Chicago Bridge & Iron Company N.V. (CBI)
Q1 2010 Earnings Call Transcript
April 27, 2010 5:00 pm ET
Philip Asherman – President and CEO
Lasse Petterson – COO and EVP
Dan McCarthy – President of Lummus Technology
Ron Ballschmiede – CFO and EVP
Scott Levine – JPMorgan
Andrew Kaplowitz – Barclays Capital
Graham Mattison – Lazard Capital Markets
Jamie Cook – Credit Suisse
Martin Molloy – Johnson Rice
Michael Dudas – Jefferies
Avi Fisher – BMO Capital Markets
Barry Bannister – Stifel Nicolaus
John Rogers – D.A. Davidson
Andrew Kaplowitz – Barclays Capital
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Any statements made or discussed today that do not constitute or are not historical facts, particularly comments regarding the Company's future plans and expected performance, are forward-looking statements that are based on assumptions the company believes are reasonable, but are subject to a range of uncertainties and risks that are summarized in the company's press release and SEC filings.
While forward-looking statements represent management's best current judgment as to what may occur in the future, the actual outcome or results may differ materially from what is expressed or implied in such statements.
Now, I would like to turn the call over to Mr. Philip Asherman, President and CEO of CB&I.
Good afternoon and thank you for joining us today to discuss our results in the first quarter. With me are Lasse Petterson, CB&I's Chief Operating Officer; Dan McCarthy, President of Lummus Technology; and Ron Ballschmiede, CB&I's Chief Financial Officer. Following some brief comments from each of us, we will then open the call for your questions.
We're pleased to announce a solid first quarter with the three sectors all reporting good results. New awards of $560 million in the quarter are well in line with the anticipated run rate that we expected; absent of the very large new projects we still see ahead of us in the rest of the year. Current backlog is nearly $7 billion compared to just under $5 billion this time last year.
Ron will be addressing the specifics of our financial results in a few minutes, but it's worth highlighting the gross profit line of over 14%, with operating income of nearly 8%, as clearly indicative of the type of return we want from our business model, considering the unique mix of work and the commercial characteristics of our operating sectors. Also contributing to this was a tax rate that was more in line with previous norms for the size and mix of our business. And our balance sheet reflects solid liquidity, positive cash flows and cash balances that are significantly improved over the same period last year.
At year-end, we reported that we expected our new awards would be more evenly distributed over 2010. With further scoping and pre-contract planning for a very large oil sands project in Canada, has pushed that curve somewhat to the right, with the timing of that project now expected to be added to our backlog in the second quarter.
The remainder of the year is still anticipated to be well within the new award guidance range we provided for the year of $3.5 billion to $5.5 billion. The new awards for the first three months of this year included a gas processing plant for Pluto's Petrol in Peru; a significant increase in the feedwork for the cash again full field development for Shell, along with our JV partners, Aker Solutions and WorleyParsons.
It also included topside engineering for the Goliad FPSO project for Hyundai, which is providing overall engineering services for ENI and Statoil in Norway for the first oil development in the Norwegian sector of the Barents Sea. And a contract in Lummus Technology for the license and process design of a grassroots petrochemical plant in China, among others that Dan will discuss.
We also announced the successful completion of two major projects in the first quarter, including the engineering, procurement and construction of the multibillion-dollar ethylene cracker in Singapore for Shell, in combination with our JV partner Toyo. This project at peak employed over 12,000 workers with one of the best safety records of any major project in the world.
We also completed the South Hook LNG regasification terminal in Wales for Exxon Mobil and Qatar Petroleum, having offloaded over 64 cargoes of LNG during what was an outstanding startup and commissioning phase of this $1 billion-plus facility.
Geographically, at least outside of the US, the energy world is very much open for business. And we're tracking tens of billions of dollars of identified opportunities in our end markets. But the competition is as strong as we've ever seen, not only from the Koreans, but from European, Indian, and other Asian companies who have significantly grown their capabilities over the past five years, and now compete head-to-head with major US firms on EPC energy projects and large tank installations, particularly, those projects for national oil companies where price is the absolute differentiator.
On major EPC projects for international and large integrated oil companies, we still see very competitive pricing, driven by improved stability in the cost of equipment, commodities and labor. But these owners also consider experience, safety, reliability and resource capability as heavily-weighted factors in their capital project decisions. In these competitions the win ratios are much higher for us and have historically been in the 50% to 60% probability range.