Foster Wheeler's 2Q Profit Up 17%

Foster Wheeler reported net income for the second quarter of 2011 of $63.3 million, or $0.52 per diluted share, compared with $58.9 million, or $0.46 per diluted share, in the second quarter of 2010.

Net income in both quarterly periods was impacted by asbestos-related provisions as detailed in an attached table. Excluding such items from both quarterly periods, net income in the second quarter of 2011 was $65.3 million, or $0.53 per diluted share, compared with $61.2 million, or $0.48 per diluted share, in the year-ago quarter.

For the first six months of 2011, net income was $86.3 million, or $0.70 per diluted share, compared with $130.9 million, or $1.02 per diluted share, for the first six months of 2010.

Foster Wheeler's Interim Chief Executive Officer, Umberto della Sala, said, "The company reported a 17% increase in net income in the second quarter of 2011, relative to the average quarter of 2010. The results were attributable to the very strong performance of the company's Global Power Group, which reported sharp increases in scope revenue and scope EBITDA relative to the average quarter of 2010."

In addition, net income for the second quarter of 2011 was aided by the continued benefit of a favorable effective tax rate.

Global Engineering and Construction (E&C) Group

  • EBITDA in the second quarter of 2011 was lower than the average quarter of 2010 due to a reduced volume of work executed, lower margins on scope revenues and costs associated with an unfavorable utilization rate. On a sequential-quarter basis, EBITDA and EBITDA margin on scope revenue improved from the first-quarter levels of $41.7 million and 11.6%, respectively, due in part to favorable timing and mix of work executed.
  • Scope operating revenues in the second quarter of 2011 were below the average quarter of 2010, primarily due to a lower volume of work executed.
  • New orders booked in Foster Wheeler scope in the second quarter of 2011 were below the level of the average quarter of 2010, reflecting the slippage of expected new awards.
  • EBITDA in the second quarter of 2011 was 65% above the average quarter of 2010 due to higher scope revenues and margins. EBITDA during the quarter was aided by lower than expected costs on projects for which the company is providing on-site erection of boilers. Also contributing to EBITDA in the second quarter of 2011 was an increase in equity earnings from the company's interest in a power plant in Chile, which benefitted from high electric power rates during the quarter.
  • Scope new orders in the second quarter reached a near-record level -- due mainly to the booking of a contract for what are expected to be the largest and most advanced supercritical CFB (circulating fluidized bed) boilers in the world.
  • Scope operating revenues in the second quarter of 2011 were 62% above the average quarter of 2010, reflecting the increased volume of boiler work.

In commenting on the market outlook for the company's two business units, Mr. della Sala said, "Markets seem to be improving for both of our business groups, although the pace of that improvement is slightly better in the power sector. Even so, all of our end markets remain competitive."

He added, "We are raising our full-year EBITDA margin guidance for the Global Power Group (GPG) to 17%-19%. GPG is having a strong year, and we further expect the group's 2011 revenues to be sharply higher than 2010. We are closely tracking firm prospects in a number of regions. However, the timing of award decisions is uncertain, and some of these prospects could slip into 2012, which would likely result in scope backlog at the end of 2011 being roughly comparable with year-end 2010."

Mr. della Sala continued, "In our Global E&C Group, we are maintaining full-year EBITDA margin guidance of 13%-15%, but we still expect to see quarterly volatility, with the third-quarter margin likely lower than the second quarter. We expect scope revenues to trend upward in the second half of 2011, but we now believe that full-year scope revenues will likely be essentially flat as compared to full-year 2010. Based on the expected timing of awards, we expect scope backlog to show growth in 2011 from year-end 2010 levels."

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