Fluor 2004 Annual Report Download - page 4

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2
FLUOR CORPORATION 2004 ANNUAL REPORT
Consolidated operating profit increased to $420 million
from $406 million in 2003. Revenues also grew, increasing
7 percent to $9.4 billion, while the operating margin declined
modestly to 4.5 percent from 4.6 percent last year. The lower
margin was primarily due to the significant falloff in Power,
which had delivered particularly strong margins as projects
were completed in 2003.
We also enjoyed another exceptional year in terms of
our safety performance. This past year, the company’s lost
workday case incidence rate was 52 times better than the
U.S. construction industry average, evidence of our steadfast
commitment to the well being of our global work force.
Consolidated
New Awards
dollars in billions
8.6
02
10.0
03
13.0
04
Consolidated
Backlog
dollars in billions
9.7
02
10.6
03
14.8
04
BUSINESS STRATEGY AND OUTLOOK
Fluor’s market diversity has long been a key strategy in
reducing the impact of cyclicality in individual markets and
enabling consistency in long-term performance. Using our
portfolio management strategy, we have been working to
increase the proportion of our more stable businesses, while
positioning Fluor to capitalize on developing growth mar-
kets, which have greater variability but offer more rapid
growth during their cyclical upturns.
This strategy is accompanied by highly disciplined
selectivity and risk management processes, as well as a
relentless focus on execution excellence. Our long-term
client relationships with leading companies have been built
over decades of delivering value-added solutions, and our
outstanding performance in 2004 continued that tradition.
Our market opportunities continue to be broad-based.
The momentum in the oil and gas market is building, and
economic expansion globally is stimulating increased capital
spending across a number of Fluor’s markets. Looking ahead
to 2005, we expect to build on the new award and backlog
growth achieved during 2004 as expanding market opportu-
nities continue to develop.
With our Oil & Gas backlog up significantly, we remain
convinced that the current cycle of investment in this
global market is likely to continue for several years. Fluor’s
capabilities and experience in managing large, complex
projects in geographically challenging locations provides
a critical expertise that remains in high demand.
Within the industrial markets, we saw significant
front-end engineering activity during the year, providing
strong evidence that a major cycle of chemical projects
is also gaining momentum. The vast majority of these devel-
oping chemical projects are located in the Middle East and
China, which are both areas of significant strength and
experience for Fluor.
The market for new mining projects was exceptionally
good for Fluor during 2004, with nearly $2 billion in new
awards booked, including three major copper projects in
South America. As one of only a few major global com-
petitors in this market, we are uniquely positioned for this
cyclical upturn, which is anticipated to remain strong during
the next few years.
In past years, we’ve outlined our goal to increase the
proportion of revenue and operating earnings from two of
our more stable markets, primarily our Government and
Operations & Maintenance businesses. During 2004, we
achieved our goal of growing these businesses to approxi-
mately 40 percent of our total business mix. In particular,
our Government business delivered outstanding growth,
increasing revenue by 34 percent and operating profit
by 74 percent.
Contributing to this strong performance in Government
was Fluor’s participation in the Iraq reconstruction effort,
focused largely on the restoration of electrical power and
water systems. This is important work, and we are proud
to support the effort to improve the quality of life for the
Iraqi people. Also, of primary importance, our security group
has kept our valiant employees in Iraq out of harm’s way
and allowed them to safely focus on their critical mission
of rebuilding.
Overall, we are particularly encouraged by the strong
growth we have achieved in backlog. This backlog represents
a number of new multi-year projects that will contribute to
future earnings as the new projects ramp up. Looking ahead
to 2005, we continue to see a favorable outlook for new
project prospects and we intend to capitalize on the broad-
based strengthening trends in capital spending globally.
Given these factors, we are optimistic that we will
deliver respectable earnings growth in 2005, although we
have chosen to remain cautious about the range of guidance
we provide at this early stage in the year. We will provide