SNC-Lavalin interim CEO makes first reorganization moves

Less than a month-and-a-half after taking over as interim CEO at SNC-Lavalin, Ian Edwards has announced that the firm is exiting lump-sum turnkey (LSTK) contracting business and will reorganize its poorly performing oil & gas, mining & metallurgy, and infrastructure construction segments into a separate business line to be called SNCL Projects.

The company says it will fulfil the contractual obligations of its current LSTK projects, including the Réseau express métropolitain (REM) light rail project in Montreal, but going forward the firm may divest its resources segment or transition it to a services-based business.

Under the reorganization, the other business segments including EPDM (engineering, design & project management), nuclear, infrastructure services [including infrastructure operations and maintenance, Middle East-North Africa, and Linxon (the ABB/SNC joint venture)], and Capital (including Hwy. 407 toll road) will all fall under the SNCL Engineering Services umbrella.

SNC-Lavalin will provide further detail on the strategy in early fall.

“Lump-sum, turnkey projects have been the root cause of the company’s performance issues. By exiting such contracting and splitting it off from what is otherwise a healthy and robust business, we are tackling the problem at the source, and as a result we expect to see a material improvement in the predictability and clarity of our results,” said Edwards in a media release. “Going forward, the reorganization will allow us to focus on leveraging growth opportunities and end-to-end project management capabilities that we have in SNCL Engineering Services, delivering consistent earnings and cash flow, with a leaner capital structure, to our shareholders.”