the more profitable coal used in production of steel.
In revelations last year that stunned investors and analysts, Fluor officials admitted that the company had lost control of critical management processes during an aggressive expansion drive.
Not only had Fluor Daniel’s operating costs gotten out of hand because of excessive hiring and duplication of efforts in some arenas, but cost overruns on two major power plant projects caused the company to take a $120-million write-down in the fiscal 1998 second quarter.
A massive restructuring was launched and Fluor cut more than $100 million from its operating budget by consolidating its far-flung operations, abandoning a number of marginal businesses, selling several operating units and firing about 700 managers and salaried employees.
Earlier this year, Fluor announced that Philip J. Carroll will become chairman and chief executive in July after retiring June 30 as president and chief executive officer of Shell Oil. He will succeed Texas oilman Peter Fluor, a long-time member of the Fluor board of directors and great-grandson of the company’s founder. Fluor has been interim chairman since January, when Leslie McCraw unexpectedly took early retirement to battle recurring cancer.
Company officials say that the cost-cutting and restructuring efforts continue. Fluor Daniel, however, still must cope with the Asian economic slump and civil unrest in Indonesia, where it is involved in several major mine and power plant construction projects.
Fluor has said it expected new contract activity to slow because of those problems and the company’s increased selectivity in the kinds of projects on which it bids. On Wednesday, Fluor reported that new engineering and construction awards for the second quarter fell to $2.8 billion from $3.2 billion a year ago. The company said its backlog of projects at the end of the second quarter was $13.9 billion, compared with $16.1 billion for the same period last year.
Still, company officials and industry analysts say that the global outlook for Fluor Daniel’s services remains positive.
