AEGN
#Good morning.
What we expect to happen on the international side of the business is actually to have a much stronger year in 2017 than we had in 2016.
We entered the year with good backlog, remember where the CIPP operation in Australia and then in Europe.
And we are entering 2016 with much better backlog in Europe than we had at this time last year in 2016.
So we expect the contracting business in both those locations to be stronger this year than what we saw last year.
What we are saying in terms of the overall margin is that we see some impact potentially on margins in CIPP just because of the increased oil prices will increase our resin costs.
We are also going to see some pressure on wages, the construction industry in US is going pretty strong and we will see some wage pressure from that.
And then we have made some investments both in R&D and in sales because we want to compete in some regions in North America, where we haven't been competitive in the past.
That requires us to put sales and construction resources on the ground it will take a while to fully optimize those.
And so, I think we are investing in growth, we expect that investment to pay off in 2018 and 2019.
We look at it as an investment opportunity in North America to grow a very strong business.
I think there is two things.
Remember, we went through a difficult restructuring last year.
We took out I think almost $80 million or $90 million worth of revenue from two large upstream contracts that we exited at the end of 2015 in beginning of 2016.
And as we exited that business we had trailing costs and we also had some project overruns that occurred on projects that were in process when we exited.
And so we are going to overcome obviously that won't reoccur this year.
The second thing is that business has really benefited from our continuous improvement program, they continue to drive utilization up they continue to have more accurate billing.
And as they improve we expect all that to hit the margins.
Also our margins on turnarounds are slightly stronger than our maintenance margins.
So we had all those together, we feel really good about the outlook for that business for this year.
I don't know.
We had a pretty good year in 2015.
Last year was probably down a little bit.
This year is going to be strong.
I don't have a good sense of 2018 yet, we will probably get a better, better feel for that later this year.
But I don't think that it is up, I don't think it is necessarily a catch up.
I think there is a little bit of variability year-to-year in that business.
You are welcome.
Well, thank you for joining us.
We are excited about our prospects for 2017.
Our plan is based on realistic assumptions and favorable end markets in North America municipal pipeline rehabilitation.
Midstream pipeline, Corrosion Protection and downstream refinery maintenance and turnaround services, we remain focused on improving sales and operating execution for organic growth in greater efficiencies across the Company.
With the hope of a clear line of sight in the energy markets, we expect 2017 to be a good year for Aegion.
Thank you for joining us.
