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Aegion's (AEGN) JV Gets Contract Extension in Middle East

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Aegion Corporation’s (AEGN - Free Report) joint venture (JV) — United Special Technical Services, LLC ("USTS") — has received a $5-million contract extension in the Middle East. The contract was initiated in 2018.

USTS — a JV between Aegion’s subsidiary United Pipeline Systems, Inc. (United) and Oman’s Special Technical Services LLC — has already installed more than 1100 km of United’s Tite Liner system to rehabilitate and protect carbon steel pipelines from internal corrosion. The work is likely to begin in fourth-quarter 2020 and conclude in 2022.

About United

United has been a global leader in high-performance thermoplastic internal pipeline lining systems for pipeline integrity over the past three decades. It has installed more than 20,000 miles of the Tite Liner system in more than 30 countries across the world.

The Tite Liner system is a high-density polyethylene (HDPE) liner, which has low cost, requires lower maintenance and provides effective solutions to customers. It is a method of lining new and existing pipelines with a corrosion and abrasion resistant thermoplastic pipe.

New Projects to Revive Corrosion Protection Business

Over the past several years, Aegion’s Corrosion Protection business — under which it performs maintenance, rehabilitation and corrosion protection services for oil and gas, industrial, as well as mineral piping systems and structures — has completed several large projects throughout the world.

The business — which accounted for 24.3% of 2019 revenues — has been carrying out several restructuring activities. The company plans to sell or shed multiple Corrosion Protection international businesses under the five-year restructuring plan, which was initiated in July 2017.

For first-half 2020, its total revenues fell 10.6% year over year. The downside mainly stemmed from a $23.4-million decrease in revenues in Energy Services, $20.5-million decline in Corrosion Protection and a $19.3-million reduction in Infrastructure Solutions segments. Corrosion Protection’s revenues fell 14.5% year over year for the first six months of 2020 due to reduced project activities. Aegion’s shares have underperformed the industry in the past three months.

Although its business suffered from larger-than-expected losses from Corrosion Protection due to COVID-19-related project delays, contract wins like the latest one are expected to somewhat offset the woes.

Zacks Rank

Aegion — which shares space with TopBuild Corp. (BLD - Free Report) , Gibraltar Industries, Inc. (ROCK - Free Report) and Installed Building Products, Inc. (IBP - Free Report) in the same industry — currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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