EMCOR and IES See Sluggish Construction Market in 2003 but Some 4th-Quarter Growth

Feb. 7, 2003
Two of the largest electrical contractors in the United States, EMCOR Group Inc., Norwalk, Conn., and Integrated Electrical Services Inc., Houston, expect

Two of the largest electrical contractors in the United States, EMCOR Group Inc., Norwalk, Conn., and Integrated Electrical Services Inc., Houston, expect uncertain business conditions in 2003.

EMCOR, the nation's third largest electrical contractor in CEE News' 2002 Top 50 listing, reported total company sales of $4 billion in 2002, and expects its revenue to increase to the $4.4 billion to $4.6 billion range in 2003. In 2001, its electrical contracting business accounted for 39 percent of sales. The company expects its recent acquisition of Consolidated Engineering Services, Inc., to contribute between $400 million and $450 million to 2003 revenues.

Frank MacInnis, the company's chairman and CEO, said EMCOR's diversification will help the company to another strong year, despite the uncertain economic climate.

“EMCOR's operating model, incorporating diversity across geographic markets, service offerings and end-users, has resulted in 2002 being a record year for earnings and revenues despite difficult economic conditions,” he said. “We are very pleased with this performance and its validation of our operational strategy.

“As we move into 2003, with an estimated contract backlog of about $2.8 billion, the economic climate remains challenging and uncertain, with no indication as yet of recovery in our commercial and industrial markets. “Notwithstanding these challenges, we expect 2003 to be another record year for both revenues and earnings. We base the high end of our earnings estimate on the current state of the economy and what we believe to be realistic assumptions of modest improvement in private sector demand in the second half of the year, while the low end of the range assumes no private sector improvement.”

MacInnis said the company, which provides electrical contracting services, mechanical contracting and other facility maintenance work, “is positioned to perform well in 2003 notwithstanding the strength or timing of an economic recovery.”

IES had a substantial backlog of work as the first fiscal quarter of 2003 ended. The company added $155 million of new large projects to its backlog during the first quarter, compared to $232 million added during the fiscal fourth quarter of 2002.

Its backlog is currently $766 million, compared to $801 million at the end of the fourth quarter. The new projects include a $33 million of high-rise hotel and condominium and mid-rise apartment projects; $24 million of new health-care projects; $20 million of wastewater treatment facility work; $19 million of work at retail centers; $17 million of work at schools and community centers; $11 million of manufacturing and heavy industrial projects and $7 million of work at office buildings.

The company, which was ranked by CEE News magazine as the largest electrical contractor in the United States with $1.69 billion in 2001 sales, reported first-quarter revenues for fiscal 2003 at $348.6 million, compared to revenues of $375.2 million for the first quarter a year ago. The seven percent decrease in revenue is a result of non-core divestitures that occurred during the fourth quarter of 2002, the significant reduction in communications work versus a year ago and continued softness in the commercial and industrial market.

First quarter segment revenues for commercial/industrial were $271.6 million in fiscal 2003 compared to $308 million in 2002. Residential revenues were $77 million in fiscal 2003 compared to $67.2 in 2002, and the housing market and housing starts remain quite strong.