SNC-Lavalin expects stronger profits ahead despite soft end to 2016, updates fraud cases
SNC-Lavalin is projecting higher profits from most of its operations and new contract wins this year despite a soft end to 2016.
The Montreal-based company anticipates that performances from all segments, aside from mining, will drive a 13 to 32 per cent improvement in adjusted earnings from its core engineering and construction operations.
Still, the $1.70 to $2 per share earnings guidance for the year missed analyst forecasts of $2.28 per share, according to Thomson Reuters.
SNC-Lavalin (TSX:SNC) said it expects to benefit from higher infrastructure spending in North America, global nuclear opportunities and higher oil and gas activities in the Middle East and the U.S. However, it forecasts earnings from mining and metallurgy will remain flat because of softer commodity prices.
Its investment in Highway 407, a toll highway near Toronto, is also expected to generate higher returns, the company said.
"We expect 2017 to be another good year for SNC-Lavalin,'' CEO Neil Bruce said during a conference call.
He said the company is focused on infrastructure opportunities particularly in Canada and expects to at least double the number of winning bids, mainly outside Canada, by the end of the first quarter in its small mining segment.
"Our diversified business model, solid balance sheet and diversified revenue backlog give us confidence that we can meet our growth ambitions,'' Bruce told analysts.
The company also said it expects to move forward this year with efforts to unlock value from its North American concessions by transferring assets excluding Highway 407 to a fund and selling portion of it to private investors.
While reporting its fourth-quarter earnings, SNC-Lavalin also provided a brief update on the status of its corruption and fraud case, saying a preliminary inquiry scheduled to begin in
September 2018 may be expedited to late 2017. SNC-Lavalin, its construction division and its international subsidiary have pleaded not guilty to one count each of fraud and corruption.
The RCMP alleges SNC-Lavalin paid nearly $47.7 million to public officials in Libya between 2001 and 2011 to influence government decisions.
The Mounties also accuse the company of allegedly defrauding various Libyan organizations of about $129.8 million.
SNC-Lavalin said it has recovered $15.2 million as of year-end from former vice-president Riadh Ben Aissa, who pleaded guilty in 2014 in Switzerland to bribery, corruption and money laundering.
Aissa was ordered to repay the company $17.2 million plus interest. He also faces fraud charges in Canada in relation to a large Montreal hospital contract.
In reporting its fourth-quarter earnings, the company said it made $1.6 million in net income, or one cent per share, down from $49.2 million or 33 cents per share in the previous year.
It attributed the decline to a loss at its core engineering and construction business, partially offset by higher earnings from capital investments including Highway 407.
Revenue fell nearly 17 per cent to $2.21 billion.
SNC-Lavalin said its adjusted earnings during the quarter was 77 cents per share, including 49 cents from its core engineering and construction business, two cents above analyst forecasts.
It also announced that its quarterly dividend will rise by five per cent to 27.3 cents per share, payable March 30.
For the full year, its net income fell 37 per cent to $255.5 million as revenues declined 11 per cent to $8.5 billion.
Adjusted profits grew to $387.1 million or $2.58 per share, with $1.51 per share coming from its core engineering and consulting operations.
On the Toronto Stock Exchange, SNC-Lavalin shares closed up 15 cents to $54.76 in Thursday trading.