Foster Wheeler AG (FWLT)

Q2 2010 Earnings Conference Call

August 5, 2010 10:00 AM ET

Executives

Scott Lamb – VP, IR

Bob Flexon – CEO

Umberto Della Sala – President, CEO; and CEO – Global Engineering and Construction Group

Gary Nedelka – President and CEO – Global Power Group (GPG)

Franco Baseotto – EVP, CFO and Treasurer

Analysts

Andrew Kaplowitz – Barclays Capital

Michael Dudas – Jefferies & Co

Joe Ritchie – Goldman Sachs

Steven Fisher – UBS

Will Gabrielski – Gleacher & Company

Barry Bannister – Stifel Nicolaus

Avi Fisher – BMO Capital Markets

John Rogers – D.A. Davidson & Co

Roger Ried – Natixis Bleichroeder

Peter Chang – Credit Suisse

Presentation

Operator

Compare to:
Previous Statements by FWLT
» Foster Wheeler Ltd. Q1 2010 Earnings Call Transcript
» Foster Wheeler AG Q3 2009 Earnings Call Transcript
» Foster Wheeler AG Q4 2008 Earnings Call Transcript

Good morning. My name is Lynn, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Foster Wheeler Second Quarter 2010 Investor Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. Thank you. It is now my pleasure to turn the floor over to Scott Lamb, Vice President of Investor Relations.

Scott Lamb

Good day everyone and thanks for joining us. Our news release announcing financial results for the second quarter was issued this morning and has been posted on our website at fwc.com. The presentation we’ll use today has also been posted on the website.

Before turning to our discussion, I need to remind you that any comments made today about future operating results or other future events are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ substantially from such forward-looking statements. A discussion of factors that could cause actual results to vary is contained in Foster Wheeler’s annual and quarterly reports filed with the SEC. The Company’s Form 10-Q is being filed with the SEC later today.

Joining us on the call today from our office here in Zug, Bob Flexon, CEO, Umberto Della Sala, President and Chief Operating Officer; Franco Baseotto, who is Executive VP, CFO and Treasurer, Gary Nedelka, CEO of our Global Power Group, and Michael Liebelson, Executive VP and Chief Development Officer.

After our prepared remarks, we will have time to take your questions. I will turn the call over to Bob.

Bob Flexon

Thanks Scott, and good day everybody. Thank you for joining us on the call today, my first as CEO of Foster Wheeler.

Beginning on Page 3 of our slide, you can see that our adjusted net income for the second quarter of 2010 were $61 million, or $0.48 per share, that’s below the average quarter of

2009, due largely to market-related declines in both the volume of work executed and the EBITDA margins for each of our operating groups. It’s important to note that even with the decline in net income, each of our business groups continued to demonstrate outstanding performance in executing contracts, and maintained commercial excellence in a market that remained highly competitive.

Turning to Slide 4, you can see that our Global E&C Group reported $85 million of EBITDA for the second quarter. This is below the average quarter of 2009 due to what I just mentioned; lower volumes of work executed and lower EBITDA margins. For second quarter of 2010, the margin was approximately 19% compared to 22% for the average quarter of 2009.

I’ll ask Umberto to speak to the market environment on Slide 5. Umberto?

Umberto Della Sala

Okay thank you Bob. Okay, let’s go to Page 5. We did in fact see good levels of bidding and booking activity in the second quarter. And I use the term good in a relative way in consideration of our current market condition. In this environment, we were able to book a number of very nice awards in our E&C Group in the second quarter. And you see it on the slide several examples.

I will start with the EPCm contract for the clinical facility in Singapore. This is a sizable award in terms of (inaudible) just below, little bit below the threshold that we set to define a project as a mega project. We have a very strong track record in Singapore which contributed to winning this first large job with a new client. So, this is a very nice award.

Secondly the lead piece, the contract for the EPCm for a pharmaceutical project in China. We really like this one because it is a large (BUS) processing plant, very similar to a chemical plant, and this is an area in which we excel.

Next in the list is the feasibility study and the FEED for the new grassroot specimen Nassiriya refinery in Iraq. Now, this project has been on our screen for a while. We are happy that we are finally able to book the project. And this is a key win for us, which plays directly to our strength in clicking on large complex assignments.

Next project on the list is the EPCm contract for an upgrade of the Limbe refinery in Cameroon. Now we did the FEED for this project and we were able then to win the subsequent EPCm phase. This is a good size job in a geography where we have not been active in recent years, as our Paris office worked very hard to develop this relationship.

Next one on the list is also in Cameroon. This is a pre-FEED concept for an LNG (inaudible) facility. Again, this a job that goes right to a lot of competitive advantage in the market.

Next we have the EPCm job for cogen plant in Germany for Dow which could sound as a surprise to you, but I’ll take this opportunity to remind you that our Global E&C Group does in fact have expertise in these kinds of power industry work. And we were very happy to win this award with the clients of Dow, with whom we are building good relationships across a number of areas of their business.

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