Aegion Corporation (AEGN) reported second-quarter 2013 adjusted earnings from continuing operations of 47 cents per share, up 57% from 30 cents in the year-earlier quarter. The results surpassed the Zacks Consensus Estimate of 38 cents.
Total revenue was $242 million in the reported quarter, down 4.9% year over year, on project delays and severe weather conditions. The revenues fell short of the Zacks Consensus Estimate of $266 million.
Cost of sales decreased 4.5% to $183.5 million from $192 million in the year-ago quarter. Gross profit declined 6% year over year to $58.5 million. Consequently, gross margin contracted 25 basis points (bps) year over year to 24.2%.
Operating expenses went down 3% year over year to $40.8 million. Operating income was $15.8 million, down 15% year over year, leading to 80 bps contraction in operating margin to 6.5%.
Revenues from the Energy and Mining segment decreased 15% year over year to $108.5 million in the reported quarter, driven by lower backlog in coating operations. The segment’s operating income went down 55% year over year to $6 million on customer directed delay and adverse weather conditions.
North American Water and Wastewater segment revenues grew 10.6% year over year to $87.9 million in the quarter compared with $79 million in the prior-year quarter. The improvement was mainly backed by strong project execution. The segment’s operating income rose 52% year over year to $8.9 million because of favorable project mix, partly offset by weather delays.
International Water and Wastewater sales were $27.7 million, up 5.6% from the year-ago quarter, due to growth in the Netherlands, Spain and Malaysia. The segment reported an operating income of $0.08 million compared to an operating loss of $2.2 million in the year-ago quarter.
Revenues in the Commercial and Structural segment declined 14.6% year over year to $17.7 million. Operating income slumped 51.5% year over year to $0.62 million, driven by project delays.
Consolidated backlog in the second quarter went up 4.2% year over year to $510 million. Contract backlog in North American Water and Wastewater segment was a record $221.1 million in the second quarter, up 39.8% from the year-ago quarter. Global Commercial and Structural backlog grew 5.7% year over year to $52.2 million. However backlog in the Energy and Mining segment declined 21.3% year over year. International Water and Wastewater also recorded a decrease of 22.6% to $44.1 million in contract backlog. Additionally, the Brinderson acquisition has added around $200 million in backlog as of July 1, 2013.
As of Jun 30, 2013, cash and cash equivalents amounted to $118 million versus $133.6 million as of Dec 31, 2012. Long-term debt was $244 million as of Jun 30, 2013, compared with $255 million as of Dec 31, 2012. Debt-to-capitalization ratio was 25.5% as of Jun 30, 2013 compared with 26.3% as of Dec 31, 2012.
Cash flow from operating activities was $8 million in the quarter versus $47 million in the prior-year quarter. Capital expenditure was $13 million in the quarter compared with $21 million in the year-ago quarter.
For full-year 2013, Aegion revised earnings inclusive of Brinderson contribution in the new range of $1.58 to $1.70 from its previous band of $1.60 to $1.80. Cash flow from operating activities is expected to be $100 million and return on invested capital will be in the range of 7–8%. The company forecast for the second half to grow based on robust end-markets and strong market fundamentals.
Aegion lowered full year guidance of revenue growth for Energy and Mining segment to 15–20% from its previous band of 20–25%. This includes contributions from the Brinderson acquisition which will begin reporting financial results in the third quarter. Operating margins are forecast to be in the range of 9–10%.
The company anticipates high single digit revenue growth for North American Water and Wastewater segment. Operating margins will also grow in high single digit.
International Water and Wastewater segment remains on track to deliver operating income in the range $3–$4 million for the European business, while operating income in the Asia-Pacific region is expected to be near break-even.
Full year Commercial and Structural revenue for 2013 is now expected to grow 10–15% compared to prior growth expectations of around 30%. As a result, gross margins will be modestly below the typical range of 40–45%.
Chesterfield, MO-based Aegion is a diversified building and construction company which provides infrastructure protection, proprietary technologies and services. It also offers services related to the rehabilitation and improvement of sewer, water, energy and mining piping systems.
Aegion currently carries a Zacks Rank #2 (Buy). Other stocks with a favorable Zacks Rank in the building and construction industry are Lafarge S.A. (LFRGY), James Hardie Industries plc (JHX) and Masco Corporation (MAS). While Lafarge holds a Zacks Rank #1 (Strong Buy), James Hardie and Masco Corporation also carry a Zacks Rank #2 (Buy).
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