Turmoil in the communications and energy industries is taking a toll on MasTec Inc., the Miami-based specialty contractor. Earnings and revenues from operations in the first quarter of 2001 are up over last year, but the company had to set aside $13.1 million as a reserve for money it may never collect from bankrupt or financially troubled clients.
Among these clients are Pacific Gas & Electric, the big California-based utility that recently filed for Chapter 11 bankruptcy protection from its creditors. MasTec officials also mentioned Pathnet as another financially troubled customer. Pathnet's Pathnet Telecommunications, which was formed with investors Colonial Pipeline, Burlington Northern Santa Fe Railroad, and CSX Transporation to build a telecom network along railroad right-of-way, has filed for bankruptcy.
Half of the Mastec's revenue comes from telecommunication or energy customers, say MasTec officials. Bellsouth and Sprint are big clients.
The company, which installs cable and switching systems, said it had seen a rapid fall-off in demand for work by its Network Services Division unit. "The rapid changes required us to make difficult decisions," the company announced, including staff cuts.
Deutsche Bank Alex Brown has down graded the company this year from a strong buy to a market perform rating, meaning the company's shares are only expected to rise as much as the general stock market. Morgan Stanley Dean Witter has also reduced its holdings in MasTec recently, from 5.8% to .3% of the outstanding shares.
Joel-Tomas Citron, MasTec's chief executive officer, says the company has a more cautious growth outlook but that its business strategy and vision has not changed. Chief Operating Officer Austin J. Shanfelter ended an April 26 conference for investor's on an optimistic note: "Will MasTec weather the storm?" he asked. "Absolutely yes."