Fluor (FLR) to Bolster Balance Sheet with $1B+ in Asset Sales, Cost and Dividend Cuts

As anticipated, Fluor Corp. (NYSE: FLR) announced the results of its strategic review on Tuesday which will include divestitures of select businesses, overhead cost reductions, and a 52 percent dividend cut. The moves will bolster the company's balance sheet and position the company to return to consistent profitable growth.

In an effort to simplify the business model, Fluor will sell its government business, sell construction equipment rental business AMECO, and monetize certain real estate and non-core investments. Fluor anticipates the divestitures to generate in excess of $1 billion in aggregate proceeds. The actions will improve liquidity, reduce debt, and reduce capital intensity.

Fluor also announced plans to lower its quarterly cash dividend from $0.21 per share to $0.10 per share, beginning with the next declaration. This reduction will decrease Fluor's annual dividend spend from approximately $120 million to approximately $60 million. The company views the decision to cut the dividend as a prudent measure to improve its liquidity profile and fortify the balance sheet.

Further, the company is pursuing $100 million in annual cost savings. One-third of the savings are expected from corporate general and administrative expenses and two-thirds of savings expected from business groups. The actions include closure and realignment of certain regional offices.

The strategic review also evaluated the entire portfolio of businesses including Stork, COOEC-Fluor Heavy Industries and NuScale. Stork continues to implement its restructuring plan and is expected to emerge as a stronger and more profitable business in early 2020. Fluor is in discussions with its COOEC-Fluor Heavy Industries partner to improve the financial performance of the fabrication yard. NuScale has the only small modular reactor (SMR) technology being reviewed by the Nuclear Regulatory Commission and it expects final approval of its SMR by the end of 2020. Commitments from new investors Doosan Heavy Industries & Construction and Sargent & Lundy, subject to regulatory approval, are expected to allow the funding of NuScale activities for the remainder of this year.

"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," CEO Carlos Hernandez commented.

Fluor worked with bankers at Lazard on the strategic review.

Shares of Fluor are down 9.4% mid-day Tuesday to $18.75.

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