Fluor Upbeat About Future Global Project Activity

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Researched by Industrial Info Resources (Sugar Land, Texas)--Executives with Fluor Corporation (NYSE:FLR) (Irving, Texas) voiced optimism last week regarding the prospect of industrial construction activity in the coming years, saying a down cycle from the past two years seemed to be over. Industrial Info is tracking projects with a combined value of more than $200 billion involving the engineering, procurement and construction (EPC) firm.

The company had $21 billion of new awards for 2016, including:

• $8.4 billion in Energy, Chemicals & Mining
• $6.2 billion in Industrial, Infrastructure & Power
• $4.6 billion in Government
• $1.8 billion in Maintenance, Modification & Asset Integrity

Among the key project awards received during the year was the EPC contract for Novo Nordisk AS' (NYSE:NVO) (Bagsvaerd, Denmark) insulin active pharmaceutical ingredient plant in Clayton, North Carolina. "This facility is the largest in Novo Nordisk's history and will produce life-saving medicines for use by patients around the world," said Fluor Chief Executive Officer David Seaton during the company's fourth-quarter 2016 earnings conference call. For more information, see January 11, 2017, article - Pharma-Biotech North American Construction Investment Review: 2016 Project Kick-Offs Top $19.7 Billion.

In June, the company received the award for construction of the Purple Line light rail extension in Maryland. The $5.2 billion project is set to kick off this summer and includes the construction of a 16-mile rail line with 21 stations extending from Bethesda to New Carrolton. The project will take approximately three years to complete.

Fluor also wrapped up some major projects during the year. "In May, we saw the completion of the large Cerro Verde mine in Peru, with excellent performance," said Seaton. The expansion of the above-ground Cerro Verde copper and molybdenum mine began in the first quarter of 2013 and was wrapped up during the second quarter last year. The project increased the mining rate from 320,000 tons per day to 850,000 tons per day and included construction of a new concentrator plant, increasing capacity from 120,000 tons per day to 360,000 tons per day to produce 500,000 tons per year of copper and 12,000 tons per year of molybdenum. The project had an estimated total investment value of $4.6 billion.

Despite a drop in the backlog in the company's Energy, Chemical & Mining segment, Seaton expressed optimism at recent oil prices, suggesting this could lead to future capital spending. The company's backlog in the sector has fallen to $21.8 billion, compared to $29.4 billion a year ago. "I believe that the relative stability in the oil price that we've seen over the last 12 months has given our customers the confidence to move forward with higher-return projects as evidenced by their indication that capital spending in certain areas could be higher in 2017," said Seaton.

Seaton said that many of Fluor's key categories were coming off of a down-cycle in investment, but were now expected to pick up: "Looking back, 2015 and 2016 represent one of the most difficult times in our industry. In fact, energy and chemical awards during this two-year period were the lowest they've been since 2009-2010. Even with that headwind, we were able to grow our backlog and focus our resources on non-commodity markets and opportunities. So what does that mean for 2017? I think it means that our energy and chemicals pipeline of opportunities will be coming off the bottom of the cycle. ... We also see reason to be optimistic not only in mining, which is also coming off the bottom of their cycle, but also infrastructure, where it appears that it appears that the interest and motivation is to expand spending both domestically and abroad."

Fluor reported fourth-quarter 2016 net earnings of $70.5 million, compared to a net loss of $51.4 million in fourth-quarter 2015.

Among the other projects involving Fluor being tracked by Industrial Info is Dominion Resources Incorporated's (NYSE:D) (Richmond, Virginia) construction of a power plant near Emporia, Virginia. The project entails construction of a 1,600-MW, natural gas-fired, combined-cycle facility. Construction on the project began in late 2015 and is expected to be completed by the end of the 2018. Fluor is acting as EPC firm on the project.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.