AMEC Foster Wheeler First-Half 2015 Profits Drop 12%, Expects New Solar Orders

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Researched by Industrial Info Resources (Sugar Land, Texas)--Pretax profits for engineering, procurement and construction (EPC) provider AMEC Foster Wheeler plc (NYSE:AMFW) (London, England) took a 12% hit in the first half of this year as customers tightened their fiscal belts amid the drop in oil prices, company executives said. Still, the company expects to see as much as $1 billion in new solar energy contract orders from North America in the second half of 2015. Industrial Info is tracking 86 active projects worth $83.13 billion that involve AMEC Foster Wheeler. This includes 23 projects, valued at $39.65 billion, in Canada; and 26 projects, valued at $17.74 billion, in the U.S.

Pretax profits for first-half 2015 totaled £73 million ($112 million), down from £83 million ($128 million) in first-half 2014. Revenue increased 43% to nearly £2.6 billion ($4 billion).

Chief Executive Samir Brikho noted "challenging conditions" among many of its markets. The company said its underlying scope revenue (revenue minus pass-through procurement revenue) for all of 2015 is expected to be "modestly lower" than last year, and it expects to see a reduction in trading margins.

The company's Americas business reported a trading profit (profit before net financing expenses) of £82 million ($126 million), down 32% from first-half 2014. AMEC Foster Wheeler cited increased pricing pressure in the Oil & Gas Industry, and lower EPC margins from downstream projects. Clean energy project revenue from the Americas was lower, largely as a result of delays in project approvals, the company reported, but the project pipeline remains strong.

Key North American oil and gas projects for AMEC Foster Wheeler included oil sands work for Imperial Oil Limited (Calgary, Alberta), Syncrude Canada Limited (Fort McMurray, Alberta) Canadian Natural Resources Limited (CNRL), (Calgary), Suncor Energy (NYSE:SU) (Calgary) and Royal Dutch Shell plc (Shell) (NYSE:RDS.A) (The Hague, Netherlands), while downstream work included a propane dehydrogenation project in Texas for Enterprise Products Partners (NYSE:EPD) (Houston, Texas), as well as projects for LyondellBasell (NYSE:LYB) (Houston) and Dow Chemical (NYSE:DOW) (Midland, Michigan).

AMEC Foster Wheeler also announced it had won contracts this year from Freeport-McMoRan Incorporated (NYSE:FCX) (Phoenix, Arizona), D'Arcinoff Group (Washington, D.C.), Canadian Nuclear Laboratories (Chalk River, Ontario) and the U.S. Air Force.

Trading profit gains were noted by the company's Northern Europe-Commonwealth of Independent States (NECIS), and Asia, Middle East, Africa & Southern Europe (AMEASE) business units. However, the Global Power Group segment reported a 66% drop in trading profit.

The company's order book totaled £6.6 billion ($10.2 billion).

Looking forward, Chief Financial Officer Ian McHoul said during the company's earnings conference call that he expects to see growth in the company's order book in the second half of the year, especially for oil & gas and petrochemical projects in the North American and AMEASE segments, and in North American solar power projects, where he said new orders will range from $500 million and $1 billion.

AMEC acquired a 95.3% interest in Foster Wheeler AG in November 2014, and acquired the remaining 4.7% in January 2015. The company said it expects to see £125 million ($192 million) in cost savings stemming from the acquisition by 2017.

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.