Given the uncertainties that have crept into worldwide financial expectations, we have maintained our Hold opinion on Foster Wheeler, Ltd. (FWLT). Our six-month target price is based on current market conditions, which are erratic and have been known to change quickly and violently.
For the longer term, FWLT is actively developing oxy-combustion technology for both circulating fluidized-bed boiler technology (CFB) and pulverized coal (PC) boilers, as oxy-combustion is one part of a practical solution for capturing and storing the majority of the CO2 from coal power plants.
Investment in new oil and gas, refining and petrochemicals/chemicals facilities, and modernization, expansion and upgrading of existing facilities in these sectors is expected to continue to be robust throughout the remainder of fiscal year 2008.
FWLT's business has not been directly impacted to date by the credit market crisis resulting from the sub-prime mortgage crisis in the U.S. market, as clients typically do not rely on financing for their capital investment programs. However, the possibility exists that credit conditions, as well as a slowdown or recession in global economic growth, could adversely affect the industries in which clients operate and, as a result, FWLT's Global E&C Group's business.
The overall global refining system appears to still be running at high utilization rates and that global demand for many refined products, particularly middle distillates (diesel, jet fuel, and heating oil), will continue to grow strongly. Therefore, it is probable that refining capacity will continue to be added through the development of grassroots refineries, notably in the Middle East and Asia.
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