US engineering giant Fluor plans to sell off its government business and its Ameco equipment rental company in a bid to raise $1bn. A streamlining drive will also aim to cut costs by $100m.
The decision announced 24 September, taken after a strategic review conducted over the summer, is part of a plan to refocus the company on its core strengths.
It comes after Fluor withdrew its profit forecast for 2019 and revealed a surprise second quarter net loss of $555m on revenue that fell 16% to $4.1bn.Â
The Texas-based company’s shares fell by almost a third after it announced its streamlining plans. Â
Fluor will be more choosy about the projects it bids for. The Government segment will no longer pursue fixed price projects. In energy and chemicals, Fluor will only pursue lump sum work when there is a "limited bid slate and there is a quantifiable advantage over other bidders or where it is a sole-source negotiated agreement", the company said.
Fluor will only bid on lump sum projects where it has done the front-end engineering and design package itself, or otherwise had the opportunity to perform sufficient diligence.
All projects will be subject to an initial bid/no-bid approval followed by final approval by the Fluor executive team.
As for streamlining, Fluor will make business units responsible for the functions that support their operations, a move it said would "improve the speed of decision making and drive greater accountability".
Carlos Hernandez, Fluor’s chief executive, said in a statement: "We took an extensive and comprehensive look at our broader business to determine the best strategic path to return the company to consistent profitable growth.
"The strategic direction we are pursuing as a result of this process builds upon Fluor’s premier competitive position in our core markets in which we expect to deliver sustainable growth, strong cash flow and attractive returns to investors."
As well as selling the two divisions, the company plans to monetise surplus real estate and non-core investments.
It will also reduce its quarterly dividend to $0.10 a share from $0.21 beginning with the next quarterly dividend declaration.
This will decrease the company’s annual dividend spend from $120mn to $60m.
Image: Work under way on the Fluor’s Citrus County gas power plant (Duke Energy)