Fluor Cites Slowdown in Construction Work for 14% Earnings Drop

Fluor Corp., the largest U.S. engineering and construction company, said Wednesday that second-quarter profit before a charge fell 14% as low oil prices and recessions abroad slowed factory and refinery construction.

Fluor’s profit from operations fell to $46.9 million, or 62 cents a share, for the quarter ended April 30, from $54.3 million, or 67 cents, a year earlier. Sales fell 5.8% to $3.09 billion from $3.28 billion.

Fluor was expected to earn 63 cents a share, according to analysts surveyed by First Call.

Low oil prices and lingering recessions in Asia and Latin America bit into Fluor revenue from building and upgrading power and chemical plants. Fluor also has been seeking higher-margin jobs, contributing to the revenue drop, spokesman George Palmer said.

In the most recent quarter, the Irvine-based company also took a charge of $119.8 million to cut 5,000 jobs, close 15 offices and break the company into four business groups.

That restructuring resulted in a net loss of $72.9 million, or 97 cents a share.

The quarter includes a pretax charge of $20 million tied to a provision for a loss at its Murrin nickel cobalt project in Australia.

Fluor officials, in a conference call, told analysts that the company unexpectedly was paid nearly $20 million from a slowed Indonesian project, according to analyst John McGinty with Credit Suisse First Boston.

The disclosure raised concerns about information the company has been reporting, McGinty said.

“The most depressing part is that seems more like the old Fluor than the new,” he said. “Earnings fall unexpectedly, and they take money out of one spot and transfer it to another.”

Fluor’s director of investor relations, Lila Churney, said that the company had previously disclosed the Indonesian project’s delays and that it was a “helpful coincidence” the payments came in time to offset the loss in Australia.

The company, which is building sulfur recovery plants in Mexico and a plant in Canada to extract oil from sand, also said it was awarded fewer contracts. New awards were $1.6 billion, compared with $2.8 billion a year earlier, as companies held off spending on new projects in some markets.

Fluor shares fell 25 cents to $37.06. The stock has been rebounding since hitting a 10-year low of $26.25 a share March 24. But the shares still are trading below last year’s prices.

McGinty also said Fluor officials told him in the conference call that oil companies have talked about ordering more work as oil prices begin rising.

“There has been no pickup in orders, and this is consistent with [other construction companies]. But they are talking about a higher level of inquiries,” he said.