SNC Lavalin shares down as results, outlook fall short
(Reuters) - Canada's SNC Lavalin Group Inc (SNC.TO) reported a 24 percent rise in fourth-quarter profit on Friday, but its shares fell as much as 8 percent after the earnings and its 2013 outlook fell short of analysts' expectations.
Excluding SNC-Lavalin Capital, the construction and engineering company's investment and financing arm, profit fell 33 percent, with earnings per share far below analysts' expectations.
SNC, one of the world's largest engineering companies, expects net income to rise between 10 percent and 15 percent this year compared with last year.
"It was surprisingly low. Hopefully conservative," said Canaccord Genuity analyst Yuri Lynk, adding the first half of 2013 was likely to be weak. "I do see more upside than downside risk, but certainly it is what it is and it's almost, I'm not afraid to say, shockingly low."
SNC shares closed at C$43.01 on the Toronto Stock Exchange, down 6.2 percent. It hit a low of C$42.16 earlier on Friday.
The 102-year-old company said its hydrocarbons and chemicals segment will continue to be challenging throughout this year, while the mining and metallurgy division could be affected by weaker commodities.
PUTTING THE HOUSE IN ORDER
SNC, which has been at the center of an ever-widening ethics and corruption scandal of former executives, said it is implementing a compliance plan.
"Much of our attention has been dedicated to putting our house in order and reinforcing our commitment to ethics, excellence, safety compliance and project delivery," chief executive Robert Card told analysts during a conference call.
"It is a work in progress that will continue to be a high priority through 2013."
More than a year ago, the company revealed it had uncovered tens of millions of dollars in mysterious payments. Former chief executive Pierre Duhaime resigned last year amid the scandal and faced new fraud-related charges last week.
The company recently hired a former Siemens AG compliance officer to help guide it through the scandal and said on Friday that the fall-out will likely result in extra costs and impact the company for the balance of the year.
Canaccord analyst Lynk noted that a number of projects booked by the prior management were not making any money and would likely not have been signed under the current management.
Net income rose to C$94.6 million ($92 million), or 63 Canadian cents per share, from C$76.0 million, or 50 Canadian cents per share, a year earlier, helped by growth in its services and packages business.
That was below the 90 Canadian cents expected by analysts, according to Thomson Reuters I/B/E/S.
Excluding infrastructure concession investments, net income was C$24.2 million, compared with C$36.5 million a year earlier.
Analysts said that translated to an earnings per share of 16 Canadian cents, well below a consensus of 50 Canadian cents.
SNC said the decline reflected higher selling, general and administrative expenses, while fourth-quarter gross margin also included unfavorable cost re-forecasts on two major projects.
Revenue rose 14.3 percent to C$2.4 million.
The firm increased its quarterly dividend by 4.5 percent to 23 Canadian cents a share from 22 Canadian cents.
"While disappointed about the results for 2012 and the fourth quarter, I'm pleased with the progress we've made in rebuilding the company," Card added.
(Reporting by Solarina Ho in Toronto and Bhaswati Mukhopadhyay in Bangalore; Editing by Dan Grebler and Andre Grenon)