Foster Wheeler CEO Discusses Q3 2010 Results – Earnings Call Transcript
Foster Wheeler AG (
)
Q3 2010 Earnings Call Transcript
November 4, 2010 11:00 am ET
Executives
Scott Lamb – VP, IR
Umberto della Sala – President, Interim CEO & COO
Franco Baseotto – CFO, EVP, & Treasurer
Gary Nedelka – President & CEO of Global Power Group
Roberto Penno – MD of Global Sales, Marketing and Strategic Planning, E&C Group
Michael Liebelson – EVP & Chief Development Officer
Analysts
Will Gabrielski – Gleacher
Andy Kaplowitz – Barclays Capital
Steven Fisher – UBS
Joe Ritchie – Goldman Sachs
Jamie Cook – Credit Suisse
Michael Dudas – Jefferies
Avi Fisher – BMO Capital Markets
Barry Bannister – Stifel Nicolaus
Rob Norfleet – BB&T Capital Markets
John Rogers – D. A. Davidson
Mark Caruso – Millennium Partners
Presentation
Operator
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Good morning. My name is Julianne and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Foster Wheeler third 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
Thanks. Good day everyone and thank you for joining us. Our news release announcing financial results for the third quarter was issued this morning and has been posted to our website at fwc.com.
The presentation we'll use has also been posted to the website. Before turning to our discussion today, I need to remind you that any comments made 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 defer 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 are Umberto della Sala, our Chief Executive Officer; Franco Baseotto, who is Executive VP, CFO, and Treasurer; Gary Nedelka, CEO of our Global Power Group; Roberto Penno, who is Managing Director of Global Sales and Marketing for the E&C Group; and Executive VP and Chief Development Officer, Michael Liebelson. After our prepared remarks, we'll have time to take your questions.
I'll turn it over to Umberto.
Umberto della Sala
Okay. Thank you, Scott, and good day everybody. Thank you for joining us on the call today. Now, this is my first time to lead the investor call and we are going to do things a little bit differently today.
After my introductory comments, Roberto and Gary will talk about new orders and market conditions in their respective businesses. And then, I will ask Franco to talk about the financial results for the company and for each business group.
So, let's start with slide number three, where you see the highlights of the quarter. Key message on this slide is the first bullet. Both of our business units had very good operating performance during the quarter. Now, 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. Now, 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, which is summarized here.
We are definitely experiencing an increase in the level of proposal activity and client inquiries in many regions of the world. It appears to us as though this activity has returned to levels we had not seen since the markets turned down in 2008. This activity as a result got two very large and very strategically important awards early in the fourth quarter.
And I will let Roberto and Gary describe those awards to you in a few moments.
Now, this activity level also helps explain why, in the third quarter, we had the sequential quarter increases in scope backlog in each business group. And why we reported the third consecutive quarterly increase in man hours in the clock in E&C group. So again, we are seeing some signs where demand is improving.
Another highlight to the third quarter, as you see here on this slide, was the repurchase of shares. Now, to be specific, we went – spent almost $100 million to buy 4.3 million shares. And while we were doing this, we also managed to increase our cash position to more than $1 billion by the end of the third quarter.
So, those are the highlights of the quarter. Now, I'll ask Roberto to talk about E&C new orders and market conditions. Roberto?
Roberto Penno
Thanks, Umberto and good day, everyone. Please turn to slide number four, which is about new orders reported in this quarter for the E&C Group. And I'll give you the key takeaways.
We had another solid booking quarter, which reflects a balanced mix of studies, FEED, FEED for EPC contracts and PMC awards. The third quarter bookings reflect a global market presence, with awards in North and South America, Europe, Middle East, Africa, and Asia across all our key E&C markets, which are oil and gas, both onshore and offshore, refining petrochemicals, chemicals, and pharmaceuticals.
The contract making after our third quarter bookings were a mix of small-to-medium projects and we were not reliant on any single large project to deliver the quarter. I ask you now to turn to slide number five and you see here some of our key third quarter wins. The first three awards on this list are for upstream projects, where we have further strengthened our capabilities through our position.
First, is a project in Iraq. This is an important upstream booking that includes both onshore and offshore components. We’ve been involved with the Al Basrah Terminal since 2008, initially working on studies (inaudible). We will now secure the PMC, which is our second major award in Iraq this year. The other being in the Nasiriyah Refinery study in FEED, which we booked last quarter.
Next on the list, is the pre-FEED and FEED for the Cardon IV Perla Field development. This is an offshore development by Eni and Repsol in the Gulf of Venezuela. Again, another very good upstream award for us.
The third upstream project we booked in the third quarter was the EPCm contract for a gas compression station in Europe. This is a relatively new and strategically important client for us and the gas compression station represents our second award from this client.
Turning to another market segment, you see next on the list the clean fuels project for a refinery in Asia, where we have received a full and final release. Again, we’ve been working on this project for some time, first executing the front-end, then working on initial EPC releases award. The client has now made the final investment decision. So we booked the main release of the work.
Moving down the list, we have made an additional booking on a major FEED contract for a very large petrochemical complex in the Middle East. This third quarter bookings fully reflects the complete scope of the work we have been asked to perform.
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