Fluor(US:FLR)2022-08-05 19:19Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $3.3 billion, reflecting projects nearing completion and the pace of limited versus full notice to proceed on projects [35] - Segment profit increased to $108 million from $95 million a year ago, with adjusted EBITDA for the quarter at $65 million, slightly below expectations due to project charges and foreign exchange impacts [35][36] - Ending backlog improved to $19.5 billion, with new awards for the quarter exceeding a one-to-one book-to-burn ratio at $3.6 billion [37] Business Segment Data and Key Metrics Changes - Urban Solutions reported segment profit of $8 million, with new awards approaching a 2:1 book-to-burn ratio at $1.9 billion compared to $617 million a year ago [11] - Mining & Metals saw significant activity, with contracts awarded for projects in Australia and Indonesia, and a pipeline of approximately $5 billion in upcoming awards [18] - Energy Solutions reported segment profit of $65 million, including new awards for a lithium chemicals project in China and a refinery upgrade project in Mexico [25] Market Data and Key Metrics Changes - 73% of new awards for the quarter were reimbursable, with nearly 40% related to energy transition opportunities [9] - The company is pursuing $28 billion of front-end prospects in energy transition, with $38 billion in potential future work across segments [33] - The LNG Canada project is over 60% complete, transitioning to a different phase of construction [28] Company Strategy and Development Direction - The company is focused on energy transition projects, differentiating itself through subject matter expertise across all business lines [48][64] - The strategy includes being selective in infrastructure pursuits, emphasizing fair and balanced contract terms [16] - The company aims to maintain a strong capital structure while investing in growth opportunities, particularly in energy transition and advanced technologies [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the new awards and ongoing projects, indicating solid CapEx plans across various sectors despite economic uncertainties [47] - The company anticipates a strong Q3 with significant new awards, particularly in energy transition and semiconductor manufacturing [52][62] - Management noted that the effective tax rate is expected to decline as U.S.-based revenue ramps up in 2023 [42] Other Important Information - The company achieved a 15% reduction in Scope 2 emissions from 2020 to 2021, supporting its net zero commitment for 2023 [6][7] - The company is on track to capture nearly $100 million in ongoing cost savings in 2022, two years ahead of its goal [38] - The company has a debt-to-capital ratio under 40%, with plans to retire 2023 notes using existing liquidity and monetization of non-core business units [39] Q&A Session Summary Question: Insights on project confidence and client CapEx plans - Management indicated strong confidence in new awards and CapEx plans across top customers, projecting $175 billion in 2022 and $190 billion in 2023 [48] Question: Updates on CHIPS Act and semiconductor projects - Management confirmed participation in semiconductor projects, expecting incremental awards in the hundreds of millions, with potential for billions in the first quarter of next year [52] Question: Context on Q2 awards margins and inflation impacts - Management clarified that Q2 awards margins were 550 basis points above the operating plan, primarily from reimbursable contracts, with expectations for quicker project burn rates [54][56] Question: Guidance on revenue and cash flow expectations - Management expects revenue to accelerate in the second half of the year, with a flat cash balance due to servicing obligations [60] Question: Competitive environment in energy transition projects - Management highlighted differentiation in energy transition projects, with a high probability of winning based on value delivered rather than price [66]