CEO: Relief bill likely good for L.B. Foster
Whenever the federal government decides to throw money at the nation’s aging infrastructure, Green Tree- based L. B. Foster Co. gets a boost.
It happened during t he Obama administration, when the American Recovery and Reinvestment Act funneled money toward shovel- ready road and rail projects.
And it is likely to happen now as Congress works on a $1.9 trillion pandemic relief package, which is likely to end up with tens of billions of dollars for infrastructure spending.
“I think the transit rail agencies are going to get money,” L.B. Foster President and CEO Robert Bauer told analysts during a call Tuesday. “That’s probably the most notable area that that package will help us with.”
But it’s not the only bright spot, he said. As states get some of that money, they will likely direct it to highway projects, bridge repairs and other categories of spending that could help L.B. Foster’s precast concrete business book some new orders.
Already, the company is
expecting some work from another federal bill, the Great American Outdoors Act, which allocated $5 billion to national parks. “And a lot of that could go towards our precast concrete buildings that are in many of those parks,” Mr. Bauer said.
The prospect for future sales comes on the heels of a year of shrunken profits for the rail parts manufacturer and infrastructure firm, which ended 2020 with net income of $7.6 million, or 71 cents per share. That’s down from $ 42.6 million, or $ 4 per share for 2019.
With massive disruptions across all industries that L.B. Foster serves, it was the oil sector that pulled down its business prospects the most, Mr. Bauer said.
The pandemic halted travel, and demand for oil plummeted. While the same was true of public rail transit and rail freight traffic, albeit for a shorter period, those project orders continued, and work, although some of it delayed, is chugging along.
But L.B. Foster’s coatings and measurement business, which serves pipelines, isn’t poised for a quick recovery.
Mr. Bauer had been bemoaning the weak energy market for years. In September, the company sold off its equity stake in a test and inspection services unit for $4 million. The business served the oil and gas production market, which had never quite recovered from a downturn in 2015 before being hit by the pandemic, the company wrote.
Mr. Bauer said the company was initially most worried about how the sharp drop in people taking public transit and the decrease in freight rail volume would impact L.B. Foster. But it turned out better than expected, he said.
“Both rail sectors have been among the more resilient areas as projects kept moving forward all the way through the fourth quarter.”
L.B. Foster drew optimism from new orders for transit projects, even as it struggled to convert its project backlog into sales in Europe, “where strict lockdowns have disrupted shipments and service work.”
That, coupled with some delays in the U.S. and other issues, prompted Mr. Bauer to draw a distinction between calling the current market environment resilient and recovering. So far, it is the former, not the latter, he said.