Fluor Corp. to close regional offices, sell off businesses as namesake director Peter Fluor retires
Fluor Corp. will sell its construction equipment and government-focused businesses and close regional offices following a strategic review that the Irving-based company hopes will make it profitable again.
The engineering and construction firm expects to create $1 billion in aggregate proceeds with the divestiture of the businesses and simplification of its structure following its worst quarterly performance ever.
“The government group and Ameco have provided valuable diversification and the contributions of these businesses, and especially the employees, have been… exemplary,” CEO Carlos Hernandez said in a conference call Tuesday with analysts, “It was a difficult decision to divest these quality organizations.”
Fluor executives said they are hopeful they can sell off the businesses in early 2020. The divestiture includes construction equipment rental business AMECO, which Fluor acquired in 1977.
Once the divestitures are complete, the company said it will reassess operational plans to realign and close regional offices — a move it expects will save $100 million a year. It will shave an additional $60 million by cutting its quarterly dividend from 21 cents a share to 10 cents.
Fluor also announced the company’s namesake director, Peter Fluor, will retire in April 2020. Fluor has been a director since 1984. The board also has recently added three other members with extensive backgrounds in project management, including former CEO Alan Boeckmann as executive chairman.
“Now that Alan Boeckmann, who successfully led Fluor for more than a decade, is providing board oversight and is working together with Carlos Hernandez to successfully strengthen Fluor’s balance sheet and restore investor confidence, I believe the timing is right for me to retire,” Fluor said in a statement.
The new structure emerging from the company’s strategic and operational review creates a “leaner organization” that gives it an opportunity to return to profitability, Hernandez said. Fluor has about 53,000 employees worldwide.
“Fluor Corporation has had rough times in its 107-year history, but has always come through those and emerged stronger than before,” Boeckmann said.
The company’s infrastructure business is about to start its roughly $1.7 billion I-635 highway project in Texas, where it currently has a $6 billion project backlog.
The portion of Fluor’s backlog comprised of fixed-price projects has grown in recent years reaching nearly 50% of this year’s total backlog. The company said Tuesday it will no longer pursue fixed-price projects. Current fixed price government projects, however, will remain with Fluor until they are complete.
Fluor ranks 164th on the Fortune 500 with revenue of more than $19 billion in 2018 and profit of nearly $300 million. It’s lost almost half of its market value in the last year.
The company reports third quarter results Oct. 31. Chief financial officer Michael Steuert told analysts Fluor expects to incur restructuring charges of $150 million to $200 million through the rest of this year, and could face additional investment write-offs.