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Babcock & Wilcox expects EPS ($0.51), will cut 200 jobs

Staff writer |
Babcock & Wilcox Enterprises, announced actions to restructure its traditional power business in advance of a lower projection for U.S. coal generation.

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The company has updated guidance for 2016 to reflect the net impact of the restructuring and decreased coal-related revenue in the second half of 2016; and a charge to correct an engineering design error on a new build renewable energy plant in Europe.

The resulting re-engineering, on-site rework and delivery delay will result in a $32 million pretax charge in the quarter and a full-year ($0.51) EPS impact.

The shift of $38 million in 2016 expected revenue from a Canadian oil sands project that was delayed due to the impact of the Fort McMurray fires.

Revised earnings guidance for adjusted EPS is now $0.63 to $0.83, primarily due to the effects of the renewable energy project and the timing shift of the Canadian oil sands project.

The restructuring savings largely offset the impact of expected lower coal-related revenue.

Revenue guidance remains unchanged at $1.8 billion as the incremental revenue from the SPIG acquisition, which is anticipated to close early in Q3, is expected to approximately offset the other revenue impacts.

B&W is restructuring its traditional power business that serves coal-fired power generation to reduce overhead and improve efficiency in response to projections that coal utilization, particularly in the U.S., will decline faster than previously forecast.

The new organizational structure includes a redesign of workflow for its North American-based coal power generation resources to provide an effective, flexible organization that can adapt to the changing market conditions.

As part of these changes, B&W will eliminate over 200 positions in North America immediately and undertake other cost-savings measures across the enterprise. The company also expects additional facility consolidations in the coming year.

Severance expenses and other costs over the next 12 months will be approximately $55 to $60 million, of which approximately $30 million are non-cash and include the write-down of B&W’s one coal power plant and deferred tax assets related to the India manufacturing joint venture and various state net operating loss carryforwards.

These savings are expected to allow the coal business to hold gross margins constant in the coming years despite the expected decline in volume.

B&W is consolidating aftermarket and global new build activities for coal-fired generation into one segment that will be led by Mark Low, Senior Vice President of the new Power segment.

All renewable energy projects, including the B&W Vølund subsidiary, will be consolidated into another segment, led by Paul Scavuzzo, Senior Vice President of the new Renewable segment.

This new structure will allow for a Power segment focus on efficiency and support for our traditional customer base while the Renewable segment focuses solely on renewable project execution and worldwide growth.

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