EMCOR Group, Inc., Norwalk, Conn., the second largest electrical contractor in the U.S., according to Electrical Construction and Maintenance magazine, expects its revenues in second-half 2003 to grow to between $2.25 billion and $2.35 billion.
But the company said it would miss its second-half per-share earnings by 47 percent to 62 percent because of a decline in its higher margin small project business. Electrical sales typically account for approximately 30 percent of EMCOR’s sales.
While the company’s sales are expected to increase for full-year 2003 over last year, the gross profit outlook remains tough. EMCOR expects gross profits to be restrained by the high proportion of public sector work within backlog, continued recessionary conditions in most of its markets, especially in the Midwest and Northeast, and a reduced level of private sector, discretionary small project work, which typically generates higher gross margins than longer-term work.
“This continues to be a challenging time for EMCOR and its entire industry,” Frank MacInnis, the company’s chairman and CEO. “While we have been able to maintain our dominant position in many of our markets, mainly through awards of public sector projects, the contracting environment remains recessionary, with many of our private sector clients waiting for clearer signs of a full-fledged economic recovery. In addition, the anticipated recovery in small-project discretionary spending has been slower and less profitable than anticipated.
“While we are disappointed by the near-term outlook, we remain committed to our long-term diversity model. The market has given us an over-weighting of public sector work. However, when the economic recovery takes a firmer foothold, our backlog mix will naturally shift to a more optimal balance of public and private sector customers.”