Latest-Quarter Results Are Tough for Some E&C Firms
Yajva District Powerplant
Project location: Perm, Russia
Frederick, Md., USA : Lead Designer
Istanbul, Turkey: EPC Contractor
Moscow, Russia : Engineer
Erlangen, Germany: Power-train Supplier
Bursa, Turkey: Steel Supplier
Seraing, Belgium: Generator Supplier
Hyvinkaa, Finland: Equipment Supplier
BC Place Stadium Upgrade
Project Location: Vancouver, B.C.
Richmond, B.C.: Construction Management
Suffern, N.Y., USA: Structural Design
Stuttgart, Germany: Structural Design
Bangkok, Thailand: Steel Fabrication
Vancouver, B.C.: Lead Design
Zurich, Switzerland: Cable Supplier
Colombo, Sri Lanka: Fabric Liner Work
Weakened results were in store for some publicly traded engineering and contracting firms for the quarter ending in June, with problem projects and delayed contracts shrinking their bottom lines.
KBR "mildly disappointed the street" in its second-quarter report, writes Jamie Cook of Credit Suisse. She cites delays in award decisions on large projects such as Canada's Kitimat LNG job, for which KBR is a strong contender, as one culprit. But she also says five "problem projects" are back on track, and KBR "is one of the best-positioned names" in the gas-monetization sector, building facilities to turn natural gas into commercial products.
Jacobs Engineering Group (NYSE:JEC) stock fell about 1% on earnings in its third quarter, despite year-over-year revenue rising 11%, to $3.08 billion. Analyst firm Zack's says, "Changes in government spending and the economic scenario in international markets are expected to mar the company's performance." FBR Capital Markets suggests an acquisition would help Jacobs, which is reportedly eyeing a purchase of Australian engineer Sinclair Knight Merz. An SKM spokesman would not confirm to ENR the status of any potential M&A talks.
Contractor McDermott International (NYSE:MDR) noted a $63-million loss in its third quarter due to charges on a fabrication job in Louisiana. It says it will transfer the work to Mexico and that its COO John McCormack will retire later this year.
Problems on two North Africa projects fueled a quarterly loss reported by SNC-Lavalin (TSX:SNC), notes Maxim Sytchev, sector analyst with Dundee Capital Markets, Toronto. He suggests the Canadian firm should buy large U.K. electrical contractor Kentz, which has a large presence in the oil-and-gas sector, although he does think such a move is likely currently.
Meanwhile, other firms are eyeing Kentx. The U.K. firm announced Aug. 19 its rejection of buyout offers from AMEC and M+W Group that it said were too low.
Sytchev also says quarterly results by AECOM (NYSE:ACM) and URS Corp. (NYSE:URS) "largely met the mark" but notes the U.S.-based firms lowered earnings estimates for the rest of the year.
