Foster Wheeler AG (FWLT) reported a net income of $65.1 million, or 51 cents per share for the fourth quarter of 2009, compared with $99.9 million, or 75 cents in the fourth quarter of 2008. This was lower than the Zacks Consensus Estimate of 65 cents for the most recent quarter. Operating revenues were $1.2 billion in the quarter.

Segment Details

Global Engineering & Construction Group (E&C)

New orders booked in Foster Wheeler scope were below the average quarter of 2008, reflecting a slippage of expected awards combined with routine quarterly variability.

EBITDA in the fourth quarter of 2009 reflects a gain of $11.3 million for the settlement of a prior claim and a charge of $6.1 million for anticipated severance costs.

Scope operating revenues were below the average quarter of 2008 due primarily to lower volumes of work executed.

Global Power Group (GPG)

New orders were below the average quarter of 2008 but showed a trend of continued sequential-quarter improvement that began in the third quarter of 2009.

EBITDA in the fourth quarter of 2009 was below the average quarter of 2008 due to lower volumes of work.

Guidance

In Global E&C Group, the company continues to have a very good prospect list, and clients appear to be committed to moving forward with prospective projects. However, the slowdown that it saw in the market in late 2008 and 2009 combined with increased competitive pressure will likely have an unfavorable effect on E&C in 2010.

The company does not expect that the workforce adjustments associated with the severance charge of $6.1 million will have a material impact on E&C scope revenues in 2010. Assuming an accelerated pace of new orders in the second half of 2010, the EBITDA margin on scope revenue for this business is likely to be in the range of 18% to 20% for the full year.

This expected decline in margin, as compared to 2009, will likely result from competitive pressure and to a lesser extent on the degree of inefficient utilization of manpower relative to 2009 caused by delays in the timing of prospect awards.

In the Global Power Group, it expects 2010 to be a transitional year. To the extent that global GDP and power demand continue to recover from the low levels of 2009, the company would expect to see a continued rebound in new orders as 2010 progresses. In GPG, it expects EBITDA margin on scope revenue to be in the range of 16% to 18% in 2010.

Foster Wheeler AG, together with its subsidiaries, provides construction and engineering services to the oil and gas, oil refining, chemical/petrochemical, pharmaceutical, environmental, power generation, and power plant operation and maintenance industries worldwide. It operates through two groups, Global Engineering and Construction Group (Global E&C Group), and Global Power Group.

We currently have a Neutral recommendation on FWLT.

 

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