While the coronavirus has affected all construction companies' operations, it hasn't done so evenly. That was evident in the first quarter results of Fluor and Granite, with one company seeing double digit decreases, and the other eking out flat gains for the period.
Irving, Texas-based Fluor announced decreases in both revenue and backlog during its first-quarter earnings call Friday.
The company reported $2.9 billion in revenue for Q1 2021, down from $4.1 billion from the same period in 2020, a 29% decrease. Backlog for the quarter, which concluded March 31, was $23.8 billion, compared to $31.4 billion in the same period of 2020, a 24% decrease.
"Results for the quarter were consistent with our expectations as we start to work past the effects of COVID-19 on our projects and operations," CEO David Constable said.
Although the market remains soft, Constable said, he anticipates awards on projects will pick up as 2021 progresses, and the firm will continue to rapidly build up its backlog. Joe Brennan, Fluor's CFO, said that could start soon.
"We expect full-year operating cash flow to be positive," Brennan said, later adding, "We believe as we get into Q2 our backlog is going to take off."
A source of new work could be the infrastructure plans pushed by President Joe Biden's administration. Constable said there was "obviously a lot of interest and excitement" in an investment in long-term infrastructure, even as the exact details of the amount of funding and allocation have yet to be determined.
It's too soon to see the impact of the bill for Fluor, Constable said, but he indicated that there is usually a two-quarter to three-quarter lag on the impact of infrastructure spending.
The earnings call followed the announcement last week that Peter J. Fluor, great-grandson of company founder John Simon Fluor, has retired from the contractor's board of directors. Fluor had served on the board since 1983.
"Peter has continued the Fluor legacy: a commitment to excellence, integrity and ethics, always putting the safety and wellbeing of employees first, and recognizing that teamwork is a key component of our success," Constable said in an official statement.
Watsonville, California-based Granite Construction announced increased revenue and slightly higher backlog for its first quarter Friday, while pointing to a court settlement with investors to put the accounting irregularities in its heavy civil group behind it.
The firm reported $669.9 million in revenue for Q1 2021, an increase of 5.3% over the $635.9 million it saw during the same span in 2020. Its backlog of $4.45 billion was less than 1% higher than the $4.43 billion it had a year ago, but 4% more than the $4.28 billion it reported in its previous quarter.
Following the restating of its financials earlier this year, president Kyle Larkin said the company would pay out $66 million to settle litigation with investors, with another $63 million paid through insurance proceeds. "Although it was a difficult decision, we concluded that it was in the best interests of the company, as well as our shareholders," Larkin said on a conference call with financial analysts. "We will be able to put this litigation behind us and focus on our business and people."
Moving forward, Larkin said the company was seeing a robust bid environment across all of its business, and the company reiterated its fiscal guidance for the year of low- to mid-single digit revenue growth, and margins of 5.5% to 7.5%.
But he also noted that competition has ticked up as more contractors emerge from the pandemic looking for work, particularly in its core transportation segment.
"It maybe is a little bit more intensified in transportation today just because a lot of contractors burned through backlog and with the pandemic, some agencies just held back on lettings," Larkin said. "Transportation is where we see the most competition in our segments today."
Rising material prices
Granite's materials business benefited from higher sales volumes in aggregates and asphalt across California and the Northwest, with a 26% increase to $63 million in Q1 2021 amid rising construction material prices across the industry.
While the company benefited from the sale of materials, Larkin said the firm is also being cognizant on the bidding front to price those material increases into future jobs.
"Certainly the one that jumps out today would be around diesel," Larkin said. "The work that we're pursing today has those anticipated increases already built in" via escalation clauses, particularly for steel and cement, Larkin said.
In addition, Larkin highlighted two major wins for the firm: the $160 million Leon Hurse Dam project in Texas and a $267 million tunnel project in Columbus, Ohio.
Like other contractors in the infrastructure space, Larkin said Granite is hoping to add to its momentum through anticipated infrastructure spending at the federal level.
"The public funding environment has been supported by direct and indirect infrastructure legislation from several different measures, and we remain hopeful that the enactment of a federal infrastructure bill will occur this year, and will serve to further strengthen the environment in 2021 to 2022 and beyond," Larkin said.