ROD DEAN'S 2006 REVIEW
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E & C Hydrocarbon Review - The Global view from Europe. Looking back on 2006 & ahead to 2007.
Punj Lloyd is another company adding both capability and volume to their current offerings as highlighted with their recent acquisition of Sembawang Engineering. - see above in the Simon Carves paragraph.
Larsen & Toubro has probably demonstrated a wider range of capability than most and had further success than most supplying large amounts of equipment to a very hungry industry but also obtaining fairly high level involvement with Haldor Topsoe with a $150 m EP award from the Saudi Formaldehyde Chemical Company for methanol and carbon monoxide plants. Additionally they are on the acquisition trail with plans to acquire gas processing companies. They are looking at companies which have the technological skills for gas processing but gave no further details. L&T already offers facilities and equipment for gas processing that includes gas gathering, sweetening, compression and dehydration.
We have also seen Essar flexing their muscles as well with plans to expand their refineries and follow on from Reliance in the Gujurat Area of NW India.
Last year (2005) Foster Wheeler UK had a brilliant year as far as awards were concerned and their Financial Numbers for 2004 were also much improved. Well this year (2006) has been even better with the global FW financials reaching all time records in the last two quarters. The years of the ‘Robins Contract’ seem a million years ago and once again the example of FW proves that you can come back from ‘death row’ in the International E & C industry and their credit rating has been restored to B1 by S & P. How was this achieved?
A rigorous project oversight department was set up as early as 2002 to ensure that Projects meet /exceed client expectations and provide fair return and FW expects to be Paid for risk. If risk is unquantifiable, then don’t do it. If you don’t know what you don’t know, then you don’t go there or may do very little as a learning process. (A bit of Rumsfeldian homespinnery in the last couple of sentences!)
FW see five key critical success factors
Company must have potential sources of competitive advantage
Find the people who "get it" - look inside company, promote from within
Focus on the basics and embed very high standards of excellence - don’t overcomplicate or over sophisticate - "Hope is not an acceptable execution strategy"
Lead by example - corporate overhead was reduced from 276 to 72
Have the courage to take systematic action
Reduced debt by $842m since 2003 (now $191m) and transformed corporate capital structure. EBITDA had increased to $273 by 2005.
FW has also been selected for inclusion in the new NASDAQ Global Select Market. From July 3, NASDAQ-listed companies were classified under three listing tiers -- the new NASDAQ Global Select Market; the NASDAQ Global Market, formerly known as the NASDAQ National Market; and the NASDAQ Capital Market, which remained unchanged. The NASDAQ Global Select Market has the highest initial listing standards of any exchange in the world based on financial and liquidity requirements, according to NASDAQ. Prior to the change, Foster Wheeler had been listed on the NASDAQ National Market.
FW claim at least 60-65% of their work is competitively bid, the balance is negotiated. About 18% is LSTK, 25% has some price risk, and the balance is reimbursable. Since 2002 they have decreased the fixed price component dramatically but this has not been an explicit strategy. FW is primarily concerned with getting paid for their risk.
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