Granite Construction Takes Another Quarter Hit Linked to Project Issues

Granite, which recorded a $69-million loss in its heavy civil division, said it will accelerate efforts to de-risk larger projects between $100 million and $500 million in its portfolio.

Photo: Granite Construction

Granite Construction Inc. reported 2019 third-quarter net income of $20.5 million for the period ended Sept. 30, down 60% from its year-ago figure of $55.7 million, due to a $69.3 million loss in its heavy civil operating group that the Watsonville, Calif., contractor attributes to disputed projects.

The company also said it will only pursue projects in "markets with strategic, competitive advantages," will be more aggressive in dispute avoidance and resolution; and boost "risk-mitigation strategy" in how it prices project bids.

Analysts expected third-quarter earnings of $1.31 a share, according to consensus estimates provided by Yahoo! Finance.

Granite’s third-quarter revenue rose 3.1% to $1.09 billion, up from $1.06 billion during the same period last year but the company missed analysts’ expectations of quarter revenue of $1.16 billion.

“During the third quarter, strong core operational performance was dampened by a negative contribution from the heavy civil operating group primarily driven by disputed work,” said Granite CEO James H. Roberts in an Oct. 25 announcement, pointing to " resolution of ongoing disputes which continue to have a distorted impact on our cash flows and earnings."

He did not identify the disputed projects or provide details on their issues or status. But in its second quarter results announcement in early August, the company said charges stem from four projects bid between 2012 and 2014. The firm announced a $97-million loss for that quarter

Roberts said the company completed a strategic review of its heavy civil division, and said it will target no more that 15% of overall revenue for heavy civil construction.

Granite also said that Senior Vice President James D. Richards, a 28-year company veteran who manages its northwest U.S. group, will replace Dale Swanberg as senior vice president of the heavy civil group.

Swanberg joined Granite in 2015, previously serving as chief operating officer at Flatiron. He also is a former heavy civil division president at The Walsh Group,

“A critical component of our current and future success is consistent performance on projects at scale, in this case projects typically in a range of about $100 million to $500 million, with particular emphasis on best-value procurements with more defined design and appropriate risk-sharing,” said Roberts.

Erica Berardi is the former editor ENR California and ENR Northwest.

As ENR Editor-at-Large for Energy, Business and Workforce, Debra K. Rubin has a broad vantage for news, issues and trends in global engineering and construction related to key areas of global energy development and transition, corporate business and management, regulation and risk and next-generation workforce development.

Debra also launched and manages ENR's Top 200 Environmental Firms annual ranking, which defines key players in the dynamic global market for environmental services; and is editor of ENR WorkforceToday e-newsletter on industry talent management news and trends. Click here to receive this free monthly newsletter.

She also is a key organizer of ENR's annual Groundbreaking Women in Construction conference, a major AEC industry forum for talent management and women's career advancement. Click here for more detail on plans in formation for the next live event.

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