SNC-Lavalin announces 4,000 staff cuts globally
MONTREAL, Nov. 6, 2014 /CNW Telbec/ – SNC-Lavalin (TSX: SNC) today announced that it will take a number of steps to restructure and right-size certain areas of its business as it continues to execute its five-year Strategic Plan to build a global Tier-1 engineering and construction firm.
“Over the past two years, we have made significant progress on our focused plan to become a global Tier-1 engineering and construction company, with industry leading capabilities in the resources, power and infrastructure markets,” said Robert G. Card, President and CEO, SNC-Lavalin Group Inc. “We have substantially transformed our business and rapidly met key milestones for creating shareholder value.”
SNC-Lavalin has implemented the following initiatives over the past 24 months and will continue to execute certain aspects of each program. The Company has:
Built a major Oil & Gas business with the acquisition of Kentz, allowing the Company to target increasing opportunities in a sector that continues to expand on a global basis. The Kentz transaction bolstered the Company’s expertise and capabilities in this sector, while strengthening its geographic mix, particularly in the Middle East;
Maintained its commitment to the highest standards of governance, ethics and compliance, while substantially improving safety, environmental and sustainability performance across the organization at all levels;
Improved efficiency and competitive positioning, by, among other things, making key executive hires and reducing SG&A expenses;
Enhanced its project proposal review and approval processes, as well as its efficiency around project cost controls; and
Strategically rebalanced its ICI portfolio, while continuing to evaluate how best to manage assets to position the Company to continue to win business and deliver growth.
In the next phase of its plan, which aims to deliver sustainable and long-term value for SNC-Lavalin shareholders, the Company will enhance client focus and generate greater cross-company efficiencies by further restructuring and right-sizing its operations. These actions will enhance SNC-Lavalin’s agility, while improving its ability to address the needs of its clients and compete on a global scale.
Accordingly, over the next 18 months, SNC-Lavalin plans to scale back certain underperforming activities and adjust, consolidate and streamline some of its operations and corporate structure to improve efficiency, effectiveness and competitive positioning. While some of the restructuring and right-sizing will affect the Company’s Canadian operations, approximately three-quarters of the plan is directed at activities outside of Canada, in sectors and end markets that face a more difficult operating environment.
“We are taking definitive action to reshape our platform and enhance our ability to deliver outstanding services to clients, long-term value for our stakeholders and exciting opportunities for our team. This is the next major phase in our five-year Strategic Plan, and we will build on the tremendous opportunity set created through the acquisition of Kentz and on the successful execution of our Value-Up initiatives,” added Mr. Card.
“As we prepared for the next phase of our plan, we took a hard look at our structure, portfolio and pipeline of opportunities and decided that further action is required to align our expertise and internal resources with the realities of our markets and client needs. While we remain committed to maintaining a leadership position in mining, a major global slowdown in the sector has created a ripple effect through other industries, and is combining with a general economic slowdown, particularly in the BRIC countries. We must therefore improve our agility and client focus in order to capitalize on the most promising opportunities in key growth markets,” concluded Mr. Card.
This restructuring and right-sizing, which is expected to result in $200 million (after taxes) in charges over the next 18 months, aims to deliver approximately $100 million (after taxes) in annual operational efficiencies beginning in 2015, and will require a reduction of the Company’s global workforce of about 4,000, or 9 percent, over this period. Simultaneously, the Company is expected to record approximately $100 million (after taxes) in non-cash charges over this time. The Company recognizes the impact of its decision to reduce its workforce, but notes that the restructuring and right-sizing actions are intended to ensure that SNC-Lavalin’s global employee base has a stronger platform from which to grow, as well as access to an increasing number of professional opportunities.
As announced today in our third quarter earnings release, the Company revised its 2014 Earnings per Share (“EPS”) guidance range to $0.40 to $0.55. This revised guidance takes into account the charges referred to above, the impact of the acquisition of Kentz completed on August 22, 2014, and the acquisition costs relating thereto, the continuing downturn in the mining and metallurgy sector and the heightened challenges of certain legacy projects. The guidance revision does not take into account the eventual gain on the sale of the Company’s interest in AltaLink.