Aegion Corporation (“Aegion” or the “Company”) (Nasdaq Global Select Market: AEGN) hosts its 2014 investor day event today in New York City with a comprehensive review of its plans for sustainable earnings growth, increasing cash flow from operating activities and improving return on invested capital.
“Aegion is well positioned to take advantage of favorable market conditions in the energy, mining, wastewater pipeline and commercial infrastructure industries,” said Chuck Gordon, Interim Chief Executive Officer. “Our diverse portfolio of technologies and services dedicated to the maintenance, rehabilitation and protection of critical pipelines, industrial facilities and commercial structures gives us confidence to set a long-term target of 15 percent annual earnings per share growth, on average and over time. The objective for cash flow from operating activities is to increase annually at the rate of earnings per share growth or greater. The expected earnings per share growth also establishes the foundation for a greater than 100 basis point annual improvement in return on invested capital with the goal of reaching 10 percent to 12 percent in 2017.”
The investor day event will outline the strategic imperatives needed to achieve the Company’s growth objectives through at least 2017.
- The Energy and Mining platform has expanded its comprehensive capabilities to target the growing upstream, midstream and downstream oil and gas segments in North America. Brinderson not only provides access to the upstream and downstream markets, but brings a greater balance between more predictable and growing recurring sources of revenues compared to the project-oriented nature of Aegion’s key pipeline protection businesses. There are promising prospects in the Middle East to support the execution of a strategy to jointly market Corrpro, United Pipeline Systems and CRTS across the region. With these favorable market drivers, Energy and Mining plans to grow revenues 10 percent to 12 percent annually from the forecast of nearly $800 million in 2014 to $1.1 billion to $1.2 billion in 2017.
2014 Financial Guidance
- The Commercial and Structural platform seeks to grow its already strong position in the North American fiber-reinforced polymer market through innovation, a shift to a product-centric sales strategy and investments to significantly enhance its operating capabilities. The global outlook for the Fibrwrap ® technology appears very promising through government-led infrastructure rehabilitation efforts, especially to address seismic concerns, in key Asian markets. The objective is to grow revenues for Commercial and Structural from the forecast of $70 million to $85 million in 2014 to $120 million to $130 million in 2017.
- The Water and Wastewater platform has delivered on its promise made in 2011 for greater consistency through improved execution. The North American cured-in-place pipe market is enjoying a cycle of elevated and sustained municipal expenditures that benefit Insituform’s market leading position. The international markets are stable in Europe and there are select opportunities for growth in the Asia-Pacific region. Water and Wastewater plans to grow revenues three percent to five percent annually reaching $570 million to $590 million in 2017, while improving operating efficiencies.
In reviewing the Company’s full-year 2014 guidance, Gordon noted that since 2011, Aegion has earned over two-thirds of its operating income in the second half of the year. “We expect that pattern to continue this year with earnings for several of Aegion’s key businesses peaking in the third and fourth quarters. However, the start of the current second quarter was below previous expectations as a result of a slower ramp-up of project activity and weaker margins for parts of the Energy and Mining platform. Water and Wastewater is performing in line with expectations for the second quarter. Commercial and Structural will likely end the quarter slightly below expectations, but this platform is positioned for improved performance in the second half of 2014. These factors result in a lower forecast for second quarter earnings per share to $0.34 to $0.36 from the previously stated guidance of $0.39 to $0.41. At this time, I do not expect we will make up the shortfall, and as a result, guidance for full-year 2014 earnings per share is now $1.50 to $1.65. The outlook for earnings per share is from continuing operations and on a non-GAAP basis. There is no change to the prior guidance for cash flow from operating activities in the range of $100 million to $110 million and return on invested capital of 7 percent to 8 percent.”