Chicago Bridge & Iron Tumbles in 2016 as Delays Diminish EPC Giant's Backlog

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Researched by Industrial Info Resources (Sugar Land, Texas)--Delays in several major project awards proved a headache for engineering, procurement and construction (EPC) juggernaut Chicago Bridge & Iron Company N.V. (NYSE:CBI) (The Hague, Netherlands) as it closed out 2016 with a sharp drop in revenues and earnings; in particular, the company saw revenue declines across nearly all of its segments in the fourth quarter. Nonetheless, executives are looking forward to big awards this year, as well as progress on high-value projects along the U.S. Gulf Coast. Industrial Info is tracking $62.83 billion in active projects involving CB&I.

The company had been looking forward to a string of contract awards that it predicted would generate about 25% of its revenues for the year, only to see them face delays for various reasons. The company booked $1.39 billion in new awards during the fourth quarter, compared with $3.25 billion in fourth-quarter 2015. Executives attributed the decline to wariness on the part of large clients, who are holding off on big-ticket spending due to weakness in the energy markets.

The backlog now stands at $18.45 billion, compared with $22.64 billion at the end of 2015.

One of the biggest hits to profits was a pre-tax, non-cash goodwill impairment charge of roughly $655 million for the sale of CB&I's Capital Services business. The company announced that it has agreed to sell the business to an affiliate of private equity investment firm Veritas Capital for $755 million. The Capital Services business provides services as a maintenance and modification contractor for the nuclear power industry, industrial maintenance industry, and federal, state and local governments, according to CB&I. The deal is expected to close in the second quarter.

Net income stood at $438 million for 2016, a 12.22% drop from 2015; revenues were only slightly down to $10.68 billion, a 1.73% decline. The Engineering & Construction and Fabrication Services segments saw a significant increase in materials costs. Divested nuclear operations in Engineering & Construction led to weaker revenues and a drop of more than 80% in new awards for the segment.

Philip K. Asherman, the president and chief executive officer of CB&I, nonetheless pointed to the EPC giant's successes during the year in a quarterly earnings conference call: "The key project milestones in 2016 include the completion of the ethane cracker for OxyChem and Mexichem in Ingleside, Texas; progress on the Cameron LNG Liquefaction Project in Hackberry, Louisiana, and the Freeport LNG job in Freeport, Texas; advancement of the Shintech Ethane Cracker Project in Plaquemine, Louisiana; as well as the Lotte Ethane Cracker Project and the associated mono-ethylene glycol plant in Lake Charles, Louisiana; and continue construction of three combined-cycle power plants throughout the U.S."

Industrial Info is keeping close tabs on these projects, including:

• $220 million ethylene storage caverns and $50 million of related storage facilities at the Ingleside project, which include a leaching plant, leach salt caverns, and ethylene-gathering and injection systems
• the $5.5 billion Train I, $5.5 billion Train II, $4.5 billion Train III, $4.5 billion Train IV, $200 million natural gas pretreatment plant and $90 million natural gas-fired unit addition at the Freeport LNG Liquefaction and Export Plant in Quintana, Texas, with each train holding a natural gas inlet capacity of 650 million standard cubic feet per day and an LNG production capacity of 4.6 million tons per year
• the $1.6 billion ethylene unit addition at the Shintech project in Plaquemine, Louisiana, with a capacity of 500,000 metric tons per year
• the $1.1 billion monoethylene glycol unit addition at the Lotte Chemical project in Westlake, Louisiana, which is expected to process 1.2 billion pounds per year of ethylene feedstock to produce 700,000 metric tons per year of ethylene oxide
• the proposed, $937 million combined-cycle addition at the Lewis Creek Power Station in Willis, Texas, with a designed capacity of 993 megawatts (MW)

For more information, see Industrial Info's project reports for the storage caverns and surface facilities at Ingleside, for which CB&I is performing EPC services; Train I, Train II, Train III, Train IV, pretreatment plant and natural gas unit addition at Freeport, for which CB&I is one of several EPC companies; the Plaquemine project, for which CB&I is a technology provider; the Lotte Chemical project, for which it is a general contractor; and the Lewis Creek project, for which it is performing EPC services.

"Now, we approached 2017 cautiously optimistic, and the timing of new awards is a driver for our plan," Asherman said. "We expect much of this activity in the second half of the year, which might have a minimal impact on 2017 revenue and earnings, but obviously creates a great outlook for next year and beyond. We have a healthy backlog of $18 billion, including the additional revenue stream from our Technology and Fabrication Services groups, which can serve projects internally and sell externally around the world."

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.