SNC-Lavalin reports loss from North African problems

SNC-Lavalin reported on its financial results last week, showing a net loss for the first six months of this year.

The net loss excluding its income from investments in infrastructure concessions was $86.1 million. This figure compared to a net income of $42.4 million for the first six months of last year.

Net income attributable to shareholders for the six month period was $15.9 million ($0.11 per share on a diluted basis), compared to $98.0 million ($0.65 per share on a diluted basis) for the same period of 2012.

The engineering company said the losses were mainly in its oil and gas, and infrastructure and environment divisions, and partly due to lower income from its mining and matallurgy business. The power division had performed well.

In its announcement, the Montreal-based company attributed its losses partly to a $70-million claim against it for late penalties on a project in Algeria, and to a risk provision it had recorded for a project in Libya. The company’s executives suggested they are still seeking to clarify and sort out both situations.

But company revenues for the six months had increased by 4% to $38 billion compared to $3.7 billion for the same period in 2012.

Robert G. Card, who became president and chief executive officer of SNC-Lavalin Group about a year ago, noted that the company’s income from its investments in infrastructure concessions (ICI), which includes income from toll Highway 407 near Toronto and AltaLink, was “very good.”

However, Card said: “Unfortunately we have had to record some unanticipated and unusual provisions on two E&C North African projects in the quarter. Although we are on track in terms of operational execution throughout the Company, this unforeseen situation, related to an evolving political context, is obliging us to reduce our 2013 outlook.”

A few days later the company had some good news to report. It has signed a five year contract with BMO Financial Group for facility management services in Canada, and it has successfully refinanced a project for the Restigouche Hospital Centre for psychiatric care in New Brunswick. The latter is “a milestone that reaffirms the support of the financial markets for our infrastructure projects,” said Gerry Grigoropoulos, senior vice-president of SNC-Lavalin Capital.

The company has also won a contract by MEG Energy to complete the detailed engineering and provide procurement services for Phase 3A of the Christina Lake Regional Project steam-assisted gravity drainage (SAGD) central processing facility in Alberta. The work will be done at the company’s Calgary and Mumbai offices and represents over 800,000 hours of work.

For full details about the financial results, click here.