(Reuters) - Canadian construction and engineering firm SNC-Lavalin Group Inc cut its full-year 2018 profit forecast on Monday, citing ongoing trade challenges in Saudi Arabia as well as a problem with a project in its mining and metallurgy unit, sending its shares down as much as 31 percent.
The company is in the crosshairs of an ongoing diplomatic spat between Ottawa and Riyadh over a number of issues which have strained relations between the two countries.
“Inter-governmental relations between Canada and Saudi Arabia, together with unpredictable commodity prices and uncertain client investment plans, have led to deterioration in our near-term prospects which we cannot ignore,” Chief Executive Neil Bruce said in a statement.
SNC’s biggest shareholder and Canadian pension fund Caisse de depot et placement du Quebec said in an emailed statement that “short-term bumps in the market don’t change our views on SNC and its solid performance prospects over the long term.”
The Caisse, which holds about 20 percent of SNC’s outstanding shares, declined to comment further.
Saudi Arabia contributed about 11 percent of SNC’s total revenue in 2017, according to Canaccord Genuity analyst Yuri Lynk. Over 15 percent of the company’s global workforce is employed in the country.
The company said it will take a non-cash after-tax goodwill impairment charge of C$1.24 billion, or C$7.06 per share, in the year.
SNC now expects earnings of C$2.15 to C$2.30 per share in 2018. It had earlier forecast C$3.60 to C$3.85 per share.
“We can’t discount the possibility that a strained trade relationship between Canada and the Kingdom of Saudi Arabia won’t hamper the company’s ability to secure future work,” analyst Lynk said in a note last week.
SNC had said in August its financial performance would take an impact if a long-term embargo was placed on Canadian commercial interests in the middle-eastern country.
On Monday, the company also said earnings before interest and tax in its mining and metallurgy segment will be lower due to added costs for a project.
The unit was expected to contribute about 7 percent to overall revenue in 2019, while the oil and gas unit was set to make 24 percent, analyst Lynk said.
SNC shares fell as low as C$33.51, before trading down 27.4 percent at C$35.21 in Toronto at mid-afternoon.
Reporting by Debroop Roy in Bengaluru; additional reporting by Allison Lampert in Montreal; Editing by Shailesh Kuber and Richard Chang
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