Corps Slowdown Continues to Hammer Orion
In reporting a net loss of $6.2 million for the three months ending September 30 2011 compared to net income of $7.1 million for the same three months a year earlier Orion Marine Group Inc. again blamed continued “funding inaction by the federal government” as dredging projects slowed in a climate of funding uncertainty. The same causes had led to a second-quarter loss of $3.2 million for Orion as it shed about 300 people from its workforce.
In a November 3 press release Mike Pearson Orion Marine Group’s president and chief executive officer said “We continue to witness pressure on our margins as we weather the current economic storm. Funding inaction by the federal government has continued through the end of the third quarter.”
Uncertainties regarding the continuing resolution that was ultimately passed by Congress contributed to the Corps’ funding cutbacks. In Orion’s second-quarter report released August 4 Pearson blamed Congress for inaction on the Corps’ budget resulting in project gaps that “extended longer than we anticipated.
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“However the Corps did let some dredging projects during the third quarter [for] several of which we were the successful bidder” said Pearson. “Additionally we are finding the appropriate price points on projects involving marine construction services which resulted in a strong bill-to-book ratio for the third quarter.”
He called the delays “unprecedented dysfunction of the U.S. government.”
In the third quarter contract revenues were $54.6 million a decrease of 45.4 percent compared with the third quarter of 2010 when revenues were $100 million. Orion said declines were partly due to “gaps between projects as a result of delays in project lettings by the Army Corps of Engineers as well as delays in start dates on two major jobs.”
Gross profit was negative $2.4 million as opposed to $20.9 million for the third quarter of 2010.
Third-quarter EBITDA was a negative $3.4 million representing a negative EBITDA margin of 6.3 percent compared to a third-quarter-2010 EBITDA of $16.4 million or a 16.4 percent EBITDA margin. EBITDA margins were “significantly impacted by underutilization of higher margin assets such as large dredges” because of gaps in projects. Orion reported a backlog of work under contract of $146.1 million compared to $217.3 million for the same period a year earlier.
Although admitting to being “frustrated” with the federal slowdown Pearson said “The need for our services has not gone away. In fact we believe we are seeing an increase in the demand for our services over the long-term…As we continue through this tough environment we will focus on protecting the intrinsic value of the company by controlling costs while manage through this downturn and preparing for future opportunities. There is pent-up demand for our services and we are ready to meet these needs.”
