UPDATE 3-SNC Lavalin profit falls less than expected, shares up

Fri Nov 2, 2012 5:47pm EDT

* Maintains full-year forecast

* Mining, better execution boost earnings

* Revenue up 11 pct, though backlog dips

* SNC under new CEO since Oct. 1

* CEO says will unveil strategy by May 2013

By Nicole Mordant

Nov 2 (Reuters) - Canadian construction and engineering company SNC Lavalin Group Inc, under investigations for alleged bribery, on Fr iday reported a narrower-than-expected 8 percent decline in third-quarter profit, and its shares rose nearly 5 percent.

One of the world's largest engineering operations, the company maintained its forecast for full-year earnings after cutting it last quarter.

"We are quite encouraged and relieved," said Frederic Bastien, an analyst with Raymond James based in Vancouver. "The fact that they are reaffirming their guidance for the year implies a good quarter for the fourth quarter."

The results were welcomed by SNC shareholders, who in the past year have contended with the resignation of the company's chief executive. The company has accused Pierre Duhaime of authorizing $56 million in payments to unknown agents on nonexistent construction projects. Canadian police are investigating.

They are also investigating bribery allegations against SNC executives in respect to a US$1.2 billion bridge project in Bangladesh. The World Bank has suspended its loan for the development and temporarily banned an SNC subsidiary from bidding on its contracts in the country.

New CEO Robert Card said on a conference call that it was too early for him to lay out a detailed strategy for the Montreal-based company, but that he hoped to do that "some time next year, certainly by the annual meeting," to be held in May 2013.

Card, who was a long-time executive with CH2M Hill Cos Ltd, a U.S. engineering and construction company, took the top job at SNC on Oct. 1.

Card said he had found some areas where the century-old, Montreal-based company could make improvements, including reducing its reliance on non-company agents to help to carry out its work in the 100-plus countries where it operates. Instead, Card wants to move more company executives to foreign offices. Shares in SNC, which at one point this year were down more than 60 percent in value, closed C$1.89 firmer at C$42.17 on the Toronto Stock Exchange.

The company said its net income attributable to shareholders fell to C$114.9 million (US$115.21 million), or 76 Canadian cents per share, in the three months to the end of September due to weaker performances in its infrastructure and environment businesses. That was well above the 64 Canadian cents per share that analysts, on average. were expecting, according to Thomson Reuters I/B/E/S data.

The company's mining business in particular performed far better than expected.

"This is a business that has been winning a number of contracts ... but we haven't seen that translate into better results. It is finally hitting the bottom line now," Bastien said.

Revenue rose 11 percent to C$2.0 billion in the third quarter, although its backlog fell to C$9.9 billion at the end of September from $10.1 billion at the end of December 2011.

The company reaffirmed its forecast for full-year earnings of C$325 million to C$340 million.

Maxim Sytchev, an analyst at AltaCorp Capital in Toronto, said, "When I spoke to clients before the quarter, there was a sense that the business was disintegrating. But we are not seeing that, which is a definitely very positive dynamic."

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