Foster Wheeler Points to Weak Markets, Renewable Energy Policies for Lower Third-Quarter Net Income

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Researched by Industrial Info Resources (Sugar Land, Texas)--Foster Wheeler AG (NASDAQ:FWLT) (Zug, Switzerland) reported third-quarter 2010 net income of $51.7 million, down 43% from the same quarter in 2009. The company pointed to weaker market conditions and lower volumes of work executed as reasons for the decline.

"Both of our business units had very good operating performance during the quarter," said interim CEO Umberto della Sala in a conference call. "Despite the good operating performance, our net income and EBITDA declined in the third quarter of 2010, as compared to the average quarter of 2009. The primary reason for the decline is the weak market conditions that we saw coming into the third quarter. However, if we look beyond the financial results of the third quarter, we can see some very encouraging news ... We are definitely experiencing an increase in the level of proposal activity in client enquiries from many regions of the world. It appears to us that activity has returned to levels we have not seen since the markets turned down in 2008."

Foster Wheeler's Global Engineering and Construction Group had quarterly EBITDA (earnings before interest, taxes, depreciation and amortization) of $69 million, compared to $114 million in 3Q09. Third-quarter EBITDA in the company's Global Power Group was $40 million, remaining flat from the corresponding quarter in 2009.

Gary Nedelka, the CEO of Foster Wheeler's Global Power Group, discussed changes in global demand for solid-fuel boilers. "Global demand for solid-fuel boilers continued to be weak over the third quarter. This is due in part to the macroeconomic environment ... We do see signs of recovery, but clearly many key economic indicators remain below where they were in 2007," said Nedelka.

"Another contributor to weak boiler demand has been the big push in renewable energy policies in the U.S. and Western Europe. In many instances, these policies are driving the addition of unneeded capacity in developed countries, further displacing the need for new conventional power," continued Nedelka. "On the other hand, we are seeing a growing need for capacity additions in a number of developing countries, and in these countries, there is often a preference for solid-fuel boilers. I'm talking here about countries and regions such as Vietnam, South Korea, Turkey, and Eastern Europe. The good news is that these are all areas where we have a strong presence."

Nedelka highlighted a substantial project that was added to Foster Wheeler's books during the current fourth quarter: Electricity of Vietnam's 600-megawatt (MW) Nghi Son-1 thermal power project in the Thanh Hoa province in Vietnam. "This project will add 600 MW to the overall economic development to Thanh Hoa province in the northern central region of Vietnam. This is a country where we have strong relationships and a significant track record of successful projects. The award is further evidence of the strength of our global presence and the very strong technical capabilities that we bring to the market," said Nedelka. Additional information on the project can be found in October 19, 2010, article - Electricity of Vietnam Likely to Begin Operations of Nghi Son-1 Power Project by End of 2013.

The Nghi Son-1 power project has an estimated total investment value of $1 billion. For information on this and more than $62 billion in other projects involving Foster Wheeler, visit Industrial Info's North American and International Industrial Databases.

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