May 7, 2009 / 2:14 PM / in 9 years

UPDATE 2-SNC-Lavalin profit rises, sales drop

* Q1 EPS C$0.51 versus C$0.47

* Revenue falls 11 pct to C$1.6 bln

* Backlog drops to C$9 bln from C$10 bln

* Shares drop 1.9 pct after initial gains (Adds detail from conference call, analyst comments, updates stock price)

By Susan Taylor

OTTAWA, May 7 (Reuters) - SNC-Lavalin Group Inc (SNC.TO) reported a nearly 10 percent increase in first-quarter profit on Thursday but the Canadian engineering and construction company’s revenue slipped and its order backlog shrank, sending the shares lower.

The profit gain reflected contributions from most of its operations, though its chemical and petroleum unit showed a loss. Montreal-based SNC also affirmed its forecast for profit growth between 7 and 9 percent in 2009.

“Some people could be perhaps a bit disappointed with the fact that backlog has not been growing year over year. But ... contract awards can be very lumpy,” said Genuity Capital Markets analyst Maxim Sytchev, referring to the drop in the share price.

Earnings rose to C$77.5 million ($66 million), or 51 Canadian cents a share, up from C$70.8 million, or 47 Canadian cents, in the same period last year.

Revenue fell to C$1.6 billion from C$1.8 billion.

Analysts, on average, had expected earnings before exceptions of 48 Canadian cents and revenue of C$1.6 billion, according to Reuters Estimates.

The backlog at the end of March was C$9 billion, down from C$10 billion at the same time last year and C$9.6 billion at the end of December.

Chief Executive Pierre Duhaime told analysts on a conference call that he will review corporate strategy in the coming months.

“We will be looking to continue the globalization of the company by strengthening our bases in certain geographic regions,” said Duhaime, who recently replaced Jacques Lamarre, a long-time executive who retired.

The company plans to expand in expand in India, Brazil, Middle East, and Southeast Asia, Duhaime said.

SNC provides such services as engineering, procurement, construction and project financing to companies in sectors including agrifood, pharmaceuticals and biotechnology, chemicals and petroleum, the environment, heavy construction, mass transit, mining, power and water management.

Shares in SNC dropped 72 Canadian cents, or 1.9 percent, to close at C$37.99 on the Toronto Stock Exchange. The stock has shed about 21 percent of its value over the past 12 months. ($1=$1.17 Canadian) (Reporting by Susan Taylor; Editing by Frank McGurty)

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