SNC-Lavalin writes down $910m in oil assets amid Saudi trade doubts

Montreal-based SNC-Lavalin Group was appointed by Saudi Aramco last April to work on a gas processing facility in the Kingdom’s Eastern Province. (Reuters)
Updated 23 February 2019
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SNC-Lavalin writes down $910m in oil assets amid Saudi trade doubts

  • SNC-Lavalin also expecting lower annual revenue from its metals and mining business
  • The company is in the middle of a political crisis that has enveloped Canadian Prime Minister Justin Trudeau

LONDON: Canadian engineering firm SNC-Lavalin has written down $910 million in oil and gas assets amid continuing uncertainty over trade relations with Saudi Arabia.
The Canadian engineering giant had picked up a string of major contracts in the Kingdom before a diplomatic dispute between the two countries last summer clouded the outlook for future orders.
The firm said on Friday that near-term prospects for the business were worsening in the face of rising trade challenges in the Kingdom.
“We disclosed back in August the potential effects of the Canadian- Saudi issue, and I think that in itself doesn’t affect the work we do today and the backlog we have,” said SNC-Lavalin CEO Neil Bruce in a video presentation accompanying the company’s full year results. “But it does put a lot of uncertainty into the future prospects because Saudi have been pretty clear that they are looking wherever they choose to maybe omit us from bidding things that traditionally we would have bid,” he said.

 

The writedown contributed to a C$1.6 billion ($1.2 billion) fourth-quarter loss at the contractor. The engineering company also faces headwinds in Latin America, where it reported a
C$346 million loss related to what analysts understand to be Chilean state-run miner Codelco’s Chuquicamata copper mine.
As a result, SNC-Lavalin expects lower annual revenue from its metals and mining business.
Closer to home, the company is also in the middle of a political crisis that has enveloped Canadian Prime Minister Justin Trudeau, leading to the recent resignation of one of his key aides and a minister, Reuters reported.
The crisis follows allegations that Trudeau’s officials pressured a former minister to allow SNC to escape with a fine and avoid a trial over charges of bribing Libyan officials.
Saudi Arabia has been a lucrative market for the Canadian engineering giant.
Last April the contractor was appointed by Saudi Aramco to install additional facilities for a major gas processing facility in the Kingdom’s Eastern Province.
The following month it also bagged a contract for a major district cooling plant in Makkah.

FASTFACTS

$1.6bn - SNC-Lavalin has reported a C$1.6 billion 4Q loss.


BMW picks insider Zipse as CEO to catch up with rivals

Oliver Zipse
Updated 20 July 2019
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BMW picks insider Zipse as CEO to catch up with rivals

  • German giant has lost ground to Mercedes-Benz and Tesla as tech steps up

FRANKFURT: BMW has named Oliver Zipse as its new CEO, continuing the German carmaker’s tradition of promoting production chiefs to the top job even as the auto industry expands into new areas such as technology and services.
Hailing Zipse’s “decisive” leadership style, BMW hopes the 55-year-old can help it win back its edge in electric cars and the premium market  from rival Mercedes-Benz.
But some analysts questioned whether Zipse was the right choice with new fields such as software and services like car-sharing becoming increasingly important.
“What is intriguing is the cultural bias to appoint the head of production. It works sometimes but ... being good at building cars is not a defining edge the way it was 20 years ago,” said Jefferies analyst Philippe Houchois.
Current CEO Harald Krueger, and former chiefs Norbert Reithofer, Bernd Pischetsrieder and Joachim Milberg were all former production heads.
Zipse joined BMW as a trainee in 1991 and served as head of brand and product strategies and boss of BMW’s Oxford plant in England before joining the board.
He will become chief executive on Aug. 16, taking over from Krueger who said he would not be available for a second term.
“With Oliver Zipse, a decisive strategic and analytical leader will assume the Chair of the Board of Management of BMW. He will provide fresh momentum in shaping  the future,” said Reithofer.
Zipse helped expand BMW’s efficient production network in Hungary, China and the US, in a move that delivered industry-leading profit margins.
Under Krueger, BMW was overtaken in 2016 by Mercedes-Benz as the best-selling luxury car brand.
It also had an early lead over US  rival Tesla in electric cars, but scaled back ambitions after its i3 model failed to sell large numbers.
Reithofer initially championed Krueger’s low-key consensus-seeking leadership, but pressured him to roll out electric vehicles more aggressively, forcing Krueger to skip the Paris Motor Show in 2016 to reevaluate BMW’s electric strategy.
Krueger’s reluctance to push low-margin electric vehicles led to an exodus of talented electric vehicle experts, including Christian Senger, now Volkswagen’s (VW) board member responsible for software, and Audi’s Markus Duesmann, who is seen as a future CEO of the company.
Both were poached by VW CEO Herbert Diess, a former BMW board member responsible for research who was himself passed over for BMW’s top job in 2015.
VW has since pushed a radical 80 billion euro ($90 billion) electric car mass production strategy, and a sweeping alliance with Ford.

Other skills
“A CEO needs to have an idea for how mobility will evolve in the future. This goes far beyond optimising an existing business,” said Carsten Breitfeld, chief executive of China-based ICONIQ motors, and former BMW engineer. “He needs to build teams, attract talent, and promote a culture oriented along consumer electronics and internet dynamics.”
German manufacturers have dominated the high-performance market for decades, but analysts warn shifts towards sophisticated technology and software is opening the door to new challengers.
“Tesla has a lead of three to four years in areas like software and electronics. There is a risk that the Germans can’t catch up,” UBS analyst Patrick Hummel said.
Germany’s Auto Motor und Sport car magazine, normally quick to champion German manufacturers, this week ran a cover questioning BMW’s future.
“Production expertise is important, but if you want to avoid ending up being a hardware provider for Google or Apple, you need to have the ability to move up the food chain into data and software,” a former BMW board member said.