Dive Brief:
- WSP’s earnings, revenue and backlog all climbed in the third quarter, according to its earnings report released Wednesday. Revenues grew across all reportable segments and the company is benefitting from various government stimulus efforts, said CEO Alexandre L’Heureux on an earnings call Thursday. The company reaffirmed the 2023 financial outlook it had raised in Q2.
- The Montreal-based engineering and design giant reported revenues of $3.6 billion Canadian dollars ($2.6 billion), up 24.2% from the same period last year. Its profits stood at CA$156.2 million, a 22.5% increase year over year, while backlog stood at CA$14.3 billion, a 7.5% increase from the year-ago period.
- L’Heureux said the firm’s Q3 performance “demonstrates the continued momentum and high demand for our services,” in particular clean energy, water, data center and transportation projects.
Dive Insight:
Although high interest rates are slowing overall market activity, the company is still well positioned to take advantage of opportunities since it has a strong balance sheet, according to WSP CFO Alain Michaud. WSP’s board declared a dividend of $0.375 per share, payable in January 2024.
The firm’s environmental and water businesses continue to strengthen: They comprised less than 10% of the firm’s top line in 2018, and now stand at more than 30%. WSP’s purchase of the environment and infrastructure business of John Wood Group, which it completed in September 2022, was the main driver of acquisition growth of 15.3%.
WSP has also focused on permitting, social acceptability studies and planning. Getting involved with projects early in their planning stage presents the opportunity to cross-sell its other services, L’Heureux said, and WSP also cross-sells its environmental work in its building, transportation and power sectors.
L’Heureux highlighted three green transition trends the company is focused on:
- Electric vehicle transition: L’Heureux sees rapid acceleration of EV-related activity and opportunity. The U.S. and Canada are expected to invest $12 trillion in renewables and grid infrastructure by 2050, and battery plants are proliferating. WSP has seen “robust” EV project wins in the past year, and provides a range of services that support this sector. The company recently released a report on the U.S.’ rapid increase in EV investments.
- Water and clean energy transition: L’Heureux highlighted strong market momentum in these sectors, and said the company is well positioned to take advantage. WSP recently won a role in the Mersey Tidal Power Project, the largest publicly led renewable energy and resilience effort in the U.K. that could power 1 million homes.
- Decarbonization and resilience: As extreme weather continues to batter infrastructure and the world moves to decarbonize, L’Heureux said the outlook for climate-related projects is strong. For example, the firm charted a decarbonization roadmap for health care for nine facilities on six continents, L’Heureux said, and recently nabbed a role in the New Zealand North Auckland Line remediation project, a railway which was damaged by Hurricane Gabriel.
WSP is seeing strong demand for its services around the world, excepting China with its weak real estate sector, L’Heureux said. The firm has “minimal exposure” in China and has continued to decrease its presence in the past 12 months to less than 500 people, he said.
U.S. infrastructure outlook
While federal infrastructure investment is creating a lot of green transition opportunities, the vast majority of funding from the Infrastructure Investment and Jobs Act is for roads, bridges and other traditional transportation projects, and WSP is well-positioned to take advantage of these opportunities, L’Heureux said.
The firm is continuing to get a bump from the IIJA as expected, and L’Heureux said its “win rate is up compared to a year or two ago.” While the 2024 U.S. presidential election could bring a change in leadership, he didn’t think that would stop federal infrastructure funding.
“These were all bipartisan infrastructure funding, so both sides of the aisle — both the Republicans and Democrats — were in favor of the infrastructure law, the Inflation Reduction Act, the CHIPs Act, so I don’t think that much of it will be impacted,” L’Heureux said. “Already $270 billion of the bipartisan infrastructure law has been deployed over 36,000 projects, and I think that’s a boat that is now sailing.”