Despite drastic efforts to restore profitability to its day-to-day business operations, Fluor Corp. reported Tuesday that it was only able to post a profit in its first fiscal quarter by selling a portion of its mining assets.
Although the $6.6-million profit for the three-month period ended Jan. 31 compares favorably to a year-ago quarterly loss of $32.6 million, Fluor would have reported a net loss of $17.5 million in the latest quarter if it had not sold off 10% of its St. Joe Gold Corp. during the period.
Revenue, however, was up 29% for the quarter to $1.2 billion from $927 million during the same period last year, the Irvine company said at its annual meeting.
David Tappan, chief executive of the engineering and natural resources concern, told shareholders that Fluor would "return to profitability in 1986." But later, at a press conference, Tappan refused to predict when the company would be operationally profitable. In fiscal 1985, Fluor lost $633.3 million.
Big China Project
Some of Tappan's optimism hinges on Fluor's announcement that it expects soon to be awarded a contract for the first phase of one of the largest energy projects in the Far East.
The multiphase project, on China's Hainan Island, is a $1-billion natural gas pipeline that is a joint venture between an agency of the Chinese government and Atlantic Richfield.
Although the contract for the first phase of the project will be worth less than $1 million, Fluor hopes that securing it will be the springboard for being awarded other portions of the lucrative project. Tappan said Fluor could potentially reap hundreds of millions of dollars in revenue from the project.
Fluor executives also said that the company is not yet finished trying to sell off assets. John Wright, the company's recently appointed president, said that, if the gold market improves, Fluor may try to "harvest" more assets from its remaining 90% stake in St. Joe Gold.
In 1985, Fluor sold $800 million of its assets, including its Irvine headquarters location and various oil and gas interests. Most of the proceeds were used to pay debt, Tappan said.
Restructuring Half Completed
Fluor also plans to further slash its admiNistrative expenses in 1986 by 33% to $24 million from $36 million in 1985. Over the three-year period from 1984 through 1986, Fluor hopes to reduce its administrative costs by some 48%, Tappan said.
The company's vast restructuring plan that began last year is 50% completed, Tappan said. Under the restructuring, Fluor is shifting from a company that was mostly involved in energy-related activities to one more broadly involved in a variety of industrial-related matters.
But the continued restructuring could result in more layoffs. Tappan would not project specific numbers or locations for future layoffs, but he did not rule out the possibility of additional job reductions at Fluor's Orange County headquarters.
The company, which employs 27,000 worldwide, laid off 2,000 workers in 1985. Tappan said that, although the company's shift in strategy could continue to cost jobs, "I thank our lucky stars that we developed the strategy when we did."