SNC-Lavalin reports lower-than-expected earnings

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SNC spent more to win new business and its executives argue it’s worth it because that’s translating into stronger revenue. They expect the bidding costs to come down in the months ahead

says it is seeing exceptionally strong demand for its services, but an increase in work prospects means it is spending more on bidding and business development, as the Canadian engineering giant reported weaker-than-expected earnings for its latest quarter.

Mr. Edwards is trying to re-establish SNC-Lavalin as a go-to partner for governments and other clients as it claws its way back from years of crisis. The CEO has reshaped the company by selling oil and gas assets and pivoting toward a new business model centred on engineering services and consulting work, while riskier fixed-price construction contracts that have historically sucked cash are wound down.

Adjusted earnings before interest and taxes for that main business came in at $126.7-million, shy of what analysts expected. The profit margin in the segment was 7.6 per cent during the quarter, below management’s 8-to-10-per-cent annual target. Mr. Edwards and his team have now reduced the backlog on the last remaining fixed-price construction contracts to less than $1-billion, shaving another $210-million from the work still to complete during the first quarter. The company said in March it will incur maximum future losses of $300-million to complete the contracts in a worst-case scenario. It booked $20-million under that estimate in the first quarter.

 

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