Fluor Corp. announced on Nov. 2 that it named David E. Constable as its new CEO, effective on Jan. 1. A board member and former executive of the contractor, he was also CEO of a client, South African energy and chemicals conglomerate Sasol Ltd.
Constable will succeed Carlos Hernandez, who has been CEO since 2019 and will retire from the firm and its board at year end.
A Canada-born engineer, Constable served as CEO of Sasol from 2011 to 2016 where "he executed a comprehensive change program and implemented a new operating model focused on enhancing growth across the organization,” said Fluor in its announcement. He also held various management roles at the contractor from 1982 to 2011, most recently as group president, operations.
Alan Boeckmann, Fluor executive chairman, said Constable’s selection ”follows a comprehensive external search" for a CEO.
Constable was named to Fluor's board in 2019 shortly after Hernandez, the company's former chief legal officer, was tapped to lead it following the departure of former CEO David Seaton and later announcement of hundreds of millions of dollars in losses and project charges that triggered involvement of the Securities and Exchange Commission and US Justice Dept and an internal review of three years of project financials. That analysis delayed release of 2019 results until Sept. 25, with those for 2020 released starting last month.
Hernandez, also a civil engineer who joined the contractor in 2007, “played an integral role setting Fluor on the path to restore confidence in our financial reporting,” said Boeckmann, who also credited him for “lowering our risk profile.” According to one industry source, Hernandez "was always transitional in the role, but did what the company needed him to do." Observers also credit him for reversing the firm's initial decision to sell its government services unit, a move determined by its internal review to boost its finances.
Naming Constable to Fluor's board "teed him up" for the CEO role, and "was not a surprise," said one industry executive who knows the firm, also noting his "good relationship" with Boeckmann.
Observers speculate that another candidate was Rick Koumoris, its group president for mining and metals, life sciences and advanced technology, who also has been an advisor to Hernandez and is described as a "strategic thinker."
Since leaving Sasol, Constable also was a board director of ABB Ltd. and mining giant Rio Tinto Ltd. He also was a director of Anadarko Petroleum Corp. from 2016 until its merger with Occidental Petroleum in 2019.
Constable touted Fluor’s “unique value proposition, strong industry position and the right talent to enable us to capitalize on the opportunities ahead."
In releasing its Q1 2020 results late last month, Fluor reported revenue at $4.1 billion and backlog at $31 billion. New awards of $1.5 billion included an EPC contract for the Canada Kuwait Petrochemical Corp. propane dehydrogenation facility, a $1.6-billion North American metals project and a $684-million award under its US Army LOGCAP logistics support contract.
Results also included a net loss from continuing operations at $171 million or $1.22 per diluted share, with the firm noting non-cash impairments and charges of about $353 million "to reflect the impact of weak commodity prices and COVID-19."
Fluor's energy and chemicals segment reported a loss of $6 million in the first quarter compared to a $12-million profit a year earlier. But Its mining and industrial group reported profit of $39 million, up from the $28-million profit figure of a year earlier. The infrastructure and power unit noted $5 million in Q1 profit compared to a loss of $22 million in first-quarter 2019. "New awards of $7.3 million in the first quarter reflect the company’s disciplined bidding protocols," the firm said.
"We continue to have the necessary liquidity to meet all of our obligations and operate our business,” said Hernandez. Third-quarter results will be released and discussed in late November.
Constable will further brief the investment community on its path ahead in mid-January.
Fluor characterized first-quarter writedowns/charges "as only due to commodity prices and COVID, stating that operationally, there was no deterioration on projects," noted UBS construction sectpr analyst Steven Fisher. "Going forward, we see upside if [the company] can grow backlog, provide confidence in profitable execution of [its estimated $14-billion] LNG Canada project and move beyond any legacy projects."
Andrew Wittmann, construction sector analyst for Baird Equity Research, said the quarter results were as expected. "We continue to believe the short-term path of least resistance is to the upside, given that it seems like the worst is likely behind the company (for now)," he said.
While some observers questioned Constable's selection with his history in sectors now facing rapid change from decarbonization pressure, Credit Suisse construction sector analyst Jamie Cook said the choice "made sense in our view," but she emphasized that the new CEO "must convince investors he will implement real change at Fluor, focus on businesses that offer above-average consistent returns and find a more appropriate balance of managing growth and risk management."
Shares of Fluor closed at $12.65 on Nov. 2, up more than 11% over the previous day.