Primoris Swung to Loss as Renewables Overruns Crushed Margins
Backlog reached a record $13.856 billion at the end of June.
Primoris Services (PRIM), an infrastructure contractor, swung to a second-quarter net loss of $24.2 million, or $0.45 a diluted share, as troubled renewable-energy projects weighed on results.
The deterioration accelerated from the first quarter, when Primoris earned $17.4 million, or $0.32 a share. Cost pressures previously concentrated in a limited number of projects widened into identified overruns on six renewables projects, only two of which were substantially complete by quarter-end.
Revenue fell 10.7% from a year earlier to $1.688 billion, compared with a 5.4% decline in the first quarter, though sales increased about 8.2% sequentially. Adjusted results swung to a loss of $14.6 million, or $0.27 a share, from year-earlier adjusted income of $92.1 million, or $1.68 a share.
Consolidated gross margin narrowed to 4.9% from 12.3%, pushing Primoris to an operating loss of $26.8 million. Adjusted earnings before interest, taxes, depreciation and amortization fell 92.6% to $11.4 million.
Energy accounted for much of the pressure. Segment revenue declined 19.2% as renewables activity slowed, despite the PayneCrest acquisition, while its gross margin swung to a 0.3% loss from a 10.8% profit. Project overruns were due to redesign, sequencing changes, labor-productivity problems, subsurface conditions and weather.
Utilities revenue rose 2.8%, supported by gas operations and power delivery, but operating income fell 16.8% as gross margin contracted to 11.9% from 14.1%. The company ended June with Utilities backlog of $7.666 billion and Energy backlog of $6.190 billion.
Primoris reiterated its reduced full-year outlook for net income of $71 million to $101 million, adjusted earnings of $2.05 to $2.60 a share and adjusted EBITDA of $275 million to $325 million. The company expects second-half revenue growth and margin improvement as its project mix changes and work on the six challenged renewables projects approaches completion.
The company repurchased 449,287 shares for $50 million during the quarter, leaving $100 million under its authorization. Its projected recovery remained tied to completing the renewables work that drove the first-half shortfall.