Fluor Corporation (NYSE:FLR) Third Quarter 2022 Results Conference Call November 4, 2022 8:30 a. m. m. ET
Participating companies
Jason Landkamer – IR Manager
David Constable – President and Chief Executive Officer
Joe Brennan – Chief Financial Officer
Conference Call Participants
Michael Dudas – Vertical Search
Andy Wittmann – Baird
Andy Kaplowitz – Citigroup
Jamie Cook – Credit Suisse
Steven Fisher – UBS
Sean Eastman – KeyBanc Capital Markets
Brent Thielman – DA Davidson
Operator
Good morning and welcome to Fluor’s third quarter 2022 earnings convention call. Today’s call is recorded. At this time, all participants are in listen-only mode. A question and answer inquiry will be maintained in the management presentation. There will be a replay of today’s convention call at approximately 10:30 a. m. today on Fluor’s online page in inverter. fluor. com. The webcast will be available for 30 days. There will also be a 7-day phone replay via a registration link also available on Fluor’s online page in inverter. fluor. com.
At this point, for opening remarks, I would like to move on to the convention to Jason Landkamer, Head of Investor Relations. Go ahead, Mr. Landkamer.
Jason Landkamer
Welcome to Fluor’s third quarter 2022 earnings call. David Constable, president and chief executive officer of Fluor; and Joe Brennan, CFO of Fluor, are with us today. Fluor released its third quarter effects this morning and a slideshow is posted on our website, which we will reference while we make ready comments.
Before we begin, I would like to refer you to our Safe Harbor note related to forward-looking statements, which is summarized on slide 2. During today’s presentation, we will make forward-looking statements, which reflect our existing trend research and information. There is an inherent threat that the actual effects and fun will differ materially.
You can find the conversation about our threat factors, which can potentially contribute to such differences, on our 2021 Form 10-K and our Form 10-Q, which were filed today. During this call, we’ll talk about non-GAAP monetary measures for sure. Reconciliations of those amounts to comparable GAAP measures are reflected in our earnings release and are posted in the Investor Relations segment of our online inverter. fluor. com page.
I now turn the floor to David Constable, president and CEO of Fluor. David?
David Constable
Thank you Jason. Hello everyone. Thank you for coming today. Continue to slide 4. Before I begin with operating results, I need percentage data on the Fluor Supply Chain Summit in Greenville, South Carolina on September 14. This high-energy occasion brought together Fluor’s top management, our consumers, suppliers and subcontractors around the world. Current industry trends, new business concepts and responses to demanding supply chain situations were discussed. And this occasion gave everyone the opportunity to meet and interact with Fluor consumers and Fluor’s supply chain and line of business leaders.
Fluor donated the proceeds of the occasion to nonprofit organizations, adding the Carolinas Virginia Minority Supplier Development Council, the Houston Minority Supplier Development Council, the Greenville Chamber and Fluor Cares. Councils and the Chamber will use the grant budget to provide education and certification to minority-owned businesses by helping them prepare for relationships with larger businesses.
Continue to the slide 5. Me you’d like to start addressing legacy infrastructure costs incurred during the quarter. Clearly, the effect of those projects greatly influenced our strong effects for the quarter. The $107 million payment includes: $64 million for additional paints and expected delays at the I-635 LBJ East project, $22 million for cargo expansion and delay mitigation pricing at the Gordie Howe project, and $21 million for subcontractor load increases and productivity estimates at the LAX Automated People Mover project.
Over the past 21 months, Fluor’s control team has taken steps to improve the progress and execution of our legacy projects. More particularly in the infrastructure domain, we completed 6 of the nine Challenge projects this period. We continue to build leadership on the remaining 3 legacy infrastructure projects in aid of our joint ventures.
Over the past 3 months, we have transferred resources through our organization, adding claims management staff, allocation estimators, procurement, and cash execution. This is only about supporting our express efforts, but also about strengthening the functionality of our joint venture partners.
Finally, we are actively engaged in formalizing our eligibility positions on those 3 legacy projects to offload relief for expected fee expansion and delays. This has taken time to expand due to the complex nature of the projects in question. We hope to validate those really extensive positions in the coming months.
Based on the positive momentum of recent quarters, an ebook to an ebook to a burn ebook for new awards, new praise in the third quarter amounted to $9. 7 billion with a pound-to-burn ratio of 2. 7. The third quarter was the largest accolade quarter of the moment in Fluor’s history. It is vital to note that these new contracts increase Fluor’s strategic priority of fair and balanced terms with reimbursable work, accounting for 91% of overall awards for the quarter. Refundable.
The new allocation margins continued our one-year trend of being above our internal plan. And we have a strong prospect group that demonstrates the price Fluor can offer our customers. Lately we are running or have recently completed FEED packages and studies constituting approximately $131 billion in new awarded clients. We are also tracking FEED and feasibility customers over the next 18 months, constituting more than $163 billion in capital expenditures. Of this amount, 40% is similar to the energy transition.
Now, as for our business, turn to slide 8. Urban Solutions posted a loss of $54 million in the third quarter. The effects of the quarter reflect the expansion in infrastructure prices of the older projects discussed above. -at the rate of $929 million of refundable paints in mines and ATLS.
This quarter, we resolved to retain Stork’s North American operations. Starting next year, this new business line, Plant and Facility Services, will be a component of our Urban Solutions segment. As some of you may recall, these are Fluor’s core operations. and maintenance business that supported North American consumers prior to the acquisition of Stork.
The plant’s new facilities business line will drive our strategic priority of driving expansion across the portfolio. This will make our relationship-based business style bigger beyond the initial EPC before executing contracts with existing clients, while bringing new rewards and opportunities for expansion. Joe will take care of everythingwith Stork’s remaining portfolio of offerings in his comments a little later.
Now let’s move on to slide 9. In the mining sector, we continue to make progress in converting our portfolio of short-term prospects. In the third quarter, we won another award for one of our key projects in South America. Lately we are executing on limited realization to continue for multiple clients and have a near-term outlook of $5 billion to request copper, gold, lithium and metals for multiple clients that are expected to be switched to complete allocations in the coming quarters.
Continue now to slide 10. Our Advanced Technologies Business
In the life sciences sector, a leading biologics company decided us on a $100 million reimbursable contract to manage the source and structure of a large-scale biologics production facility in Scandinavia. This project, and more than $3 billion in opportunities in Europe and the U. S. Next year’s U. S. expansion also supports our strategic priority of driving expansion across the corporate portfolio.
During the quarter, we sourced paints from a new consumer supplying complex robotics and automation technologies to some of North America’s largest stores and wholesalers. Our initial contract is for the installation of racks and automation devices in five mega distribution centers. The sites are finished, we see the possibility of expanding particularly this dating in the United States.
Continue to slide 11. Since we have already reviewed the demanding situations this quarter, I need to expand our expectations for Urban Solutions, and more particularly, the infrastructure line of business. 2 years ago, as part of our strategy for the future. , we focus our infrastructure activities on the Decomponent of State Transportation, moving away from major flagship projects and focusing on regional road and bridge works.
After narrowing our scope, we are further refining the strategy by adjusting our selectivity criteria. Simply put, it means saying no to projects, no to customers, or no to joint venture agreements that offer a fair balance of threat. And I can verify that this selectivity strategy works well. For example, over the past 18 months, we have refused to bid for an approximate $28 billion worth of infrastructure works, where we can see a way to mitigate the threat while delivering adequate performance.
For projects we can undertake, we expect fair and balanced contractual terms. This includes other contingencies, the ability to temporarily acquire appliances and materials, and contracts in which the visitor has some degree of responsibility for the quantities and risk of heavy workload. In addition, we have searched for fixed-price EPC contracts in which we are a minority partner.
Mission Solutions reported segment profit of $29 million for the third quarter, in line with our expectations. Royal Air Force UK. Fluor began restoring the auxiliary airfield to complete its capacity in 2020. The east side of the runway is now complete and marks part of the assignment.
New awards for the quarter include a 4-year extension for $4500 million with the U. S. Department of Energy. U. S. Department of Attorney for the management and operation contract of Savannah River Nuclear Solutions LLC, near Aiken, South Carolina. Work on the Savannah River includes environmental control and cleanup of materials, services and waste inherited from the Cold War. It also supports the U. S. government’s nonproliferation efforts. The U. S. Department of Health through the processing and storage of nuclear materials.
In addition, Mission Solutions won a one-year extension from the U. S. Army. U. S. Africa Command is expected to continue working with U. S. Africa Command. U. S. Currently, we work at 14 sites in 8 countries across the African continent. Mission Solutions customers are increasingly positive with upcoming renewals, contests and new frames.
As for power solutions, continue to slide 15. The segment’s revenue source of $59 million reflects a loss on embedded derivatives of $5 million, a $4 million impairment similar to the final touch of an assignment in Russia, and a reduction in execution activity for allocations that are nearing completion. This is offset by increased activity in recently granted allocations.
The new awards for the quarter included two reimbursable contracts, totaling more than $2 billion for BASF, ethylene oxide and ethylene glycol, as well as application packages and external infrastructure in China. Fluor also won a $600 million award for upgrading a refinery in Mexico with our ICA joint venture component. This allocation is part of the reactivation of a residual update allowance that was suspended in 2019. This is a fixed-price contract that aligns with our strategy as it is sourced from a long-standing visitor with whom we have a strong relationship.
Another recently announced major award is a reimbursable contract for fundamental engineering, detailed design, and engineering and procurement for inconsistent content. This allocation will utilize our demonstrated inconsistent capacity to expand a world-class renewable diesel complex at Strathcona’s visiting refinery near Edmonton, Alberta, Canada. The facility is expected to be Canada’s largest renewable diesel facility and will produce approximately 20,000 barrels of renewable products per day from locally sourced feedstocks.
Let’s move on to slide 16. As part of LNG Canada’s allocation, this month we celebrate our 4-year milestone since we received the full completion of the assignment start. The scope of our joint venture is almost 75% complete. At the end of the quarter, 137 modules were shipped, adding 124 on-site. The 250 modules are expected to be delivered by mid-2023. We continue to work with the visitor on our COVID-related effects at the main site and production sites.
Fluor is well placed for the increased LNG demand. During the third quarter, we announced the full completion of the graduation of the New Fortress Energy project, FAST LNG 2, as an extension of the first quarter’s LNG 1 project. We’re also looking at the option to get more refundable rewards with this visitor early next year. Not only do we have customers on the way for LNG work, but we also have customers for our chemical visitors. This includes a significant reimbursable outlook for a primary chemical facility in North America.
Returning to the energy transition on slide 17. We see activity AND across all of our business areas, adding a task for a major automotive visitor reaching out to experts in energy, mining and metals solutions. In addition to this automotive award, Carbon Capture Incorporated, an American weather generation company, recently decided that Fluor will provide engineering and assignment integration for the Bison Project in Wyoming. It will be the first atmospheric carbon removal facility to use Class VI sinks for permanent CO2 storage, and will be the first scalable direct air installation. capture mega-allocation in the United States.
In September, NuScale and KGHM signed an assignment order to launch the deployment of the first small modular reactor in Poland. As part of this work order, NuScale works with KGHM to identify and compare potential allocation sites and expand allocation, marking milestones and cost estimates. Fluor is expected to have interaction in those activities early next year.
On October 20, the Nuclear Regulatory Commission’s Reactor Safeguards Advisory Committee issued a letter endorsing NuScale’s method for determining emergency planning zones for small modular reactors. The approved method will allow for a smaller planning area, opening up a wider diversity of possible sites. for NuScale plant locations, including, for example, a coal-fired plant scheduled to be decommissioned.
Finally, the U. S. Trade and Development Agency. awarded a grant to Romanian company RoPower Nuclear, a subsidiary of national nuclear power producer Nuclearelectrica, for a FEED study to expand NuScale’s first SMR plants in Romania. update, however, I’ll only mention that Fluor remains NuScale’s largest investor with a 57% stake. We’re thinking about the right time and technique to start monetizing our investment in NuScale.
With that, let me call Joe for the monetary update. Jo?
Joe Brenan
Thank you, David, and good morning everyone. I will review our third-quarter results, provide an update on our divestitures and capital design plans, and review the key assumptions in the monetary outlook that underpin our guidance for 2022.
Turn to slide 21. For the first: For the third quarter of 2022, revenues of $3. 6 billion higher due to the increase in refinery allocation execution in Mexico, a recently granted reimbursable LNG allocation, and the chemical allocation discussed through David. The segment’s profit dropped to $31 million from $116 million a year ago. The minimum stems from the $107 million in legacy infrastructure allocation costs discussed above.
Adjusted EBITDA for the third quarter was $26 million and our diluted adjusted EPS for the quarter was $0. 07. The effects reflect a $16 million currency effect on various allocations in the energy and urban response sectors. The company’s general and administrative expenses for the quarter were $30 million, compared to $45 million last quarter. This improvement included $12 million in incentive cancellations related to assignment fees taken during the quarter.
The net source of revenue interest for the quarter was $14 million, compared to a ratio of $1 million last quarter. Income accrual is the result of the positive effect of higher rates on our global monetary balances.
As expected, the profit from new awards for the quarter was $9. 7 billion. This increased our order book to $25. 4 billion, which also increased our redeemable order book to 58%. Our cash balances and marketable securities for the quarter were $2. 6 billion, of which 23% available domestically. The total money includes $348 million held through NuScale.
Continue to slide 22. Our operating money for the quarter increased to $118 million as equity securities in operation remained strong. For the year, we expect our balance of money to be more or less solid when normalized by the effects of the consolidation of NuScale’s Sale with subsequent lease.
As for the monetization of Stork and AMECO, we continue to make progress. We have reached an agreement to sell Stork’s operations in Australia and New Zealand, and this transaction is expected to close by the end of November. While this transaction is not material, it is the next step in our adventure of refocusing the business.
As David mentioned, instead of selling Stork’s North American operations, we will keep the operations as part of Urban Solutions. This will be reflected in our monetary effects from the first quarter of 2023. With regard to Stork’s European operations, our discussions with bidders have progressed and we will provide more main points in the near term.
Skip to slide 23. With positive developments at NuScale, we continue to focus on our ownership strategy. As we said on our last call and on our Strategy Day in 2021, our long-term goal is to own approximately 20-25% of NuScale. The De-SPAC-like lockdown era ended in late October. Lately we are comparing our features and will move forward if market situations allow.
At the end of the quarter, we had $1100 million of notable debt, of which $145 million matured in March 2023. Our debt-to-equity ratio is 36. 5%. We have just withdrawn our 2023 Bonds to dispose of cash. With respect to our capital structure, we remain committed to our plans to reduce debt inventory to a more appropriate point and utilize existing liquidity.
The NuScale product and monetization of our non-core sets to meet our business needs. Pending functions to distribute cash to shareholders, whether through percentage repurchases or dividends, we will have to be diligent with the known uses of cash. Execute capital design functions at the right time.
Continue to slide 24. For the fourth quarter, we established consistent adjusted earnings with consistent percentage direction diversity of $0. 50 to $0. 60. We expect fourth-quarter adjusted EBITDA to be between $125 million and $150 million. This diversity is due to the strong functionality of Energy Solutions, the advanced functionality of Urban Solutions and supported through more than $15 billion in new awards since the beginning of the year recorded in consistency with the allocation margins that our internal expectations have.
Our assumptions for the fourth quarter include earnings of more than $4 billion, adjusted administrative and general expenses of approximately $40 million and an effective tax rate of approximately 34%. the quarter-quarter segment steering margin is approximately 4. 5% in Energy Solutions, approximately 4% in Urban Solutions and approximately 3% in Mission Solutions.
Finally, with respect to our 2024 adjusted UPA and EBITDA guidance, we are lately finalizing our 2023 operating plan and long-term strategic plan. We look forward to providing an update on our year-end call in February.
Operator, we are now in a position to ask our first question.
Q&A session
Operator
The first comes from Mike Dudas of Vertical Research. And we ask that you limit yourself to one and one follow-up. Continue.
Michel Doubts
Thank you. Good Friday morning everyone.
David Constable
Hi Mike.
Joe Brenan
Hi mike.
Michel Doubts
First question, David, maybe you can just make a percentage of your mind on 3 possible potential attrition rates in a little more detail over the next few quarters. First, the progress of semiconductors in the U. S. and its overseas exposure with Intel? Second, the timing and speed of some of the mining notes to follow that we can see. And thirdly, from a power point of view, there is a lot of momentum, notoriously large projects in China, however, in the United States, this great chemical project, is it a short- and medium-term opportunity?Are there any that may appear in 2023?
David Constable
Thank you, Mike, and yes, hello, again. So, semiconductors, especially with Intel, where we’ve built a wonderful relationship with them and you’ve probably heard about what they’re doing when it comes to CapEx. They had a forecast of $27 billion for this year, reduce that in the last quarter to $23 billion and now to $21 billion by 2022, but it goes back to more than $28 billion in 2023. So, as I said, in the ready comments, they’re redefining their priorities and looking at their plans and how to continue and continue to assign us more jobs to make sure they put mandatory effort into all their assets properly, adding in the U. S. U. S. and internationally. So that’s what we’re basing ourselves on.
Now we see this kind of CapEx coming: in the future, we see these paintings coming and they will keep us busy. But it will be a bit more on 23 and 24 for larger events, so to speak. And that kind of thing aligns with, say, other people like Samsung, who have noticed a bit of a slowdown, but in the future, they’re seeing: their CapEx hasn’t been replaced in 2022, and it’s at $38 billion going up to $39 billion in ’23. And their feeling is that they see the need to build at the moment part of 23 for high-performance computing and in the automotive sector. So yes, it is, it turns out it’s just a little break here. And then a repeat at the moment starts at 23 as the way to classify that. And I would also say that it is as you have said in the US. “It’s the U. S. and internationally, whether it’s in Asia, for us and in Europe, that’s what they are. Hunting in.
Mining, we have the ones that are starting to rise, right?We had our strategic planning sessions here recently and talked about the fact that mining is lately in a very favorable scenario and a lot of new paints are coming in, and those who realize limited notices are continuing. I discussed the $5 billion internally right now only in the initial realization limited to the product that will be converted in due time to your question, I would say next, next quarter. This quarter, we’re talking more in the first part of 23, and in the third quarter, this kind of delay. But in fact, in the next nine months, we expect to see broad and thorough reviews to continue in mining.
Energy, the chemical task I talked about, is in North America. I’ll explain. And very exciting. Is. . . And this is what I would call a transition of power assignment. This is a path to 0 assignments for the client, we will be at the forefront and we must worry about helping that client, but also helping others with that low carbon footprint with their chemical facilities. So we expect more of that as well. Chemistry is one of our target commercial spaces right now, where we’re seeing quite significant growth, also in the works. And I think that covered it.
Joe Brenan
Yes, I did.
David Constable
It is ok. Yes, thank you, Mike. Thank you.
Michel Doubts
Yes, great. And can I temporarily keep up with NuScale?And is there any indication or mind about monetizing such a giant state, personal investors, personal capital, other providers or other people who are or a government could look at where it can very likely take a position from you in this transaction. Thank you.
David Constable
Thank you, Mike. Yes, just a wonderful position for us right now with other features that we are considering. And I’ll ask Joe to comment.
Joe Brenan
Yes, Mike, hello. We have introduced here a kind of parallel track with regard to the strategic review and perhaps the review of a public activity. We see a significant amount of price and in terms of implementing a strategy. In many cases, those strategists have a vested interest, not only in the technology, but in some cases they seek to apply that technology. Therefore, they are a very critical and vital spouse when we look at NuScale valuations going forward. But at the same time, we are also looking for a public transaction opportunity. What I will say is that we will do this in a very measured way, in a way that maintains not only the integrity and valuations that are at NuScale, but also the required liquidity that Fluor will want as we move into the 23rd and ’24th.
Michel Doubts
Thank you, gentleman.
David Constable
Thank you, Mike.
Joe Brenan
Thank you, Mike.
Operator
The following is from Andy Wittmann of Baird. Please continue.
Andy Wittman
Yes. Thank you very much. Hello. I only have the idea that we check the 3 infrastructure projects here. Maybe, David, can you or Joe give us the updated POC and final touch dates for those 3 projects so we can get started?
Joe Brenan
Maybe you’ll answer the detailed query about that. And then we can communicate a little better in terms of how we meet the challenge as we move forward. With the caveat, Andy, when you think about this, what we were given in our ready comments related to the progression of claims and other things ahead of us as we enter the fourth quarter. But in terms of LBJ, we are 50% complete in the third quarter, Gordie is 41% complete and LAX is 73% complete. And so, maybe, David, if you wanted to. . . ?
David Constable
Yes, Andy, hello. So, following those completion percentages, it seems that lately we expect LBJ 635 to end in the current quarter of the 25th. Gordie finishes in the current part of 2025 and LAX further away, as Joe said, with 73% ending at the end of the current quarter of 2024.
Joe Brenan
Andy, if I may go up and say where we are in relation to the progression of claims and other entitlements as we move forward based on understanding the prices and effects of charges within those allocations, we record them when they are made to be had and knew the assignment teams, And it takes time to expand their defense positions and the potential variable attention around this. All of this is starting to bear fruit as we enter the fourth quarter and first quarter of next year.
So, I hope we leave, you’re starting to hear a little bit of the twisting aspect of what’s been a difficult story, not only to provide and listen, but I think you start to perceive some of our positions. as a fluoride in terms of how we help our EACs as a whole in the future.
Andy Wittman
It is ok. So that’s where I looked to move on next. I just need to be a little more transparent about that because you really discussed some of it in 10-Q, as well as in the fourth quarter, you have some of those discussions about them. So I guess, are you saying, Joe, that I’ve taken reservations about some of them, and you’re looking to get them back?Or is the balance of 215 million unapproved replacement orders in its 10-Q?That is what we are discussing. So, I just want to see where the effects of those discussions might happen when they are accounted for in your revenue stream here. I only sought to be transparent about it, if possible.
Joe Brenan
Let me recommend that, in terms of what we have recorded in terms of the charge and the possible recovery of the variable share, this is a smaller component of the general claims that we will put on the table. And those claims are particularly larger than our existing positions, not just in terms of variable stock, but we’ve recorded one hundred percent of the charge related to that. So what you see in our third quarter presentation today is actually what we’re going to be a pending issue of all those additional claims and discussions that are going to take place. And I would tell them it’s not just at LAX and it’s not through Gordie, it’s through a significant component of the infrastructure portfolio. Nominally [indistinguishable] forward.
Andy Wittman
It is ok. it’s a context Thanks guys.
David Constable
Thank you Andy.
Operator
Next one comes from Andy Kaplowitz of Citigroup.
Andy Kaplowitz
Hello everyone.
David Constable
Good Morning.
Joe Brenan
Good Morning.
Andy Kaplowitz
David, obviously, you reported a very smart quarter of bookings. I think you’ve given us a smart color, when it comes to individual end markets with many imaginable potential reserves to come. Given some of the considerations you’ve discussed with some of your customers, can you continue your recent booking push?And at the end of the day, do you see that the order book continues to grow from here, call it, in the short and medium term?
David Constable
Hi, hello, Andy, and thanks for the question. I think we’ve already talked a little bit about that. We have recessionary pressures and inflation that we see in the market. However, even with the mild recession we expect in the US, we are still unable to do so. In the US and even more so in Europe, the global recession is very likely to be: I think the current GDP forecast is 2. 7% to 2. 9%. On average, it burdens what China can and cannot do in terms of how it returns to normal after its 0 COVID policy ends. It can add a touch of flavor to the global economy temporarily.
But after saying all that, from our attitude and talking to our consumers and looking for their CapEx plans, they are Array if you take some kind of pattern from some of our key consumers in the 3 business segments, CapEx plans start from 117 take the 10 most sensible consumers $175 billion in 22, up to $195 billion by 2023. And much, well, a smart component of that, let’s call it $30 billion, is the transition of power.
So, those are decade-long decisions about the projects that we’re running that were actually affected by a recession or transitory recession, economic activity can just. . . Our chief strategy officer told us that a recent dashboard, a survey of CEOs, 136 CEOs, 98% of them expect a recession in the next 12 to 18 months. But 86% said they maintain or accumulate their capital expenditures. So, the cash is there. Obviously, we have to be very accurate in our estimates.
And fortunately, supply chain forecasts or penalty reduction, in general, and that will be our estimates and the rate of return for our customers. So yes, I think we’re going to move on; We said last quarter that we felt we were at an inflection point for the order book. And thinking that our pound-to-burn ratios can remain at or above one for sure. The process of ordering e-books in our lines of business. Jo?
Joe Brenan
No, it could go up that the pipeline we talked about in recent quarters has shifted to the right. But as we begin to see this tipping point and our new ramp of praise, what I would recommend to you is this channeling that we were looking for that is leading to part of the release of that capital in some of the allocation activities that we’ve been able to put into the backlog hasn’t fundamentally replaced as we look at the long term. Those opportunities still exist. It will be a bit bulky because some of those opportunities amount to billions. And others are more strategic, but the pipeline itself has not fundamentally replaced in terms of what we imagine and how we imagine the long term of our business.
David Constable
I think, Andy, the very smart news is that we are the new strategy that pushes us to refundable paints and has not slowed us down or cut off opportunities. In fact, it is: we’re seeing an improvement in margins as we talk over the past few quarters. We’ve been talking about an improvement in margins since the fourth quarter, then, the fourth quarter of 2021. So yes, we’re pretty positive about the markets ahead.
Andy Kaplowitz
Very helpful guys. And a similar consultation on the benefits side. You talked about a cash inflow accumulation of more than $4 billion in the fourth quarter. You know you have 24 targets there. 900, which would require a big step forward next year. Again, without saying too much about 23, what is its visibility regarding this stage?Do we see any kind of notable milestone here in the 23rd as we move forward, given the increased amount of cash in the fourth quarter?
David Constable
No. Es something we’re looking at right now, as I said, in our strategic plans, and we’re doing our operational plan for the 23rd here. Second week of December, Joe, do you have any additional comments on the instructions and how?Let’s take care of this?
Joe Brenan
I think my general idea is that we had signaled to the market that we were probably closer than maybe two previous quarters in those kinds of order book improvements. So this two quarter has an effect in terms of how it affects overall P consumption.
Andy Kaplowitz
Helpful guys. Thank you.
Joe Brenan
Thanks.
Operator
The next one comes from Credit Suisse’s Jamie Cook. Continue.
Jamie Cooking
First question, just look to perceive what drives the sequential accumulation of profits from the fourth to the third quarter, the $4 billion and up and what Urban Solutions’ operating margin entails just because this market has: the margins of this business have been questioned. So what do we want to get to that margin, I think, of about 4. 5%?And then my other question, Joe, obviously, the execution rate in the fourth quarter, I mean, in EBITDA, you say $125 million to $150 million. Is it a smart foundation, a quarterly basis for thinking as we enter 2023, assuming we don’t have execution issues?So, the 125 for 4, I’m just looking to frame 2023 with that base gain and only some of the smart fortune he had in recent bookings. Thank you.
Joe Brenan
Thank you, Jamie. La expansion we’re seeing in earnings is the fact that, and we took it to that in several previous quarters when we suspended those projects as new rewards. They are not projects that were tendered, not all, most of them in which we had worked and we had a percentage of progress in those projects that, now that they are in the portfolio, are going to generate higher profits at a faster rate only based on the percentage of progress and completion. So I think that’s why you’re seeing a slight buildup in the third quarter, and we expect it to accumulate. And your question for now, Jamie. . .
Jamie Cooking
The margins of Urban Solutions, only the demanding situations that we have noticed so far this year?
Joe Brenan
Oui. Je what’s right — sorry, go ahead, Jamie.
Jamie Cooking
I just like the fourth-quarter margin on Urban Solutions’ confidence point.
Joe Brenan
We are very confident in ourselves at the 4% we announced for the fourth quarter.
Jamie Cooking
But what motivates him?
Joe Brenan
What motivates you? Well, clearly, we don’t have the contested projects that we have. If we have the contested projects, I can go back to a normalized delivery rate that is in that diversity of 4% based only on the order book that goes through the segment.
Jamie Cooking
It is ok. And then my last consultation, what can I do?For 2023, can I say your fourth quarter EBITDA is $125 million to $150 million, is it a smart quarterly foundation to think about as we move into 2023?
Joe Brenan
I think, Jamie, it’s a smart starting point to think about a very simplified linear execution rate as we move forward on the operational plan over the next two weeks and we can give it a particularly additional color in the fourth quarter. Call for earnings. But I don’t see the $125 million as the low end of our execution rate going forward. I see it more as a starting point and a starting point to start as we start investing. You have to do it too, Jamie, we just invested $15 billion in nominal terms, a smart, high-quality order book, and it’s going through to start flowing through the books.
Jamie Cooking
It is ok. That’s very helpful. Thank you.
David Constable
Thank you, Jaime.
Operator
Next comes from Steven Fisher of UBS. Please continue.
Fisherman Steven
Merci. Bonjour. Je only sought to track Urban Solutions’ margins and functionality and ask questions about the expectations you should set for the segment. Obviously, he just talked in detail about the fourth quarter, but he is more curious. about the next few years as it goes through the procedure of completing those projects. I mean, it deserves that we assume that there will be noise about other tariffs in the future. I know that as a rule of thumb, once you’re in those positions, it becomes tricky not to have full loads. So, I’m a little curious about what expectations you should set. Curious how you need to set expectations for the next two years and how that can influence some kind of blank community or not?
Joe Brenan
Steven, yes, I’ll answer that question. We know that as of today, we have captured the facts and cases as we know them in the forecasts. Obviously, it is difficult to say that we ensure that there will be no more demanding situations in projects that have a few years of execution to complete. But starting today, we think we’re starting to make enough progress to become more comfortable with Gordie and LAX. And I think we pushed LBJ away. We’ve talked about the Penguins in the past, and we’re very comfortable having an agreement to come to a conclusion. Therefore, over time, we will get more assurances about our deliverability as part of the forecasts we have presented today. Date, we have captured the right predictions to reach the conclusion.
As we paint about what we are communicating in terms of variable care and adjustments to orders and claims taking position in the fourth quarter, we will be public by nature. So listen to it through press releases and others as we post some of those claims. But I don’t need to communicate accurately about all the moving parts of that, however, it applies to about five projects in the infrastructure line of business. And we’re going to be able to provide a lot more transparency about that when we have on the fourth-quarter earnings call.
David Constable
Yes, Steven, I’ll upload it to help us here. Joe previously talked about the final touch percentage when you’re in the final touch range of 50% to 75%, as we’re between 45% and 75%, let’s say, right now, given that we’re in the fourth quarter, they’ve been purchased almost entirely on those products, over 90% purchased from a gadget and procurement standpoint. So it’s also very helpful that it’s us.
Joe Brenan
And I guess maybe I’ll go up a little more because those are the demanding situations that we face, we’ve mobilized a significant amount of resources around the business, the most productive ones that we have compared to a series of adjustments. They have been performed on the assignment control side, on the structure control side. We’re still moving resources, through estimating through acquisitions, managing the main contracts, very key roles in all those paintings and therefore we have. on the laser that can make those assignments. These are hotly contested assignments and, not to be repetitive, obviously would not have crossed our criteria for prosecution and our pending work today. But we rely on the conclusion and final touch of those assignments. .
Fisherman Steven
So, I guess it’s just a follow-up question, of the same type, specifically similar to LNG Canada. How does continued inflation in the market affect this specific project?I know, of course, that they are having ongoing discussions. in that too. But I think it’s more similar to the effects of COVID, but maybe inflation is cooked under that umbrella. How does it merit that we think about inflation in this project?
David Constable
Yes, I think it is: the fountain is over, everything has been bought back. Actually, we’re essentially getting into creation and build mode, Steven. So it’s all of us. And like you said, it’s more of a scheduled and COVID discussion that we’re working on right now.
Joe Brenan
Any additional exposure to inflation you’re having is for labor, but it’s covered through PLA agreements, job allocation agreements. So, for the most part, we have some restraint in what we want, which we can potentially see in this escalation of paint strength. But as David said, most of that threat has been eliminated. And most of that threat would go through their curtain beads and appliances and to the extent that we’re being acquired, and all of that apparatus is on-site or in our production yards in China, and we feel like we substantially limit our exposure to any kind of increase in value to perform this task.
Fisherman Steven
Oui. Il more commonly about work, however, he talked about it. So thank you very much.
David Constable
Thank you Steven.
Operator
Next up is from Sean Eastman of KeyBanc Capital Markets. Continue.
Sean Eastman
Hi, guys. Thank you for answering my questions. Joe, when you communicate that you are diligent with the known uses of money, obviously, the 2023 expenses that you will reimburse are defined. But what else are you communicating here? And in particular, I’m curious beyond the $100 million charge to fund the loss-making projects he defined for the fourth quarter. What will this figure be by 2023?
Joe Brenan
In 2023, we are looking for a number that has not been affected by variable attention in claims and how we analyze them. If I look up at the industry without taking into account the variable attention and our claims discussion, probably a higher number than we expected it to be in diversity of $200 million to $250 million right now in 2023. But again, we haven’t layered all of those discussions as we begin to file claims and take a look at the [indistinguishable] potential.
So, at this point, there will be a smart amount. I don’t see upward variability in that, but I do see downward variability as we mature some of those conversations with customers. So, really, it crosses the years 2023 and 2024 and the projects in dispute as we see them today.
Sean Eastman
It is ok. So in the same vein, I mean, the key turning point for the story here is kind of marking this improvement of curtains on operating money generation. Is the message still that this is a 2023 event?
Joe Brenan
Yes, I think, Sean, start to see an upfront cash flow, a slightly upfront money flow as we continue: 23 years left. So we’ll have headwinds there. It’s going through having some difficult projects, but there are other money resources we can access as we move forward on some key projects that have the opportunity to withdraw money, in the form of dividends. But I don’t need to go into too much detail about it, however, there are liquidity resources that, as we bring back some of those difficult items, will allow us to start repatriating some of them to Fluor [ph] banks.
Sean Eastman
It is ok. Thank you so much. I’m going to come back.
Operator
Next is by Brent Thielman of D. A. Davidson. Continue.
Brent Thielman
Hey, great. At Urban Solutions, when you think about the origin of the rewards opportunities and this planned transition into the segment’s portfolio over the next few years, how do you think the end-market exposure between IT, mining and metals calls, complex technologies and then the classic kind of infrastructure projects could look like. I guess I wonder if the infrastructure elements in the end are a much smaller slice of that pie.
David Constable
Again, as I have discussed here several times, we have just gone through the procedure of drawing up strategic plans that has taken us until 2026. And I would also mention that mining and metals are fair, we couldn’t have done it. a larger market right now for mining and metals. And also for ATLS with all the opportunities that are presented both nationally and internationally.
These are two very difficult drivers of expansion for the company in the long term and are based on what we see. So, in that and in your express question, we see that infrastructure probably accounts for about 10% of the portfolio of urban solutions for the age of planning. We are until 2026 and before.
And then between ATLS mining and you can think about it probably like I said, because it’s very difficult in mining. Right now, you’re probably seeing mining in 65% of the advertising segment and ATLS, around 20%, and then we have others, we have TRS, our corporate recruitment firm and we’re building the service corporations plant as well. Therefore, it will remain in others, in the short term, about 5%. So, 65% mining, 20% ATLS, 10% infrastructure and 5% others. I think that’s right.
Brent Thielman
It’s useful. I am aware that. And then, at Mission Solutions, and especially on the strong rewards, how much was related to Savannah River this quarter compared to some of the other businesses in the segment?And then an update on Pantex? I know consumers might be considering splitting this up, but is it possible, a possible time to worry about this again?
Joe Brenan
So yes, $4. 5 billion of that praise: New praise totals for the project go through Project Savannah. And as far as Pantex and Y-12 are concerned, we know we’ve split the two contracts. Pantex will come out in mid-2023 as an offer and we will stick to this process. We’ve done a lot of inside paints to reposition our search criteria and strategy on how we’re going to attack the Pantex opportunity, and then how we’re going to chase and attack. the Y-12. The Y-12 will be further along in the strategic creation planning cycle beyond the end of, mid to late 2025 before we know it, but we will look for any of those opportunities as they are. Divided. But the structure of how we will pursue them, the strategy around those prosecutions will be different.
Brent Thielman
It is ok. What about any other kind of significant opportunities in this segment beyond those two?
David Constable
We have a lot of competencies in the nuclear and civil area and the DOE, DoD and DOE, actually. So yes, we just see that it continues on a trajectory like we had and then we feathered, obviously, the biggest Pantex and Y-12 opportunities in the ’24, ’25 period.
Brent Thielman
It is ok! Super. Thank you.
David Constable
Thank you, Brent.
Operator
That’s all the time we had for today’s questions. I turn to David for closing remarks.
David Constable
Thank you, operator, and thank you all for joining today’s call. And to conclude, we are very satisfied with the speed and timing of new awards in the current economic environment. Fluor is a wonderful company with exceptional people, and we are well placed to fulfill the ever-increasing desires of our customers. And finally, rest assured that those two demanding situations of legacy tasks that the company is going through this quarter are by no means a picture reflected in the overall state in a very positive direction of Fluor Corporation. We appreciate your interest in the company today and thank you for your time.
Operator
That concludes the convening of today’s convention. You can now log out.