|Maintenance and Repair Grow for Matrix Service
Maintenance and Repair Revenues Grow for Matrix Service
Reenues from the Repair and Maintenance segment climbed 14.9% to $40.6 million from $35.4 million in the first quarter of fiscal 2004, resulting from continued strong turnaround activity, which increased 63.2% in fiscal 2005. Gross margins in the Repair and Maintenance segment widened to 9.7% from 9.1% in the same period last year, as the result of a higher volume of refinery turnarounds.
These improvements were tempered by softness in the Eastern operations' maintenance and repair revenues.
Matrix experienced softness in the Construction Services segment, as the two large power projects executed last fiscal year were not replaced dollar-for-dollar in the first quarter of fiscal 2005. Revenues for the Construction Services segment fell 64.1% to $44.3 million from $123.4 million in the first quarter of fiscal 2004.
"The softness experienced in the first quarter was more severe than anticipated, as our client base remained reluctant to take equipment out of service due to continued strong demand for product and storage capacity,” said Brad Vetal, president and CEO of Matrix Service.
“We were pleased with the strengthening of our Repair and Maintenance segment at the end of the first quarter and see a trend of increasing revenues in the upcoming quarters. Our backlog continues to increase and stood at $142.9 million, as of August 31, 2004 compared to $106.1 million at May 31, 2004."
Matrix Service has retained a financial advisor to assist in refinancing the $20 million term loan that matures on August 31, 2005. The company anticipates having replacement financing in place by November 30, 2004.
Vetal added, "Although we are only one quarter into the new fiscal year, a number of factors are making our ability to provide yearly guidance very difficult. While we expect continued growth in repair and maintenance as well as improved construction services' margins in our existing backlog, we remain uncertain about the timing of the large capital construction projects we are following. Delays in the start of these projects would result in a shortfall of construction service revenue in this fiscal year prolonging the current underabsorbtion of fixed costs. In addition, the more conservative approach we have taken to negotiating terms and conditions implemented in light of our prior year challenges is beginning to cost us some opportunities. We believe the strategy is sound though the short-term impact will make attaining our previous earnings guidance less likely. As a result, we believe a reduction of our guidance to $0.45 to $0.55 per fully diluted share on revenue of $425 to $475 million from our prior guidance of $0.60 to $0.70 per fully diluted share is appropriate."
Matrix Service Company provides general industrial construction and repair and maintenance services principally to the petroleum, petrochemical, power, bulk storage terminal, pipeline and industrial gas industries.
The company has assets of $207 million, and liabilities of $122 million.