Foster Wheeler AG recently published its second quarter 2010 results. Net income reached $58.9m, equating to $0.46 per diluted share. This compared to $122.2m, or $0.96 per diluted share in the second quarter of the prior year, 2009. Nevertheless the company anticipates more positive results over the years’ remaining quarters.
Consequently, net income fell by over half compared to the previous year, at a rate of 52% in quarter two. The company advised that net income and consolidated EBITDA over both quarterly periods was detrimented by asbestos-related provisions. Taking this into account, net income in Q2 of 2010 was $61.2m, or $0.48 per diluted share, versus $124.0m, or $0.98 per diluted share during the corresponding quarter in 2009, which equates to a slightly lower percentage decline of 51% year on year.
Furthermore, second quarter 2010 consolidated EBITDA declined by approximately 44%, reaching $90.2m, compared to $162m in the same quarter of 2009. A broader fiscal analysis finds that the net income in the first six months of 2010 was $130.9m, or $1.02 per diluted share. In contrast, the first six months of the prior year saw more positive figures; net income of $195.1m, or $1.54 per diluted share.
Robert Flexon, the company’s CEO, rationalised these results with market declines in both of Foster Wheeler’s operating groups. He commented, “The company's net income in the second quarter of 2010 was below the average quarter of 2009 primarily due to market-related declines in scope revenues and EBITDA margins in both of our operating groups. Nevertheless, both operating groups continued to demonstrate outstanding performance in executing contracts - and maintained commercial excellence despite ongoing competitive pressure.$quot;
Flexon anticipated a more optimistic market outlook for the company’s two businesses. He remarked, $quot;Our outlook for the Global Power Group is unchanged. We expect EBITDA margin on scope revenue of 16-18% for full-year 2010, and we expect to exit 2010 with a level of scope backlog that will be well above the levels we reported in the first two quarters of this year.$quot;
He continued, “In our Global E&C Group, we now expect a steady, rather than accelerating, pace of new orders in the second half of 2010, with projects moving forward in a measured fashion and, in some cases, through phased releases.”
Flexon elaborated, “Although we see clients delaying decisions on certain significant project investments into 2011 due to a variety of factors, such as permitting, complexity of consortium/partner approvals, timing of political events such as elections, appointments to key positions in national oil companies and the pacing of investment decisions among multiple client projects, markets are continuing to show signs of improvement, particularly in emerging economies.
However, as a result of these delays, and lower currency exchange rates as compared to 2009, our 2010 scope revenues in E&C are likely to be moderately lower than they were in 2009, whereas our previous outlook was for E&C scope revenues in 2010 to be comparable to 2009. As a result of excellent operating performance, we reaffirm our expectation that EBITDA margin on scope revenue in the Global E&C Group will be 18-20% for the full year 2010, bolstered in part by profit enhancement opportunities,” concluded Foster Wheeler’s CEO.