UPDATE 5-Libya clouds SNC-Lavalin outlook as profit surges

Fri Mar 4, 2011 3:35pm EST

* Q4 EPS C$0.91 vs C$0.65 a year earlier; revenue up 20 pct

* Says evacuated 4,000-plus employees from Libya

* Sees flat adjusted earnings and gross margins in 2011

* Sees higher revenue in 2011

* Raises quarterly cash dividend by 23.5 pct

* Shares down 0.5 percent (Adds details from conference call)

By S. John Tilak

TORONTO, March 4 (Reuters) - SNC-Lavalin Group Inc (SNC.TO) posted a higher quarterly profit and raised its dividend on Friday, even as the Libyan crisis prompted a flat earnings outlook after at least six straight years of profit growth.

The robust earnings report from SNC, one of the world's biggest engineering and construction companies and Canada's largest, comes just days after the Libyan crisis brought several big projects it has undertaken in the country to a halt.

The stock rose 3 percent initially but was down 0.5 percent at C$55.62 on Friday afternoon on the Toronto Stock Exchange. It had fallen 8 percent in the past two weeks due to the unrest in the Middle East and North Africa.

SNC's fourth-quarter earnings rose to C$139.2 million ($143.5 million), or 91 Canadian cents a share, from C$98.7 million, or 65 Canadian cents a share, a year earlier. Revenue rose 20 percent to C$1.9 billion.

Analysts, on average, had forecast earnings of 75 Canadian cents a share on revenue of C$1.76 billion, according to Thomson Reuters I/B/E/S.

However, the company said it expects its 2011 net income to be flat, excluding certain gains, because of recent events in Libya and the Middle East. In 2010, its net income rose 9 percent, excluding items, and in 2009 it was up 11 percent.

Including all items, SNC expects net income to fall in 2011, which marks a century since its founding. Gross margins are expected to be flat, while revenue is seen rising.

The forecast highlights worries about the company's business in Libya and the possibility of more upheavals through the Middle East.

"It's a real concern," Raymond James analyst Frederic Bastien said. "The question now is, will they ever be back in Libya to finish those projects?"

"The odds are good that they'll be asked to go back and finish it, once everything calms down, regardless of who ends up governing the country," he said.

The company said on a conference call on Friday it has evacuated more than 4,000 employees from Libya because of violent clashes between forces loyal to Muammar Gaddafi and protesters calling for his ouster. It is confident it will be paid what it is owed on its Libyan contracts.

The company's projects in the North African country, where it has had operations for decades, include a prison, a water pipeline and an airport.

SNC also increased its quarterly dividend by 23.5 percent to 21 Canadian cents a share for the fourth quarter of 2010.

The company said its revenue backlog was C$13 billion ($13.4 billion) at the end of 2010, excluding fourth-quarter bookings of Libyan projects totaling at least C$934 million.

"The situation in Libya is quite serious. But the remaining business is doing extremely well," NCP Northland Capital Partners analyst Maxim Sytchev said.

"The biggest risk is if there's contagion in the Middle East -- if there's additional upheaval, perhaps in Algeria."

It is business as usual in Algeria at the moment, the company said.

"The numbers are all good," Versant Partners analyst Neil Linsdell said of the results. "The company is taking the most conservative stance on business exposed to Libya."

In 2009, SNC-Lavalin generated a quarter of its revenue from Africa and the Middle East, according to its annual report. In 2010, Libya contributed 6.6 percent to revenue.

The company is working on three major projects in Libya: a C$500 million expansion of the airport in Benghazi, the center of recent violent clashes; some C$450 million ongoing work on a major water pipeline called the Great Man-Made River system; and a jail in the capital city, Tripoli.

($1=$0.97 Canadian) (Reporting by S. John Tilak; editing Peter Galloway)

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