Fluor Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 4, 2023

There are 10 speakers on the call.

Operator

Morning, and welcome to Fluor's Second Quarter 2023 Earnings Conference Call. Today's call is being recorded. At this time, all participants are in a listen only mode. A question and answer session will follow management's presentation. A replay of today's conference call will be available at approximately 10:30 a.

Operator

M. Eastern Time today, accessible on Fluor's website at investor. Fluor.com. The web replay will be available for 30 days. A telephone replay will also be available for 7 days through a registration link also accessible on Fluor's website at investor.

Operator

Fluor.com. At this time, for opening remarks, I would like to turn the call over to Jason Landkamer, Head of Investor Relations. Please go ahead, Mr. Landkamer.

Speaker 1

Thanks, Regina. Good morning, and welcome to Fluor's 2023 Second Quarter Earnings Call. David Constable, Fluor's Chairman and Chief Executive Officer And Joe Brennan, Fluor's Chief Financial Officer are with us today. Fluor issued its 2nd quarter earnings release earlier this morning and a slide presentation is posted on our website that we'll reference which is summarized on Slide 2. During today's presentation, we will be making forward looking statements, which reflect our current analysis of existing trends and information.

Speaker 1

There is an inherent risk that actual results and experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute to such differences in our 2022 Form 10 ks and our Form 10 Q, which was filed earlier today. During the call, we will discuss certain non GAAP financial measures. Reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at investor. Fluordot I'll now turn the call over to David Constable, Fluor's Chairman and Chief Executive Officer.

Speaker 1

David?

Speaker 2

Well, thank you, Jason. Good morning, everyone. Thank you for joining us today. Please turn to Slide 3. During the Q2, I visited our New Delhi office and hosted a town hall meeting that was attended by over 1100 of our Fluor colleagues.

Speaker 2

It was great to see the vibrancy and enthusiasm of our team who will continue to play a critical role in supporting our current projects As well as our significant pipeline of growth opportunities worldwide. While in India, I also met with the CEO of Tech Mahindra To sign a strategic partnership agreement, Tech Mahindra is a leading provider of digital transformation, consulting and business reengineering services. Under the partnership, both Fluor and Tech Mahindra will combine our respective expertise to help support the growing client demand for digital handovers. The seamless integration and interoperability of data is critical to support professional services teams In driving successful project delivery and optimizing life cycle operations and maintenance costs. I'm looking forward to providing updates on this strategic partnership in future quarters.

Speaker 2

Now let's turn to Slide 4. Revenue for the Q2 was $3,900,000,000 representing our 2nd straight quarter of 20% growth over the prior year. Our increase in revenue was led by Energy Solutions as execution activities accelerate on refinery projects in Mexico, Mid scale LNG projects and recently awarded chemicals projects in China. New awards for the quarter were $3,700,000,000 and on track relative to our full year plan of a book to burn ratio of 1 or greater. New awards were 70% reimbursable and our total backlog is now $25,500,000,000 of which 64% is reimbursable.

Speaker 2

Margins on new awards continue to be strong, coming in over 200 basis points above our total backlog margin. Our optimism for the future of Fluor is further supported by a robust prospect pipeline. We are currently working on or have recently completed feed and study packages that represent an estimated $300,000,000,000 of installed cost, high quality new award prospects. In the near term, we are tracking key EPC and EPCM prospects totaling approximately $49,000,000,000 across the company. Moving to our business segments, please turn to Slide 6.

Speaker 2

Urban Solutions reported a $76,000,000 profit Results included a positive forecast adjustment related to a legacy infrastructure project As well as increased execution activities on newly awarded projects. New awards for the quarter were $2,300,000,000 And any backlog is now $11,700,000,000 58 Percent Reimbursable. Please move to Slide 7. In mining and metals, we are actively working on a number of front end studies supporting the advancement of critical minerals production, Including 2 pre feasibility studies for lithium developments in North America, another lithium project feasibility study in Europe and a metals recycling facility in Europe. We also recently completed engineering services on a major new steel mill in the United States using electric arc furnace technology And have 2 additional electric arc furnace projects entering the feasibility study and execution phases.

Speaker 2

These are just 3 projects in Green Steel Technology, which we consider to be a strategic growth market for Fluor. Near term prospects in this segment include projects relating to potash, lithium and copper. Moving to Slide 8. Our Advanced Technologies and Life Sciences business continues to win new work in an expanding Reimbursable growth market. During the quarter, we announced that we received a $574,000,000 award for the first phase of a new life sciences production facility In the Central U.

Speaker 2

S, we also won a $487,000,000 expansion for an existing biotech facility with a key client in Denmark. Looking ahead, we are well positioned to expand our existing portfolio of semiconductor work, particularly in the U. S. I'm also pleased to report that our portfolio of infrastructure projects, including legacy projects, met our forecast expectations for the quarter. Specific to our legacy infrastructure portfolio, we are starting to see some very positive momentum from our efforts last fall.

Speaker 2

This included strengthening leadership and execution at the project and management levels as well as working effectively with our joint venture partners To align our strategy to manage claims. On the Gordie Howe project, Fluor along with our partners I've had a number of successful and productive conversations with the client as it relates to costs and schedule relief, including costs related to COVID. Negotiations are progressing with the client, which should result in a positive path forward by the end of the year. Finally, during the quarter, we booked a $700,000,000 award for the I-thirty five South project in San Antonio for the Texas Department of Transportation. This project is a crucial step in our ongoing efforts to enhance the state's transportation infrastructure and to further support the demands of population growth and business expansion in one of America's most rapidly developing regions.

Speaker 2

Moving on to Slide 9. Mission Solutions reported segment profit of $40,000,000 for the 2nd quarter compared to $28,000,000 a year ago. Results for the quarter reflect increased execution activities on European logistics support project for the Army and our ongoing work to Support NuScale's carbon free power project. Regarding the protest of our winning bid for the Hanford Tank integrated disposition contract, We learned that the judge has set aside the award and sent it back to the DOE for corrective action. While we await the department's path forward on the acquisition, The incumbent has been extended on the contract for the time being.

Speaker 2

Fluor continues to be well positioned for Hanford and other future nuclear Remediation opportunities with the DOE. Looking ahead, Q3 is shaping up to be an exciting quarter for this group. We recently announced that our joint venture with Omentum was successful in securing the contract for the Portsmouth gaseous Diffusion plant decontamination and decommissioning contract. This contract has an estimated value of $5,900,000,000 Over a 10 year ordering period and includes potential task orders for up to an additional 5 years. We expect to book our initial annual portion of this contract in the Q3.

Speaker 2

Finally, the request for proposal for Pantex was recently issued. Fluor was successful in the original bid and is currently working on this RFP package, which we expect to submit in September. The revised RFP includes a 5 year base period with 3 5 year options valued up to $30,000,000,000 over 20 years. Moving to Energy Solutions, please turn to slide 10. Segment profit improved to $89,000,000 from $65,000,000 a year ago.

Speaker 2

Results reflect the ramp up of execution activities on refinery projects in Mexico through our EcoFlor joint venture. We also had positive forecast adjustments totaling $74,000,000 on 2 projects. Q2 results also included a $34,000,000 charge For cost growth and schedule extension on a large upstream legacy project. During the quarter, this project experienced a number Challenges arising from lower than anticipated subcontractor productivity, unexpected discovery work and delays from weather and activist protests. Our new estimated completion date is December.

Speaker 2

New awards for the quarter totaled $753,000,000 And included in an EPC contractor Mitsubishi's ethylene vinyl alcohol copolymer facility in the UK As well as incremental awards on existing LNG projects. Moving to Slide 11. During the quarter, we had a number of accomplishments at the LNG Canada project. Last month, we announced that the 215th and final Module was delivered to the site. This represents a significant milestone for the project and for the teams that led our fabrication efforts.

Speaker 2

With the project at 85% complete overall, our efforts now turn to module installation and hookup In advance of pre commissioning and commissioning activities that will commence next year. In past earning calls, We've discussed our collaborative conversations with the client related to fabrication and construction costs. We continue to have successful resolution to ongoing variation orders. I'm also pleased to report that as a result of the tremendous effort by our project team, We continue to execute LNGC per our current expectations. Regarding the Phase 2 expansion, LNG Canada's 5 joint venture participants continue to evaluate the timeline and scope.

Speaker 2

For the balance of 2023, we are anticipating some significant new awards. This includes a multibillion dollar full EPCM award for Dow's path At the 0 ethylene and derivatives chemical complex in Canada, the $1,400,000,000 Salina Cruz refinery in Mexico, Nuclear engineering work in Romania and a large chemical project in Europe. Before I turn the call over to Joe, I want to note that our results And accomplishments this quarter reflect notable progress against our corporate strategy and is indicative of our ongoing transformation It's one of the leading engineering and construction companies in the world. With that, let me turn the call over to Joe For the financial update, Joe?

Speaker 3

Thanks, David, and good morning, everyone. Today, I will review our results for the Q2, provide an update on divestitures and go over key financial outlook assumptions that support our guidance. Please turn to Slide 13. As David mentioned, for the Q2 of 2023, revenue of $3,900,000,000 came in as expected and represented a 20% increase from last year. Revenue for the quarter was driven by the ramp up of execution activities on several recently awarded projects in Energy Solutions, Urban Solutions and Mission Solutions.

Speaker 3

This was partially offset by declines in the volume of execution activities for projects, which were completed or nearing completion. Our consolidated segment profit for the quarter was $191,000,000 This performance was driven by higher execution activity on new projects as well as positive forecast adjustments on 2 Energy Solutions projects and a positive forecast adjustment on a legacy infrastructure project. Adjusted EBITDA for the 2nd quarter was $181,000,000 compared to $68,000,000 a year ago. Our adjusted EPS was $0.76 compared to $0.15 in Q2 of 2022. Our adjusted results for the quarter exclude $52,000,000 for the income effects of FX and the embedded derivative in Mexico.

Speaker 3

G and A expenses for the quarter were $60,000,000 up slightly from $45,000,000 a year ago. This was driven in higher by higher performance based compensation that is expected to be paid in Q1 of 2024. Net interest income for the quarter was $37,000,000 compared to $41,000,000 last quarter and an expense of $1,000,000 a year ago. Since our outstanding debt is at a fixed rate, I expect we will continue to generate positive net interest income throughout the year with prevailing interest rates on our deposits. New awards of $3,700,000,000 in the quarter drove our ending backlog balance to $25,500,000,000 Based on our current prospect pipeline, we anticipate new awards will roughly approximate our revenue burn for the full year.

Speaker 3

Moving to slide 14. Our cash and marketable securities balance for the quarter was $2,100,000,000 This excludes cash held by NuScale. Operating cash flow for the quarter was a positive $62,000,000 We expect this positive cash flow trend to continue for the balance of 2023, which includes approximately $200,000,000 for legacy project cash needs this year. We anticipate legacy project cash needs will be approximately 2 $1,000,000 in 2024. Finally, I'm pleased to say that during the quarter, the DOJ has informed us That it has closed its investigation of the company and does not intend to bring charges.

Speaker 3

Please turn to Slide 16. We are raising our 2023 adjusted earnings per share guidance to a range of $2 to $2.30 and our adjusted EBITDA guidance to a range of 500,000,000 $600,000,000 Our assumptions for 2023 include revenue growth of approximately 10% to 15%, Adjusted G and A expense of approximately $45,000,000 per quarter and an effective tax rate of approximately 40%. This may vary depending on the countries in which revenue is generated. We expect tax rates to moderate as revenue in our tax advantaged locations start to increase. Our revised expectations for 2023 full year segment margins are approximately 6% in Energy Solutions, Approximately 3% in Urban Solutions and approximately 4% in Mission Solutions.

Speaker 3

Finally, we also reaffirm our 2020 adjusted EBITDA guidance of $800,000,000 to $950,000,000 as indicated in our earnings release this morning. Operator, we are now ready for our first question.

Operator

Our first question will come from the line of Jamie Cook with Credit Suisse. Please go ahead.

Speaker 4

Hi, good morning. I guess my first question, David or Joe, as I think about your guidance, the increase in guidance that you provided today and what is that imply For the back half of the year, I think it implies like, at the high end, dollars 0.75 a quarter. So let's say if you annualize that, it's about $3 in earnings power and if you annualize your back half EBITDA, adjusted EBITDA, it implies like $800,000,000 in EBITDA. So I'm just trying to understand what that means for 2024. Is that a good base that we can think about?

Speaker 4

Or are there projects rolling off in 2023 That would imply that that's not a good sort of run rate to think about because that just implies the earnings power for 2024, dollars 3 or $800,000,000 in EBITDA It's pretty substantial. And so just any color on that. Thank you. Or how if I'm thinking about that incorrectly. Just the area is power is greater, I guess, than I would have thought.

Speaker 3

Yes. Thanks for the question, Jamie. I think what we've leaned into the last few quarters As that we have been making progress on some of our activities in our infrastructure or legacy kind of businesses relative to how we recognize cost. And then As we look to claw back some of our entitlements through the contract, some of that is flowing through The Q2 numbers, but I would suggest that that run rate that we're posting on an adjusted EBITDA basis of $181,000,000 is probably overstated slightly. If I were thinking about run rates as we continue to onboard new backlog is in that 140 to 160 range.

Speaker 3

And with that, we would expect to see a ramp up from that as your baseline. So I think I would think about it that way at least for 2023. And again, as we onboard the new backlog that we're forecasting for the back half of the year, We should start to see that trend in a more positive direction moving forward.

Speaker 4

Okay. And then just my second question, just It sounds like new award prospects for the back half of the year also seem pretty good. So just Dave, how are you thinking about backlog as we exit the year? And then can you give some color? I know the bookings are The margins and the bookings have been improving.

Speaker 4

Can you just talk about the terms and conditions of the projects that you're sort of looking at and how we should think about Awards going into backlog the margins on awards going into backlog relative to where it sits today, just again trying to understand what the margin power is for 2024? Thank you.

Speaker 2

Good morning, Jamie. Yes, we've been really pleased with our ability to increase booking margins On reimbursable work, I guess that's the kind of the headline is that all this The majority of our work, I think about 84% of our prospects right now are reimbursable, and they are coming in higher than our expectations, higher than our planned target margins. As I said, we've I think we put in the backlog at 200 basis points above what's in there now in 2nd quarter. So as we continue to do that, the healthy backlog will continue to give us more certainty and Predictability as we work that backlog off. And yes, we hope to be at a book to burn through the year Of 1 or slightly above and that will kind of gives you an idea of where we'll be at the end of the year for backlog.

Speaker 2

But not just on revenue, I think what's important here is that gross margin that's coming in higher than expected is also being executed. We are executing. We had this discussion with our risk committee at the Board meeting this week. Since 2020, those Projects that have come into backlog are executing at 114 percent of asphalt. So we've got some great earnings power in our execution.

Speaker 2

It's all about execution excellence. And when you've got that behind you, right, and we just really think that it's going to support That earnings power for us going forward and increased shareholder value for us.

Speaker 3

Could I maybe if I could just add To that too, Jamie, if you look at what we've done with our operating margin guidance for the quarter, we have bumped our Energy Solutions and our Mission Solutions Numbers for the period. So we are starting to see that and it is starting to demonstrate In our quarterly postings here. So we're starting to see that flow through the backlog in a very positive way, Which is considering us to readdress our margin guidance. Thanks, Jamie.

Speaker 4

Thank you.

Operator

Your next question comes from the line of Andy Wittmann with Baird. Please go ahead.

Speaker 5

Great. Thanks. Excuse me. Thank you for taking my question this morning. I guess I wanted to ask on the Urban Solutions, There was a positive adjustment on the legacy project.

Speaker 5

Good to see that you're recuperating some of those. And I do think that the balance on some of those legacy projects is substantial. So I guess maybe my question As it relates to your guidance for the rest of this year, are you expecting More positive adjustments like the one you saw in the quarter to be in that guidance range? Or is the guidance that you're giving kind of clean of any of these Claims resolution changes that you were able to accomplish this quarter. And maybe just to be a little more specific, could you just talk about which project You're able to get this positive adjustment on during the quarter.

Speaker 3

Phil? Yes. No, thank you for the question. For the year, we have not factored in any additional activity relative to claims until we get closer to Better assessment on that. So what you're looking at relative to our guidance is based on Q2, Q1 and Q2 actuals and then our normal run rate from an outlook basis moving forward.

Speaker 3

So I think that's I need your second question around

Speaker 5

sorry, what's the Which project got yes, which project got the benefit?

Speaker 3

Yes. I think we're going to hold off naming that client right now. And we'll probably have some

Speaker 6

Okay. And then Joe, just kind of

Speaker 5

a follow-up on your last answer to Jamie, Kind of mentioned that the profit margins picked up in 2 of your segments. I guess, So you're giving annual guidance here and some of the performance in the second quarter was pretty good because of these Positive change orders. I guess the question for me is on a prospective basis, meaning for the rest of the second half of this year, which margins Are up versus prior expectations rather than the benefit from the performance in the second quarter, just to make that a little bit more clear.

Speaker 3

Well, I guess maybe let me understand your question a little bit better. Are you talking about How we're upping our guidance within Energy Solutions from the 5.5% to 6% and what's driving that, I guess is

Speaker 5

Yes. I mean, you're giving annual segment margin guidance, which is fine. But I just I'm trying to understand How much of the increase in margin guidance was from performance in the second quarter versus an improved outlook for the second half of the year versus your prior

Speaker 3

Sorry, okay. I understand the question a little bit. I think there's symmetry in what we're laying out relative to how the performance within Energy Solutions and Mission Solutions. So I would expect this not to be a 2023 activity. I would see this having some impact into 'twenty four and beyond.

Speaker 3

Well, as we've discussed

Speaker 2

On many calls, our range for the planning period, when we first came out with our strategy in 2020 Our range on margins was 4% to 6%, right? And we it looks like we're going to be at that and near the higher end of That range through 24 and then on into 26 at the upper end.

Speaker 3

Yes. And we're seeing this is underpinned by the margins that we're putting into backlog relative to our plan. So I think that's all kind of playing into this improved margin outlook moving forward Beyond the 2023 timeframe.

Speaker 2

And also that execution I talked about just a few minutes ago is that we're executing above asphalt.

Speaker 3

Yes, a lot of factors there.

Speaker 5

Yes. Okay. That's clear. Thank you very much. Have a good day.

Speaker 2

Thanks, Andy. Thank you.

Operator

Your next question comes from the line of Michael Dudas with Vertical Research. Please go ahead.

Speaker 5

Good morning, Jason, Joe, Dave, David. Hi, Michael. Good morning, Michael.

Speaker 6

Joe, maybe you could share with us your updated thoughts on financial profile on the balance sheet relative to the 2024 notes And maybe an update on NuScale would be helpful.

Speaker 3

Yes. Thanks, Mike. We're we have signaled over the last few quarters, we're going to be The 24s, that is something that we plan on doing, here kicking off towards the last half of twenty twenty 3 and into 2024. So we have our plans are still to address the 24s. And in terms of NuScale, we continue the discussions around the monetization.

Speaker 3

They are going well. We would expect to have additional information to share with this audience towards the end of the year, December or January timeframe.

Speaker 6

Appreciate that. Thank you. And David, As you're looking at the $300,000,000,000 worth of front end or FID of front end design engineering and study work, Can you maybe share a little bit of it, is it across the board, what areas seem to be peaking your clients' interest more to Get you involved and is and I assume energy transition and we think of lithium and even I guess the Dow project And into that, is that do you anticipate being step function over the next couple of years of those types of projects coming in? And is that going to allow for Maybe a better margin performance given what you guys are doing on the productivity and cost side.

Speaker 2

Good morning, Michael. Yes, you're spot on, on energy transition, right? Of that $300,000,000,000 we think After analyzing it, solid prospects are about $160,000,000,000 of that $300,000,000 So We see $160,000,000,000 as very likely going forward. And a lot of it sits in the energy transition space. Just to give you an example of the Inflation Reduction Act and The carbon credits that flow through that, the IRA, we're seeing significant activity In our Carbon Capture, in our Production and Fuels Energy Solutions business line, I think we've got 30 projects on the go or at some mostly front end work, a few moving further on into EPC.

Speaker 2

So that's That's important, like you said, lithium as well. So Energy Transition is going to feature quite a bit. I think They are about 28%. If you look at the total work we're chasing, energy transition is about 20% 28% of that. We're looking for about almost $3,000,000,000 in energy transition awards in Q3.

Speaker 2

And like you said, Dow would feature because it is a path Your path to 0 program. But you also in those numbers see mining and metals feature significantly In the $160,000,000,000 downstream production fuels again, a lot of it energy transition. LNG is in there. And the biggest portion, as I look at it here, is chemicals. So we're seeing a lot of activity in chemicals with across the board, including recycling of plastics And the whole ethylene value chain.

Speaker 2

So pretty broad across those prospects And about like I said, about $49,000,000,000 of full EPCM prospects that we'll be chasing in the next 18 months. And obviously, that gets supplemented by our mission solutions work, which is The Department of Energy, Department of Defense and the intelligence agencies, all those budgets continue To either stay flat or grow year on year. So a lot of good Growth coming at us in all of our business lines, Michael. So thanks. Excellent, David.

Speaker 2

Thank you.

Operator

Your next question comes from the line of Brent Thielman with D. A. Davidson. Please go ahead.

Speaker 7

Hey, thank you. Good morning. Hey, just a comment about margins on new awards. I think you said 200 basis points above the current backlog margin. Which business line or lines or markets are you seeing Sort of more meaningful improvement in terms of what's coming in the door now relative to what you have in the book today.

Speaker 2

Yes. It's broad. It's across all three segments. Again, I'm looking at the plan versus the outlook here, And we are performing above across the board. So it's pretty broad based.

Speaker 7

Okay. Okay. And then you mentioned continued expectations for modestly positive Cash flow this year, I know there's typically some moving parts to that. But could you talk about some of those moving pieces, I guess, in particular, What could cause you to potentially outperform this year's expectation for cash flow in the second half?

Speaker 3

Yes. I thought reconfirming, that we do see positive trends for the back half of the year. And as and I think what's going to drive maybe some improvement within that is continued execution And our projects in Mexico and Canada will be a big contributor to that as we repatriate dividends back into Fluor's treasury. So I think both those will underpin, a fairly positive, cash trajectory moving forward.

Speaker 7

Okay, great. Thank you.

Operator

Your next question comes from the line of Sean Eastman with KeyBanc. Please go ahead.

Speaker 5

Hi, team. Nice update here.

Speaker 8

I just wanted to understand the revenue guidance For this year, stepping up from 10% to 10% to 15%. Is that just accelerated schedules on stuff that was in the backlog already? And then second part of the revenue question perhaps is just relative to the one or slightly above one times Book to bill expectation for the full year this year, what should we take away from that relative to revenue our revenue assumptions for Next year.

Speaker 3

Yes. Thanks, Sean. I think from the revenue guidance, we would continue to see that growth. We feel Yes. We feel very confident based on not only the bookings this year, bookings in previous years and then also what we're seeing in the back half Of 2023, a lot of some of the opportunities, a significant amount of the opportunities that we're seeing are coming From maybe our nontraditional Energy Solutions side, it's flowing through our ATLS business and there are some big chunky awards.

Speaker 3

So we feel Reasonably good about the trajectory of kind of revenue moving forward. And then we're also seeing a lot of the projects that we booked 2, 3 years ago, Sean, really starting to get Into production as they move into procurement and into construction activities. So I think we really see a revenue growth trajectory within 10% to 15% that's supported by solid fundamentals at this point.

Speaker 8

Okay, Got it. And then relative to the second half new award visibility, I mean, it's encouraging to see some specific Prospects, specific larger prospects being called out. I mean, how would you describe the line of sight That implied second half new awards outlook, I mean, are these projects FID ed, just teed up, ready to go in the Any comments on that would be helpful.

Speaker 2

Yes. Hi, Sean. Good morning. Yes. Looking at the Q3 and Q4 prospects and the go gets, most of the goes are between 90 and 100 Well, 80 to 100.

Speaker 2

And so the ones I spoke to are definitely Cleared for takeoff, so to speak, in the chemicals work and at EcoFlor. And then in Urban Solutions, in the semiconductor space, we've got some big reimbursable programs that Are also ready to move forward. So generally speaking, the line of sight, all of the Mission Solutions projects are going ahead as well. So Yes. I'd like to give you a high degree of comfort on our second half New awards and getting to that book to burn or 1 or slightly above.

Speaker 8

All right. Gentlemen, thanks very much. I'll turn it over.

Speaker 2

Thanks. Thanks, Sean.

Operator

Your next question comes from the line of Sahil Manocha with Citigroup. Please go ahead.

Speaker 9

Hi. This is Sahil Minocio on for Andy Kaplowitz. Good morning.

Speaker 6

Good morning. Good morning.

Speaker 9

Hi. Just a quick one for me. You guys mentioned the floor was recently awarded a chemicals project in China. Can you give us some more color on what customer conversations you're hearing out in the region? We've heard from some of our industrial companies that the environment is Still a bit of a mixed bag, but curious on your take and your outlook for the region.

Speaker 2

Yes. Great strategic question. As we roll the China scenarios into our strategies for each of the business segments And what could happen and the risk involved, not only on the execution side, but more importantly for our clients, our Multinationals that we follow into the region. And I think what we're at a big picture level, It may not be a de risking with China, but there's definitely decoupling and not Wanting to put all eggs in one basket. So I think the China Plus 1 strategy for our clients is taking hold And we're seeing work flowing either near shoring to North America and Europe or Friend shoring in countries where values based globalization, if you will, and India is featuring prominently.

Speaker 2

Mexico, I think, will see an uptick as well for manufacturing. So it's real. Yes, there are certain clients that have like you say, a chemicals client has moved in there. They are Obviously, having trouble with very high cost feedstock in Europe and they've moved into China. But I think it's something to watch.

Speaker 2

But I see it as an opportunity. We're putting together we've got an India task force put together India Plus the Asia Task Force is being put together to just see just be ready for this shift Manufacturing away from China, make sure we're ready for to support our clients elsewhere in the region And to be ready for that possibility. So that's how we're looking at it right now.

Speaker 9

Awesome. Thank you for the color. I'll turn it back over.

Speaker 2

Thank you. Thanks.

Operator

With that, I'll turn the call back over to David for any closing remarks.

Speaker 2

Well, thank you, operator, And many thanks to all of you for participating on our call today. We're really pleased with our performance And the diverse slate of opportunities in our prospect pipeline, primarily reimbursable. And based on the continued strong performance for our services, we're well on our way to delivering increased shareholder value. So we appreciate your interest in Fluor and thank you again for your time today.

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