Shares in Texan engineer Fluor have fallen by about 25% after it announced preliminary third quarter results that were below market expectations.
Their price decreased from more than $60 to around $45 after the results were announced on 11 October. The company said it expected to declare revenue of about $4.6bn for the quarter, compared with a consensus forecast of $5bn. The company’s shares are presently trading for just under $47.
The fall was blamed on two troubled projects, one in the US and one in Europe, and came despite the disposal of its share in the Seagreen windfarm off the northeast coast of Scotland for $124m, a higher price than expected.
David Seaton, Fluor’s chairman and chief executive, told analysts in conference call he was “frustrated” and said the company has “done a lot of soul searching” following the results.
He said the two under-performing projects were bid for by a team that “did not follow the rules”, and were “no longer at Fluor”. He added the company had since revised its procedures.
The troublesome US project is a gas-fired power station for Duke Energy in Citrus County, Florida. Seaton said this scheme was taking the company “double the hours to do the work that it is taking us in Virginia to do the same thing”. He said that while he has had success before in changing management teams on flagging projects, “this one I have not been able to turn the tide on”.
Fluor’s share price over the past six months (Google)
The European project was a downstream energy scheme that, Seaton said, had a “significant payment” tied to a 5 October deadline, which Fluor missed. Fluor said it had taken a $46m hit on this scheme, and a $35m loss on the Florida project.
Despite these setbacks, Seaton said Fluor was about to come out of an eight-year downturn. He said he expects numbers to improve throughout 2019. “We are seeing the light at the end of the tunnel and it’s not a train coming at us,” Seaton said.
The company announced $9bn of new work, which may include its 60% stake in a $14bn liquefied natural gas export facility in Kitimat, British Columbia, which it is taking on with Japan’s JGC Corp.
Fluor’s shares experienced a similar plunge in May, which was also tied to the Florida scheme.
Fluor is the second largest contractor in the US, after Bechtel, and 17th largest in the world. It ranks 153 in the Fortune 500 with annual revenue of $19.5bn in 2017 and more than 56,000 employees worldwide.
Top image: Work under way on the Citrus County gas power plant (Duke Energy)
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