USA: Orion Marine Group Issues Investors Update
Orion Marine Group, Inc., a leading heavy civil marine contractor serving the infrastructure sector, provided its investors with an update on the Company’s outlook and end markets.
“As the Company begins a new year, it remains pleased with strong market fundamentals and continued steady demand for its heavy civil marine construction services. The private sector remains a dependable source of bid opportunities and the Company expects this trend to continue throughout 2014. In the fourth quarter, the Company bid on approximately $498 million worth of opportunities and was successful on approximately $137 million, representing a win rate of approximately 28%,” they announced.
Additionally, the Company currently has approximately $224 million worth of bids outstanding, of which it is the apparent low bidder on approximately $39 million. The Company reminds investors that the timing and size of awards can and does affect the win rate in any particular quarter.
During the fourth quarter, the Company experienced better production on several projects, which led to better than expected utilization of the Company’s equipment. This will result in some improvement in gross margin and revenue when compared to the third quarter. However, the better than expected production during the fourth quarter will result in less production during the first quarter 2014 due to the timing of project schedules. It is important to remember that most of the recently announced jobs will not begin until the second quarter of 2014, as currently planned.
“These two factors will negatively impact the Company’s overall fleet utilization and gross margins in the first quarter of 2014. However, the Company continues to build a strong backlog for 2014, and is pleased with a steady level of identified projects in its market tracking database. This coupled with continued strong demand from the private sector, should lead to full year 2014 profitable results,” they stated.
After the partial government shutdown in the beginning of the fourth quarter, which had little impact on the Company’s existing federal contracts, developments out of Washington have been encouraging.
In December, both houses of Congress reached a two year budget deal for the Federal Government through fiscal year 2015. Appropriations for fiscal year 2014 have now been signed into law under this budget deal, including appropriations for the Army Corps of Engineers. This includes over $2.8 billion for Operations and Maintenance funding, where the Company typically bids on the majority of its federal dredging projects.
“The Company is hopeful that the two year budget deal will lead to certainty in Corps funding through fiscal year 2015, which will allow them to more efficiently execute their spending program. However, the Company believes the benefits of this budget deal may not begin to be realized until the second half of this year,” Orion Marine announced.
The Company continues to monitor the progress of The Water Resources Development Act (WRDA) of 2013 (Senate Bill 601) and Water Resources Reform and Development Act (House Bill 3080) as both remain in House-Senate conference where the differences between the two bills will be reconciled. The Company does not believe it will realize an immediate impact from the passage of this bill, but should see a positive long term impact.
Regarding coastal restoration opportunities, the second portion of the two-part federal trial continues in New Orleans. This phase will determine the amount of oil released in the 2010 Gulf of Mexico oil spill. Once a quantity has been determined, Clean Water Act fines will then be levied against the responsible parties. Under the RESTORE Act, 80% of the fines collected will go to the five Gulf Coast states for coastal restoration.
As 2014 begins, the Company continues to expect to see a steady amount of bridge opportunities from various state Departments of Transportation. The Company continues to execute on several bridge projects and expects bid opportunities to continue. The current transportation bill expires in June of 2014, and the Company will be closely monitoring funding developments.
Local & Private Update
Capital improvement plans continue to be implemented in various stages by local port authorities in order to prepare for larger ships transiting the expanded Panama Canal, which is currently expected to be completed in 2015. The Company continues to enjoy strong demand from the private sector as energy and non-energy sector clients continue to repair, expand, and refurbish their waterside infrastructure.
Press Release, January 22, 2014