SNC-Lavalin 2013 fourth quarter and year-end results meet outlook in pivotal year
- Executed significant steps to progress transformation into Top-Tier global E&C firm;
- Developed world-class ethics and compliance framework, punctuated by receipt of approval to contract with public authorities in Quebec;
- Performed an extensive evaluation and analysis of our ongoing projects and associated risks, notably in the second and third quarter of 2013, and initiated a reorganization of our European operations, totalling a net negative amount of $435 million;
- Continued strategic rebalancing of the ICI portfolio to develop both new business and shareholder value;
- Decreased SG&A expenses and launched a profit improvement initiative ("Value Up") program to enhance efficiency and effectiveness and improve competiveness;
- Continued execution of Strategic Plan to focus on key markets and optimize geographic and services mix to enhance overall margin profile;
- Announces dividend of $0.24 per share, up 4% compared to current quarterly dividend, showing confidence in the Company's long-term outlook, cash position, backlog, opportunities and expected E&C and O&M recovery;
- Although challenging legacy projects continue to negatively impact 2014, EPS guidance for 2014 set at $2.25 to $2.50; and
- Company driving to achieve improved consolidated EBIT margin on revenues and further improve earnings in 2015.
MONTREAL, March 6, 2014 /CNW Telbec/ - SNC-Lavalin Group Inc. (TSX: SNC) announces its results today for the fourth quarter and the year ended December 31, 2013.
"This last year was a true testament to the character and determination of SNC-Lavalin's employees. Thanks to them, we have made significant progress on the strategic plan we outlined in May 2013," said Robert G. Card, President and Chief Executive Officer, SNC-Lavalin Group Inc. "We also developed a strong ethics and compliance framework, announced key executive appointments, allocated more than $300 million mainly to cover project risks, $123 million mainly to reorganize our European operations, and reduced our SG&A expenses after years of increases. The strong contribution, mainly from our Power and ICI segments, allowed us to offset this financial effort and to deliver $186 million of operating income. Simultaneously, we are strategically rebalancing our ICI portfolio and will continue to evaluate how best to manage our assets to position the Company to win business and deliver growth."
"Our recent receipt of authorization by the Autorité des Marchés Financiers (AMF) to contract with public authorities in the Province of Quebec is a key milestone in our objective to become a standard of excellence in ethics and compliance in the industry," added Mr. Card. "With a strong cash position; a solid backlog, following recent awards; and a volume of additional bid opportunities, we are well-positioned to improve performance and continue building our platform for future growth and value creation."
(in thousands of Canadian dollars, unless
|Fourth Quarter||Year Ended December 31|
|Revenues by activity|
Net income (loss)
from E&C and O&M (1)
SNC-Lavalin's net income
from ICI (2)
Net income attributable to
SNC-Lavalin's shareholders (1)
Net income attributable to
|Net income (1)||92,630||93,970||36,384||306,342|
per share ($) (1)
|Revenue backlog by activity|
|Cash and cash equivalents||1,108,694||1,174,900|
(1) Effective January 1, 2013, the Company adopted the amendments to IAS 19
with respect to employee benefits. Accordingly, comparative figures
were adjusted to conform to these amendments. See Note 2C to the
Company's 2013 audited annual consolidated financial statements for
(2) Including a net gain of $36.2 million on the partial disposal of Astoria II in the fourth quarter of 2013.
Fourth Quarter Results
For the fourth quarter of 2013, SNC-Lavalin reported a net income attributable to SNC-Lavalin shareholders of $92.5 million ($0.61 per share on a diluted basis), compared to a net income of $93.8 million ($0.62 per share on a diluted basis) for the comparable quarter of 2012. Net income from Infrastructure Concession Investments ("ICI") increased in the fourth quarter of 2013, compared to the corresponding quarter of 2012, while net income from Engineering & Construction and Operations & Maintenance ("E&C and O&M") continued to be challenging.
Net income from ICI increased to $123.8 million for the fourth quarter of 2013, compared to $70.4 million for the corresponding quarter of 2012, mainly due to a net gain of $36.2 million on the partial disposal of Astoria II and a higher net income from AltaLink, partially offset by a lower dividend received from Highway 407.
The Company reported a net loss from E&C and O&M of $31.3 million, compared to a net income of $23.5 million for the fourth quarter of 2012, mainly reflecting an operating loss in the Infrastructure & Environment segment and a lower contribution from the Mining & Metallurgy segment, partially offset by a higher contribution from the Oil & Gas segment. The operating loss in the Infrastructure & Environment segment was mainly due to unfavourable cost reforecasts on certain unprofitable legacy fixed-price contracts in the road sector. The Power segment contribution in the fourth quarter of 2013 was slightly better than the same quarter of 2012, as an unfavourable cost reforecast on a major Packages project in Tunisia recorded in the fourth quarter of 2013 was lower than the cost reforecast recorded in the fourth quarter of 2012. In addition, as previously indicated, the Company recorded an additional charge for restructuring costs and goodwill impairment in the fourth quarter of 2013. This charge totalled $55.2 million ($49.7 million after taxes) in the quarter and relates mainly to the Company's European reorganization. The reorganization is designed to increase efficiency and competitiveness for that region and related service offerings by sector of activity.
Revenues for the fourth quarter of 2013 totalled $2.1 billion, compared to $2.4 billion in the fourth quarter of 2012.
For the year ended December 31, 2013, SNC-Lavalin reported a net income attributable to SNC-Lavalin shareholders of $35.8 million ($0.24 per share on a diluted basis), compared to a net income of $305.9 million ($2.02 per share on a diluted basis) for the same period of 2012. Net income from ICI increased in 2013 compared to 2012, while the net income from E&C and O&M, as expected, concluded 2013 in a loss position.
Net income from ICI increased to $281.6 million, compared to $156.9 million for the year ended December 31, 2012, mainly due to higher net income from AltaLink and Shariket Kahraba Hadjret En Nouss S.p.A., a net gain of $36.2 million on the partial disposal of Astoria II, and higher dividends received from Highway 407.
The Company reported a net loss from E&C and O&M of $245.8 million, compared to a net income of $149.0 million for the year ended December 31, 2012, mainly reflecting operating losses in the Infrastructure & Environment and Oil & Gas segments, a $123.5 million ($112.1 million after taxes) charge for restructuring costs and goodwill impairment relating mainly to Europe, as well as a lower contribution from the Mining & Metallurgy segment, partially offset by a higher contribution from the Power segment. The operating loss in the Infrastructure & Environment segment for the year ended December 31, 2013, was mainly due to unfavourable cost reforecasts and additional costs on certain unprofitable legacy fixed-price contracts, particularly in the hospital and road sectors, as well as a risk provision recorded on a Libyan project. The operating loss in the Oil & Gas segment for the year ended December 31, 2013 was mainly due to a loss and an unfavourable cost reforecast related to a fixed-price project in Algeria.
Revenues for the year ended December 31, 2013, were $7.9 billion, in line with revenues for the same period in 2012.
Selling, general and administrative ("SG&A") expenses for the year ended December 31, 2013, decreased to $836.6 million, compared to $855.5 million for the corresponding period of 2012, thus attaining the Company's objective of not exceeding its 2012 SG&A level. The decrease mainly reflected new initiatives and programs that the Company is currently implementing.
Cash and cash equivalents as at December 31, 2013, increased to $1.1 billion, compared to $0.8 billion at the end of September 30, 2013, and remained in line with December 31, 2012.
Revenue backlog totalled $8.3 billion at the end of December 2013, compared to $10.1 billion at the end of December 2012, mainly reflecting a decrease in the Power, Mining & Metallurgy and Infrastructure & Environment segments. The challenging legacy projects in the Company's backlog, the large majority of which are in the hospitals sector, totalled $902.6 million, a decrease of $158.5 million since September 30, 2013.
For 2014, the Company is establishing its Earnings Per Share ("EPS") guidance in the range of $2.25 and $2.50 per share, reflecting continued challenges in the Infrastructure & Environment and Oil & Gas segments, mainly due to certain challenging legacy projects, and in the Mining & Metallurgy segment, which continues to be affected by the softening of the commodity markets, as well as the expectation that the Power, O&M and ICI segments should increase their contributions. This outlook assumes that SG&A expenses will continue to decrease mainly as a result of new initiatives and ongoing activities associated with SNC-Lavalin's new company-wide profit improvement program.
This above outlook is based on the assumptions and methodology described in the Company's 2013 Management's Discussion and Analysis under the heading "How We Budget and Forecast Our Results", which should be read in conjunction with the "Forward Looking Statements" section below and is subject to the risks and uncertainties summarized therein, which are more fully described in the Company's public disclosure documents.
"While challenging legacy projects continue to negatively impact the Company's earnings in 2014, we continue to drive toward returning gross margin to revenue ratios to the stated goals set forth in our 2013 Management's Discussion and Analysis, through increasing operational efficiencies and the completion of unprofitable legacy fixed price contracts," said Robert G. Card. "Based on our progress in 2013, which I am confident will continue with momentum in 2014, I believe we are well positioned to improve our consolidated EBIT margin on revenues and further improve earnings in 2015."
Given the Company's long-term outlook, cash position, backlog, opportunities and expected E&C and O&M recovery, the Board of Directors has increased the quarterly cash dividend to $0.24 per share, payable on April 3, 2014, to shareholders of record on March 20, 2014. This dividend is an "eligible dividend" for income tax purposes.
SNC-Lavalin is one of the leading engineering and construction groups in the world, and is a major player in the ownership of infrastructure and in the provision of operations and maintenance services. Founded in 1911, SNC-Lavalin has offices across Canada and in over 40 other countries around the world, and is currently active in some 100 countries. www.snclavalin.com
Reference in this press release, and hereafter, to the "Company" or to "SNC-Lavalin" means, as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint arrangements, or SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements.
Statements made in this press release that describe the Company's or management's budgets, estimates, expectations, forecasts, objectives, predictions, projections of the future or strategies may be "forward-looking statements", which can be identified by the use of the conditional or forward-looking terminology such as "aims", "anticipates", "assumes", "believes", "estimates", "expects", "goal", "intends", "may", "plans", "projects", "should", "will", or the negative thereof or other variations thereon. Forward-looking statements also include any other statements that do not refer to historical facts. All such forward-looking statements are made pursuant to the "safe-harbour" provisions of applicable Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of the Company's current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company's business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
The 2014 outlook referred to in this press release is forward-looking information and is based on the methodology described in the Company's 2013 Management's Discussion and Analysis under the heading "How We Budget and Forecast Our Results" and is subject to the risks and uncertainties described in the Company's public disclosure documents. The purpose of the 2014 outlook is to provide the reader with an indication of management's expectations, at the date of this press release, regarding the Company's future financial performance and readers are cautioned that this information may not be appropriate for other purposes.
Forward-looking statements made in this press release are based on a number of assumptions believed by the Company to be reasonable as at the date hereof. The assumptions are set out throughout the Company's 2013 Management's Discussion and Analysis (particularly, in the sections entitled "Critical Accounting Judgments and Key Sources of Estimation Uncertainty" and "How We Analyze and Report our Results" in the Company's 2013 Management's Discussion and Analysis). The 2014 outlook also assumes that previously disclosed amounts relating to a claim in Algeria and the attempted draw on a letter of credit in Libya will not be reversed and does not take into account any sale or partial sale of the Company's interest in AltaLink. If these assumptions are inaccurate, the Company's actual results could differ materially from those expressed or implied in such forward-looking statements. In addition, important risk factors could cause the Company's assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by these forward-looking statements. These risks include, but are not limited to: (a) the outcome of pending and future claims and litigation could have a material adverse impact on the Company's business, financial condition and results of operation; (b) the Company is subject to ongoing investigations which could subject the Company to criminal and administrative enforcement actions, civil actions and sanctions, fines and other penalties, some of which may be significant, which, in turn, could harm the Company's reputation, result in suspension, prohibition or debarment of the Company from participating in certain projects, reduce its revenues and net income and adversely affect its business; (c) further regulatory developments could have a significant adverse impact on the Company's results, and employee, agent or partner misconduct or failure to comply with anti-bribery and other government laws and regulations could harm the Company's reputation, reduce its revenues and net income, and subject the Company to criminal and administrative enforcement actions and civil actions;(d) if the Company is not able to successfully execute on its new strategic plan, its business and results of operations would be adversely affected; (e) a negative impact on the Company's public image could influence its ability to obtain future projects; (f) fixed-price contracts or the Company's failure to meet contractual schedule or performance requirements may increase the volatility and unpredictability of its revenue and profitability; (g) the Company's revenue and profitability are largely dependent on the awarding of new contracts, which it does not directly control, and the uncertainty of contract award timing could have an adverse effect on the Company's ability to match its workforce size with its contract needs; (h) the Company's backlog is subject to unexpected adjustments and cancellations, including under "termination for convenience" provisions, and does not represent a guarantee of the Company's future revenues or profitability; (i) SNC-Lavalin is a provider of services to government agencies and is exposed to risks associated with government contracting; (j) the Company's international operations are exposed to various risks and uncertainties, including unfavourable political environments, weak foreign economies and the exposure to foreign currency risk; (k) there are risks associated with the Company's ownership interests in ICI that could adversely affect it; (l) the Company is dependent on third parties to complete many of its contracts; (m) the Company's use of joint ventures and partnerships exposes it to risks and uncertainties, many of which are outside of the Company's control; (n) the competitive nature of the markets in which the Company does business could adversely affect it; (o) the Company's project execution activities may result in professional liability or liability for faulty services; (p) the Company could be subject to monetary damages and penalties in connection with professional and engineering reports and opinions that it provides; (q) the Company may not have in place sufficient insurance coverage to satisfy its needs; (r) the Company's employees work on projects that are inherently dangerous and a failure to maintain a safe work site could result in significant losses and/or an inability to obtain future projects; (s) the Company's failure to attract and retain qualified personnel could have an adverse effect on its activities; (t) work stoppages, union negotiations and other labour matters could adversely affect the Company; (u) the Company relies on information systems and data in its operations. Failure in the availability or security of the Company's information systems or in data security could adversely affect its business and results of operations; (v) any acquisition or other investment may present risks or uncertainties; (w) a deterioration or weakening of the Company's financial position, including its cash net of recourse debt, would have a material adverse effect on its business and results of operations; ( x ) the Company may have significant working capital requirements, which if unfunded could negatively impact its business, financial condition and cash flows; (y) an inability of SNC-Lavalin's clients to fulfill their obligations on a timely basis could adversely affect the Company; (z) the Company may be required to impair certain of its goodwill, and it may also be required to write down or write off the value of certain of its assets and investments, either of which could have a material adverse impact on the Company's results of operations and financial condition; (aa) global economic conditions could affect the Company's client base, partners, subcontractors and suppliers and could materially affect its backlog, revenues, net income and ability to secure and maintain financing; (bb) fluctuations in commodity prices may affect clients' investment decisions and therefore subject the Company to risks of cancellation, delays in existing work, or changes in the timing and funding of new awards, and may affect the costs of the Company's projects; (cc) inherent limitations to the Company's control framework could result in a material misstatement of financial information, and; (dd) environmental laws and regulations expose the Company to certain risks, could increase costs and liabilities and impact demand for the Company's services. The Company cautions that the foregoing list of factors is not exhaustive. For more information on risks and uncertainties, and assumptions that would cause the Company's actual results to differ from current expectations, please refer to the sections "Risks and Uncertainties", "How We Analyze and Report Our Results" and "Critical Accounting Judgments and Key Sources of Estimation Uncertainty" in the Company's 2013 Management's Discussion and Analysis.
The forward-looking statements herein reflect the Company's expectations as at the date of this press release and are subject to change after this date. The Company does not undertake any obligation to update publicly or to revise any such forward-looking statements whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation.
SNC-Lavalin's Consolidated Financial Statements and Management's Discussion and Analysis and other relevant financial materials are available in the Investor Relations section of the Company's website at www.snclavalin.com. These and other Company reports are also available on the website maintained by the Canadian Securities regulators at www.sedar.com.
SOURCE SNC-LavalinFor further information:
Vice-President, Investor Relations
514-393-8000, ext. 57553
Public Relations Manager
514-393-8000, ext. 54772