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Fluor Expects 1st Quarterly Loss in 5 Years


Fluor Corp. said Tuesday it expects to post a second-quarter net loss of about $70 million, or 83 cents per share, later this month--its first quarterly loss in five years.

While the Irvine-based company had been expected to release bad news, the numbers shocked some analysts and sent investors scrambling to sell Fluor shares. They plummeted $6.125 in the last 30 minutes of the trading day to finish at $50 on the New York Stock Exchange--a drop of 11%.

The loss in large part is the legacy of a massive cost-cutting drive and previously announced problems at two power plant projects. But Fluor also revealed that ongoing operating profit of its major subsidiary fell sharply to just $30 million. Analysts had expected the Fluor Daniel engineering and construction unit to post operating earnings of about $60 million.

Because Fluor posted a $62-million first-quarter profit, its net loss should drop to about $8 million.

Chairman Leslie McCraw said Fluor does not expect to take significant write-downs in coming quarters and that the company will post a profit for the year. He declined to predict its size but said Fluor Daniel should generate an operating profit of $140 million in the second half and that Fluor's A.T. Massey Coal Co. subsidiary is profitable now and is expected to remain so.

Fluor has been struggling with a reorganization of its corporate and Fluor Daniel units since late last year.

The company made some of its problems known in mid-February when it reported its first-quarter earnings and failed to meet analysts' expectations of a 15% profit gain.

But Fluor executives held off revealing the extent of the company's woes until now, saying they knew what to do but were still trying to get a handle on how to do it.

Among the details that surfaced Tuesday is that Fluor expects to lay off as many as 575 employees, including 75 of about 600 senior managers, as part of its effort to return to profitability.

The company would not identify any of the executives scheduled to get the ax, except to say that the four top officers, including McCraw, were not on the list.

As part of its drive to slash $100 million from operating costs, Fluor is closing a number of domestic and overseas offices. It is likely that some of the casualties will come from those closures and will include some of the company's group presidents.

Already, Fluor Daniel President James Stein said, consolidations have cut the number of operating units in the engineering and construction subsidiary by almost 30%, to 17 from 24.

McCraw said the company has pushed hard for profit growth in recent years and in its push "asked too much of certain operating executives."

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