SNC-Lavalin tumbles as Mideast project costs rise

SNC-Lavalin tumbles as Mideast project costs rise
Dubai Opera House is among a string of high-profile regional projects handled by Canada’s SNC-Lavalin and its engineering units. (Shutterstock)
Updated 01 August 2019

SNC-Lavalin tumbles as Mideast project costs rise

SNC-Lavalin tumbles as Mideast project costs rise
  • Montreal-based engineering giant faces trial in Canada over Libya corruption charges

BENGALURU: SNC-Lavalin Group cut its dividend and reported a quarterly loss, as the struggling Canadian construction and engineering firm was hit by a C$1.7 billion goodwill impairment charge related to its resources unit.

The company reduced its quarterly dividend to 2 Canadian cents per share from 10 Canadian cents per share, its second cut this year.

SNC-Lavalin withdrew its forecast for 2019 last week citing lower-than-expected results and said it would exit fixed-price contracts while it explores all options for its resources unit, including a sale.

Revenue from SNCL Projects, the company’s unit which will manage its exit from lump-sum turnkey construction contracts, fell about 36 percent to C$709.68 million, affected by projects in the Middle East and Canada.

The Montreal-based company, which announced a strategic review in June and named its Chief Operating Officer Ian Edwards as interim CEO, has been pressured by corruption charges back home, poor business performance and trade challenges in Saudi Arabia and China.

SNC faces a trial in Canada over allegations that its former executives bribed Libyan officials to get contracts between 2001 and 2011. The company’s unsuccessful attempts to reach a settlement led to a political scandal engulfing Prime Minister Justin Trudeau.

The company reported a loss attributable to shareholders of C$2.12 billion ($1.6 billion), or C$12.07 per share, for the quarter ended June 30, compared with a profit of C$83.01 million, or 47 Canadian cents per share, a year earlier.

Revenue dropped by nearly 10 percent to C$2.28 billion.

SNC, which in February forecast 2019 earnings of C$3 to C$3.20 per share, plans to reorganize its resources and infrastructure construction segments into a separate business following poor performance of the units.

The reorganization will allow the company to focus on its high-performing and growth areas, which will now be reported under SNCL Engineering Services, the company said last month.

SNC said it would also explore options, including a sale, for its resources segment, particularly its oil & gas business, and exit lump sum, turnkey contracts.