3 Min Read
(Adds details from conference call, market reaction)
By Allison Martell
TORONTO, Nov 6 (Reuters) - Canadian engineering and construction company SNC-Lavalin Group Inc lowered its full-year earnings forecast on Thursday, citing weakness in mining and other factors, adding it would scale back some operations and cut 4,000 jobs.
The news, which sent SNC shares down 9 percent, came as the company reported a third quarter profit, compared with a year-earlier loss. The Montreal-based company has been weathering a far-reaching scandal involving allegations of fraud and bribery, and dealing with troubled projects launched by its previous management.
SNC said it plans to scale back underperforming areas over the coming 18 months and shed some 4,000 jobs, or 9 percent of its global workforce. About three-quarters of the cuts will be outside Canada.
"We're not in the business of downsizing," Chief Executive Officer Robert Card told analysts and investors during a conference call.
"We're only doing it in this case because we felt we had to, to preserve a Canadian national champion that's going to be a big, successful E&C (engineering and construction) company in the future."
Card's predecessor, Pierre Duhaime, resigned in 2012 after an internal investigation found he authorized payments for projects that did not exist. Duhaime was later arrested, one of several executives accused of fraud and other offenses. . The allegations have not been proven in court.
Card said SNC has built a strong ethics and compliance system that he hopes will become a competitive advantage.
"One CEO of a major oil company who's a client says: 'You're the safest supplier we have, because no one else has been through their closets the way you have,'" he said.
SNC did not offer much detail on which areas it would cut, but it did highlight weakness in the mining industry.
The company will book C$200 million ($175.25 million) in after-tax charges related to the restructuring over the next 18 months. It said the cuts should deliver about C$100 million in annual after-tax savings beginning in 2015.
SNC cut its full-year earnings forecast to between C$2.15 and C$2.40 a share, from between C$2.80 and C$3.05 a share. Analysts, on average, had been expecting earnings of C$2.79 a share, according to Thomson Reuters I/B/E/S.
Including its recent acquisition of resource-sector engineering group Kentz Corp, and the reorganization announced on Thursday, SNC said earnings would likely range from 40 to 55 Canadian cents a share.
Third-quarter net income was C$69.0 million, or 45 Canadian cents a share, compared with a net loss of C$72.7 million, or 48 Canadian cents, in the year-ago period. Revenue edged up to C$2.0 billion from C$1.95 billion.
SNC shares closed about 9 percent down at C$42.47 on the Toronto Stock Exchange.
$1 = $1.14 Canadian Editing by W Simon, Chizu Nomiyama, Richard Chang and Andre Grenon