November 5, 2010 / 1:26 PM / 7 years ago

UPDATE 3-SNC-Lavalin posts higher profit, boosts outlook

*Q3 EPS C$0.84 vs year-earlier C$0.68

*Profit includes C$0.13/shr asset sale gain

*Sees growth in full-year profit exceeding 7-12 pct target

*Stock gains 2.5 pct to end at C$53.99 on TSX (Adds details from conference call, closing stock price)

By Susan Taylor

OTTAWA, Nov 5 (Reuters) - SNC-Lavalin Group Inc (SNC.TO), reported a big jump in quarterly profit on Friday, boosted by gains from an asset sale, and said it now expects 2010 net income to exceed its target of 7 percent to 12 percent annual growth.

Canada’s biggest engineering and construction company also said it had a record C$12.7 billion backlog of work at quarter’s end, up from C$11.4 billion at the end of the second quarter.

“Our strong backlog bodes well for 2011,” Chief Executive Pierre Duhaime said on a conference call with analysts. “I still believe there is more to come.”

Three big contracts SNC recently won, for example, are collectively worth C$1.1 billion, and will be booked into backlog in the fourth quarter.

“SNC-Lavalin is clearly standing up head and shoulders above international peers, who are barely lapping into positive year-over-year backlog territory,” Northland Capital Partners analyst Maxim Sytchev said.

The cash-rich company, which has been selling investments and plumping up its war chest to C$1 billion, is being closely watched for signals on how it will use that capital.

This past month, SNC sold its shares of Valener Inc (VNR.TO), which has a stake in Quebec-based natural gas distributor Gaz Metro, for C$58.7 million. A C$1.3 million loss from the sale will be recognized in the fourth quarter.

The C$118 million sale of its stake in Trencap, an investment company with an interest in Gaz Metro, will result in after-tax gain of about C$27 million in the fourth quarter.

Analysts say SNC could be preparing for a sizable acquisition.

It is already bidding for Atomic Energy of Canada Ltd, the Canadian government’s financially troubled nuclear technology agency, in a secretive process that may conclude this year.

“Our cash balance positions us well to seize strategic opportunities for business acquisitions and concession investment,” Duhaime said.

Alliances may also help win work. SNC has struck a deal with a Brazilian engineering firm, hoping to land contracts as Brazil builds infrastructure in preparation for hosting soccer’s World Cup in 2014 and the Summer Olympics in 2016.

For the third quarter, SNC posted net profit of C$128.2 million, or 84 Canadian cents a share, up from year-earlier earnings of C$103.1 million, or 68 Canadian cents a share.

The most recent quarter includes a gain of 13 Canadian cents per share from SNC’s August sale of its energy control systems business to General Electric.

Revenue increased 13 percent to C$1.61 billion.

Analysts, on average, had expected earnings of 72 Canadian cents a share and revenue of C$1.61 billion, according to Thomson Reuters I/B/E/S.

The company’s shares rose C$1.30, or 2.5 percent, to end at C$53.99 on the Toronto Stock Exchange on Friday.

$1=$1.00 Canadian Reporting by Susan Taylor; editing by Peter Galloway

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