Jacobs Engineering Sees Profits Dip in Fiscal First-Quarter 2014, but Expects Boost from Acquisitions

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Researched by Industrial Info Resources (Sugar Land, Texas)--Jacobs Engineering Group Incorporated (NYSE:JEC) (Pasadena, California), a leading worldwide provider of technical and construction services, completed several major acquisitions during the first quarter of the company's fiscal year 2014, with rising costs offsetting gains from expanded services. Net earnings were reported to be $93.73 million, a 5.33% decrease from fiscal first-quarter 2013.

Total revenues for the quarter stood at $3.07 billion, an 11.21% increase from the same period last year. Projects from the Chemicals Industry made up 22% of the company's business, the largest share for any market. During the quarter, Jacobs incurred increases of more than 12% in both direct contract costs and selling, general and administrative expenses. However, the company saw strong gains in segment revenue and overall backlog:

• The Technical Professional Services segment reported $1.67 billion in revenue, a 3.81% increase from fiscal first-quarter 2013. The segment's backlog was $12.28 billion, a 21.59% increase.
• The Field Services segment reported $1.4 billion in revenue, a 17.99% increase from the same period last year. The segment's backlog was $5.77 billion, basically unchanged from first-quarter 2013.

The company's book-to-bill ratio stood at 1.15; a ratio of more than 1 indicates a company has a demand for orders that exceeds what it can immediately supply.

In December, Jacobs completed its acquisition of Sinclair Knight Merz (SKM) for about $1.2 billion. SKM is an employee-owned company with an established presence in Australia, Asia, South America and Europe that serves multiple industries, such as metals and minerals, construction and energy. The acquisition boosted Jacobs' first-quarter revenues by $25.7 million, but reduced net earnings by $12.8 million; the expected loss was attributed "two weeks of SKM operations and transaction-related expenses," according to a Jacobs press release.

Capital expenditures for the quarter were reported to be $37.95 million, compared with $25.17 million in the same period last year.

Industrial Info is tracking more than $36 billion in active projects involving Jacobs, including the $550 million construction of a methanol plant in Geismar, Louisiana, for Methanex Corporation (NASDAQ:MEOH). The project involves building a 950,000-metric-ton-per-year facility that will utilize electric services provided by Entergy Gulf States Louisiana. Equipment to be installed includes materials from a previously mothballed unit owned by Methanex in Chile.

"The process industries"--chemicals, Oil & Gas Production and Petroleum Refining--"are really strong markets today," said Craig L. Martin, the president and chief executive officer of Jacobs, in a conference call. "The business grew 1% in our overall capital expenditures, and we saw lots of activity--particularly strong in chemicals, so the outlook is very positive."

Martin said that among the promising signs for the company is the acquisition of Guimar in Brazil, which he said will expand Jacobs' presence in a country that is looking to become a major oil & gas exporter and could have "more than $90 billion of refining investment." He noted that global spending in the Oil & Gas Industry is up, with strong activity in gas monetization.

"Niche acquisitions are going to continue to be important to us," Martin said. "There were several of them this quarter, and I think we're going to continue to see that. A couple like Marmac and FMHC, are in markets where we think we're going to see significant growth. So very small acquisitions, we hope, will give us very strong leverage."

MARMAC Field Services Incorporated (Costa Mesa, California) provides pipeline engineering services to the Western U.S., and FMHC Corporation (Chicago, Illinois) provides services to the wireless telecommunications industry.

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