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Recently announced, Harsco Corporation ( HSC - Snapshot Report ) declared that it has received two separate construction project contracts in Germany. These awards, directly related to the company’s Infrastructure business segment are projected to ameliorate revenues by $1 million for Harsco.
The first of these is a major contract, intended for the proliferation of Porsche’s automotive research and development center, which would now consist of an advanced wind tunnel, design center and an electronics integration center. As per this agreement, Harsco will help build this state-of-the-art center with walls of nearly 280,000 square feet and also provide formwork for the iconic Porsche Spielzeugmuseum at Bavaria.
Harsco’s second contract pertains to assisting HOCHTIEF Solutions in a partnership agreement to plan and construct 19 highway bridges across the A8 motorway in southwest Germany. This development would ultimately extend the motorway around 58 km and is currently being considered to be a landmark project in the construction sector of the world.
Results declared for the Infrastructure segment were not very encouraging in the final quarter of 2011. Revenues fell almost 6% sequentially and margins were also quite under pressure. Softness arising from the European economy was the primary reason for the downfall coupled with re-structuring activities implemented by the company which deteriorated the overall performance of this segment in the December quarter of 2011.
Success cannot be aleatory in this regard and it is imperative that the company adopts some decidedly proactive measures to pull up its Infrastructure segment while traversing through 2012. Harsco hopes to drive some amount of recovery in the segment from its varied re-structuring activities and contract wins in its financial results of March quarter of 2012, which are expected to be declared on May 2, 2012.
Harsco should remain wary of ominous competitors like W. W. Grainger, Inc. ( GWW - Analyst Report ) , TMS International Corp. ( TMS - Snapshot Report ) and Scansource Inc. ( SCSC - Snapshot Report ) in the industry. The company currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. However, we maintain a long-term ‘Neutral’ recommendation on the stock.
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