ENGlobal revenue up 58%, $8.3M new business, $20M hydrogen plant contract for RD facility
No, we aren’t talking about Zoom or Clorox or Lysol, but ENGlobal, a company proving you can adapt and even thrive in crazy times.
By providing the world’s largest independent beverage bottler with technical expertise enabling the speedy bottling of critically needed hand sanitizer during these crazy times, to expanding their work in renewable diesel projects, ENGlobal has been surviving COVID-19 just fine.
In fact, they secured $8.3 million in new business in the second quarter of this year, which includes additional scope of work valued at $2.8 million on a Midwestern U.S. renewable diesel facility.
In fact, they’ve quite a year with revenue up 58% in Q1 2020 compared to Q1 2019…not something you hear many companies saying lately…except maybe Zoom and Clorox. The first quarter ended March 28, 2020 and achieved net income of $1,101,000, or $.04 per share, compared to a net loss of $974,000, or $(.04) per share, in the first quarter ended March 30, 2019.
Added to the company’s Q4 2019 earnings of $741,000, or $.03 per share, this marks ENGlobal’s first consecutive profitable quarters since the third and fourth quarter of 2015.
This gain was the result of a 116 percent rise in revenue from the company’s automation segment, which compiled a gross profit margin of 21 percent in Q1 2020 compared to 10 percent in last year’s first quarter. The company’s overall gross profit margin in Q1 2020 improved to 17 percent compared to 11 percent in the same quarter a year ago.
“We are encouraged by our first quarter results,” said CEO William A. Coskey, P.E. “Going forward, the company will continue to focus on building industry alliances and thus securing more of these targeted projects, most of which are estimated to have revenue value of between $10 to $250 million each.”
“Regarding the ongoing coronavirus pandemic,” said Coskey, “our company, like most others today, is in a dynamic and difficult to predict situation. We have a double dose of issues to manage through – both the pandemic as well as a difficult energy industry environment. While most of our office staff returned this week, we have experienced project execution inefficiencies and constraints on pursuing new business due to a majority of employees needing to work from home for about one month. It is tough to put a number on both of these factors.”
Coskey continued, “ENGlobal had approximately $53 million of backlog as of March 28, 2020, after giving effect for a project cancellation and we have also had one project delayed until next year. An important metric is that we currently have in excess of $100 million of proposals outstanding which are awaiting our customers’ feedback. Over a one year look back period, the company has been successful in landing approximately 39 percent of our proposals outstanding on a dollar volume basis. However, because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain and dynamic, our ability to convert proposals into backlog, and the results of future operations continues to be difficult to predict.”
$20 Million Modular Hydrogen Plant Contract for Renewable Diesel Facility
ENGlobal signed an agreement valued in excess of $20 million to supply process modules that will be used to construct a complete hydrogen production facility. The total sum expected under this contract could exceed ENGlobal’s $25.8 million revenues for the first half of 2019, with the Company’s scope of work potentially being increased over the 18-month project duration.
ENGlobal’s compact plant will be a major component of a grass roots renewable diesel facility with an expected maximum production of 10,000 barrels of renewable diesel per day. ENGlobal’s services will include engineering, detailed design, procurement, module fabrication and automation, with other project responsibilities such as field construction being handled by others.
The hydrogen unit design utilizes Haldor Topsoe technology. The synthesis gas process consumes approximately 20% less feed and fuel gas than conventional hydrogen plants, and produces no excess steam, leading to lower operating costs and a smaller carbon footprint. It will mark the first time this innovative technology will be used in the United States, after more than 40 successful implementations worldwide.
“This agreement is a significant event in the history of ENGlobal,” said Chairman and CEO William A. Coskey, P.E. “Not only does it introduce to the U.S. market an efficient and environmentally-friendly syngas process, it also validates our strategic shift toward providing higher-revenue modular process systems that utilize differentiated technology. We fully expect this win to greatly enhance our ability to secure additional modular systems business using this and other related technologies.”
“We are excited to be participant in this project and hope it can be replicated,” said Coskey. “We look forward to future projects with Haldor Topsoe and others.”
Mr. Bruce Williams, Senior Vice President of ENGlobal and the lead for the company’s renewable efforts, said, “I am proud to be part of the excellent and mutually beneficial working relationship we have in place with Haldor Topsoe. The jobs we are currently proposing range from $25M to $125M and typically involve renewable fuels, refining, chemicals and fuel cell applications. ENGlobal offers a full range of capabilities to engineer, fabricate and automate these plants, with each application realizing significant cost and schedule benefits through the company’s modular execution strategy.”
The Digest’s Inside Scoop
In an exclusive Digest interview with Coskey and Williams, they said they expect to deliver modules to construction firm that is going to erect them soon and to assist with the commissioning and startup with no indication that any vendors are impacted by Covid-19 at this point.
While they weren’t at liberty to give company names due to a non-disclosure agreement, they said it was a renewable diesel facility in the Midwest and the feedstocks used for the hydrogen can’t be disclosed yet either (so we don’t know whether they are natural gas based or syngas from biomass, etc.)
The nice thing is how it produces no excess steam – whatever steam is produced, it is consumed in it, so it’s not an exporter of steam. Williams also noted it produces more ratio of hydrogen as conventional gasification.
As to what the future holds, ENGlobal is talking to other companies (though they can’t say who due to confidentiality agreements with owners) and having discussions underway for other projects like feed studies – things are still moving forward and coranvirus is not slowing them down at all. Since they are considered critical infrastructure, their shops have been open the whole time, offices are open but working from home, and they continue to operate their fabrication facility in Henderson, Texas, and their 80,000 sq feet automation center in Austin. “We have a good backlog, nothing cancelled or postponed,” said Williams. “But alliances and relationships are key especially now.”
We think the key signal here is that renewable diesel, hydrogen, and other renewable and bioeconomy projects are still moving forward and that is indeed good news.