Chicago Bridge & Iron Company N.V. (NYSE:CBI)
Investor Day Conference Call
November 9, 2011 8:00 AM ET
Philip Asherman – President and CEO
Before beginning today’s meeting, the company would like to caution you regarding forward-looking statements. Any statements made or discussed today that do not constitute or are not historical facts, particularly comments regarding the Company’s future plans and expected performance are forward-looking statements that are based on assumptions the company believes are reasonable, but are subject to a range of uncertainties and risks that are summarized in the company’s press release and the SEC filings.
While forward-looking statements represent management’s best current judgment as to what may occur in the future, the actual outcome or results may differ materially from what is expressed or implied in any such statements.
Now, I would like to turn the meeting over to Mr. Philip Asherman, President and CEO of CB&I.
Thank you Christy. Well, good morning. Welcome to CB&I’s Investor Day. Glad to see all, so many familiar faces join us this morning. It’s a beautiful day in New York, we’re glad you could come.
I hope that all of you that were able to attend our reception last night, enjoyed meeting the team we had here and former ambassador John Bolden, who I think provided valuable insight on how geopolitical forces are certainly influencing the volatility that we’re seeing in the marketplace around the world.
These good looking group or the folks that you’re going to meet today, that’s the same team that you met last year. I think the stability in the organization is a key success factor for us and what strengthens the consistency and control the management in each of our businesses. Now this team represents an average of over 25 years of industry experience, virtually every one of them has a Masters’ degree from schools like Texas A&M; University of Texas, Texas Tech & Rise (ph), and I know it’s impressive. And for those of us who couldn’t get into a Texas school, we also include graduate degrees Corneal, Duke and of course the Norwegian University of Technology, so it’s a quite diverse group.
Most have undergraduate engineering business or finance degrees or in many cases both. At a barely 61 years old, I represent the oldest one on the chart. Most of my direct reports are 5 to 10 years, younger than I am and the overall age in this group, averages around 5 to 10 years younger, the reason that I think that’s important to us and to our business is that we certainly have a long runway for this team. So, I think you’ll enjoy meeting.
We have one Norwegian, we got several Texans, we got a few Yankees, plus we have, some of us have some Mercier origins. But I’ll state my absolutely biased opinion is, this is collectively the most talented management team in the industry. And it’s our mission today to reaffirm to you that that is indeed a fact.
So, our agenda today, we’ll include four breakout sessions which you’ll hear a detailed discussion from all three of our business sectors, plus finance and treasury information. And it’s going to be all from the executives who manage the business every day.
So, I’m going to provide some additional details about the session before I conclude my remarks. So, but for some of you, certainly on the webcast or in the room who may not be as familiar with the company, again our business model is comprised of three operating units what we refer to as business sectors.
Each is quite different in terms of commercial characteristics and scope of services. But they do share a common energy market that encompasses the entire globe. And I think we’ve demonstrated that when you aggravate the earnings from these businesses, the results are pretty good with double digit earnings growth year-over-year, I don’t know why I needed to stumble on double digit, but it’s certainly a fact.
Although we’re in a peer group that’s essentially comprised of engineering companies, we’d like to point out that CB&I limits, Lummus for example, which is the engineering and construction sector of company is probably the most relevant comparison to that group. Our steel plate structure business looks more like a supplier of engineering products. And certainly Lummus Technology is focused on refining and petrochemical licensing and catalyst sales with additional income derived from gas processing technology and heat transfer equipment.
And you’re going to hear this model (ph) that we repeat to you over and over that in order to measure the performance of our company, concentrate on these sectors. If you really want to understand the wide range of operating and commercial attributes and comparing what we figure is a pretty unique business model with the peers on our space. And that truly is the focus of today’s sessions.
This is one of my favorite slides that many of you have seen over and over, and I call it my dream harbor, I think it actually exists on the Gulf Coast but I’m not sure. But what it illustrates is virtually every energy project that CB&I is involved with around the world for example, gas processing and gas processing plants similar to our projects for both Occidental at Elk Hills and Old Dominion in West Virginia, our Dominion gas in West Virginia, one plan is leveraging the further integration of its facility by monetizing it’s gas assets. And the other is part of the Marcellus gas field development. Both are in the neighborhood of $0.5 billion investment per project. And we certainly expect them to increase that investment.
And more importantly they’re among the first major infrastructure investments focused on developing the abundance of natural gas in this country. And on both sites we are providing sole source technology, engineering, construction and certainly the storage tanks.
On the next door is our lovely Liquefaction plant, which is an actual photo of the Peru LNG project which we finished last year. That which, again, illustrates our strong position in the market by leveraging this expertise in a joint venture for example with our partners Geode and Saipem for feed work at their multi-billion investment opportunity of Browse LNG on the Northwest Shell of Australia, which we hope will convert JBC by year’s end or early 2013.
It also illustrates the feed work we’re doing for Arrow Development which is another major investment by Shell and (inaudible) gas in Australia also representing multiple billion of dollars in capital investment. The current billion dollar project for Exane for design and construction which is in our current backlog for the gas conditioning and infrastructure in Papua New Guinea, to supply gas to liquefaction plant in Port Moresby in that country. And that’s again the liquefaction plant is traded and executed by Geode. And of course we’re doing the takes on that project as well.
And of course, the recent award of the $2.5 billion mechanical erection and electrical instrumentation contract for Chevron on their environmentally sensitive project on Barrow Island. So, a lot of examples of those, certainly LNG positions around the world.
And I’d go on and on around these projects and but you’re going to hear a lot more about in the individual sessions. But of course when involved in major scope of our Canadian Oil Sands, we’re building the largest refinery expansion in this hemisphere for Ecopetrol in Columbia. We’ve got offshore platforms which we’re exciting for topside projection units FPSOs around the world. Feed work for Russian LNG and Siberia and erection of containment vessels for our nuclear plant in Georgia and technology of course for sales and refining in petrochemical plants around the world. So, a pretty diverse book of projects and certainly 95% are concentrated in energy related end markets.
So, you’re going to see a lot of bubbles today too, we like these bubble charts. But how is the shakeout when you compare us to our global competition. And you’re going to see these bubbles. And each unit is going to show you their view on their relative position in their marketplace. These particular bubbles actually represent real company. And as you can see, we certainly are a key player in the oil and gas business with pretty broad diversification in that quadrant. Not the biggest, but our goal is not size.
Although there is an optimum mix that we’d like to look at in terms of our universe that we need to achieve what I call an elegant balance between the advantages of cost reimbursable work without diluting obviously the premium opportunities for fixed price and structure and certainly the high margins we get in our technology business.
But I kind of (inaudible) this part of the space, you know, we got headroom. There are several bubbles up here, looking over their bubbles backs at us. You know, and I was flattered to hear that one major bubble up there, they had a sales conference and it that sales conference they said, their biggest competitor threat in the world was Koreans, the Chinese and CB&I, I love that comment. Fairly we are being wise though. So, they’re very flattery.
Confidence, we do have a lot of confidence which I hope is also the impression you leave here at the end of the day. We have a solid EPC backlog which is long and durable. And a position our respective tank and technology markets in which we’re industry leaders. We believe the end markets in which we are successful. We’ll continue to provide opportunities well until the next two decades as energy diversifications find some global equilibrium as countries continue to investment in their growing economies and exploit new assets and technologies.
And we’re confident we’re positioned to win our shares this exciting future with talent, relentless focus on safety, standard of environmental care, which is a growing requirement, with virtually all of our customers. And uncompromising standard of business ethics around the world and certainly our continuing emphasis on acquiring and retaining talent, which we’re going to meet today, and certainly demonstrated by these people that are around our groups.
So, with that, with that confidence now we’re going to certainly reaffirm our guidance that we gave last earnings call for this year. And we’re going to provide our guidance for 2012. We see new awards in the range of $5.5 billion to $7 million.
Revenues, we anticipate to be in the range of $5.2 billion to $5.6 million. And earnings in the range of $2.75 to $3.05 earnings per share, and there is a press release that will probably be sent probably now. I’m sure there’ll be issue to everyone on the call and everyone in the room.
So, let me give you a little help on today’s sessions. Before we adjourn this portion of the meeting, I want to thank everyone who’s on the webcast this morning. There will be printed material available on each of the session and it’ll be posted on the website.