Jacobs Wins Dutch Contracts – Analyst Blog

Recently, Jacobs Engineering Group Inc. (JEC) has won a contract from Corus Staal BV (Corus), subsidiary of Tata Steel, for providing engineering services. The service is supposed to support Corus’ new TRUST investment in a 525 MW cogeneration plant in IJmuiden, The Netherlands. Management did not disclose the contract value.

Jacobs will provide front-end engineering services for all the offsite and onsite operations of the IJmuiden plant.

Jacobs has also received a three-year extension for its existing contract with ONEgas of the Royal Dutch Shell PLC (RDSA) Southern North Sea asset base. ONEgas is a combined business unit of Shell U.K. Exploration & Production and the Nederlandse Aardolie Maatschappij B.V or NAM. Through this Integrated Services Contract (ISC) Jacobs is expected to earn 200 million euros per year.

The services will be provided for the gas plants in Bacton, UK and Den Helder, The Netherlands, and 54 assets in the Southern North Sea.

Jacobs is one of the world’s largest and most diverse providers of technical, professional and construction services. Jacobs’ diversification across markets, geographies and services helps generate growth in the present sluggish environment.

The company plans to expand into emerging markets like India, China and the Middle East. Emerging markets are expected to perform much better than the developed markets in the coming years.

Jacobs’ continual emphasis on cost control is an important component of the business model. Cost control initiatives may help the company deliver superior technical, professional and construction services safely, efficiently and within the cost and time parameters of the clients.

Another reason for the company’s sustenance in these difficult market conditions is its strong liquidity. The company had a net cash position of $240.4 million at the end of the first quarter of fiscal 2010. Thus, we upgrade our recommendation on Jacobs from Underperform to Neutral.