CB&I, a leading engineering & construction player, today announced a second-quarter net loss of $304.1 million and plans to sell its technology business.
The company, along with many E&C players is struggling in today’s low oil price environment and reduced number of projects. CB&I’s revenue in the second quarter was $1.3 billion compared with $2.2 billion in the year-earlier quarter. Second quarter 2016 net income was $115.6 million.
“Although our second quarter results are disappointing, we are taking decisive actions to improve our operating performance and strengthen the company’s financial position,” said Patrick Mullen, president and CEO. “We have initiated a comprehensive cost reduction program and suspended our dividend. We are injecting additional rigor and discipline into our execution and risk management processes, further strengthening the integration between our E&C and fabrication services operating groups, and accelerating the implementation of innovative practices and technologies.”
The sale of the technology business should “unlock significant value for stakeholders,” Mullen says. “We plan to use the proceeds from the sale to significantly enhance CB&I’s financial strength and flexibility by eliminating the majority of our debt and reinvesting in our E&C and fabrication services businesses.”
The technology business includes some of the world’s best-known processes. The company is one of the four remaining licensors of ethylene technology, along with TechnipFMC, Linde, and KBR. Its ethylene technology is used in more than 120 plants around the world, accounting for about 40% of the world’s ethylene capacity.
In addition to steam cracking, CB&I’s technology portfolio includes fluid catalytic cracking, and the Catofin catalytic dehydrogenation process, olefins conversion technology, methanol-to-olefins, ethylene dimerization and co-monomer production technology. The Novolen polypropylene technology is also part of the portfolio.
The technology group reported revenue of $72.8 million, in the second quarter, an increase of 13% from the year-ago quarter due to increased petrochemical licensing. Its operating income was $21.5 million compared with $23.1 million in second quarter of 2016. The technology group’s new awards in the second quarter were $148.5 million, up 38% from the year-ago quarter.
“This is a business that consistently generates very attractive margins with minimal capital requirements. Our intent is to negotiate a long-term strategic alliance with the ultimate buyer, which we believe could benefit both CB&I and the buyer,” Mullen says.
The sale is intended to include the former engineered products business, which is currently part of CB&I’s fabrication services operating group, but previously was part of the technology group. The former engineered products business specializes in equipment modularization, proprietary equipment and engineering services. CB&I has retained Bank of America Merrill Lynch and Wachtell, Lipton, Rosen & Katz to advise on the divestiture.
By Natasha Alperowicz
Source: Chemical Week
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