SNC-Lavalin Q2 profit drops, company lowers profit outlook for 2012

MONTREAL - SNC-Lavalin Group Inc. had a dramatically lower second-quarter profit that missed analyst expectations and says its 2012 earnings will be lower than the engineering company previously forecast, due to revised cost projections.

The Montreal-based engineering company (TSX:SNC), which operates around the world in a number of industries, said Friday that its net income fell to $32.7 million or 21 cents per share in the three months ended June 30.

That's down from $104.8 million or 67 cents per share a year earlier and far below a consensus estimate compiled by Thomson Reuters.

Analysts had been looking for 59 cents per share of earnings.

Revenue was $1.9 billion — up from $1.7 billion in the second quarter of 2011 and $500 million ahead of a consensus estimate.

SNC said its full-year profit will be lower than previously thought due to a re-evaluation of projected costs at two major projects.

However, the company's had $1.2 billion in cash and equivalents at the end of the quarter and its revenue backlog remained strong at $10.7 billion at the end of June, compared to $10.1 billion at the end of December

The company said its revised 2012 outlook adjusts for $50 million in higher cost forecasts on two fixed-price projects, one in SNC's power segment and on in its hydrocarbons and chemicals segment.

Full-year net income is now expected to be in a range of $325 million to $340 million.

"The second quarter was difficult in terms of project execution, but we are encouraged by our strong financial position and backlog," said Ian Bourne, SNC's vice-chairman and interim chief executive officer.

It has been a tough year for SNC-Lavalin, which is grappling with a financial scandal, a labour dispute at its Candu nuclear energy division and a worsening global economic outlook that has put pressure on capital spending plans.

The Montreal-based engineering and construction company continues to be under scrutiny, amid allegations of corrupt practices by some of its employees.

In June, the Dhaka Daily Star reported unnamed sources with in an anti-corruption commission had access to evidence that the company had offered bribes to at least six influential Bangladeshi officials to obtain a bridge contract.

SNC-Lavalin declined to comment on the newspaper's report, noting that investigations are continuing.

In May, a shareholder suit was filed seeking more than $1.5 billion in compensation for a decline in SNC's stock price related to unproven allegations that three company officials had been involved with "improper or unlawful payments" to secure contracts in Libya during the Ghadafi regime.

Despite the controversy, SNC continued to receive numerous megaproject contracts during the quarter including a part of a $1-billion extension of the 407 toll highway in southern Ontario.

The company also made headlines when about 800 employees at its subsidiary Candu Energy went on stroke.

News from © The Canadian Press, 2012