(Adds details on losses, analyst comment on outlook)
By Solarina Ho
TORONTO Aug 2 Canada's SNC-Lavalin Group Ltd
unexpectedly reported a quarterly net loss and lowered
its financial forecast for the year on Friday following charges
on projects in two North African countries.
The company's shares fell 6 percent to C$40.44 on the
Toronto Stock Exchange.
The Montreal-based company, one of the world's largest
construction and engineering companies, said results reflected
operating losses at its oil and gas unit for a project in
Algeria and at its infrastructure and environment business for a
halted project in Libya.
"Due to a variety of unexpected factors, such as the ones
(we) have experienced in the second quarter in North Africa,
2013 is proving to be a very challenging year for the company,"
Chief Executive Robert Card said in a statement.
SNC, which is trying to move forward from a series of
corruption and ethics misconduct cases, said it is in talks with
a client who made a C$70.1 million claim alleging late penalties
under a fixed-price project in Algeria.
The company also recorded a C$47 million risk provision,
following an unexpected attempt to draw on letters of credit
relating to a project that has been halted due to civil unrest
in Libya. SNC said it was unaware of any claim and would use all
legal means to prevent any draws.
"North Africa, Middle East - still very difficult markets,"
Maxim Sytchev, a senior analyst at Dundee Capital Markets, said.
"The company cannot step away from a difficult project, they
have to finish it. So that's exactly what they're going through
"It's been a number of disappointments back to back."
SNC had announced a new turnaround growth strategy in early
May, which called for a focus on lower-risk markets like North
and South America as well as liquidating unspecified
SNC also remains occupied by ongoing investigations into
past corporate misconduct. The far-reaching scandal involved
former top executives who have since been charged with bribery
and corruption for activities in several countries including
Libya, Canada and Bangladesh.
The net loss for the second quarter was C$37.5 million
($36.2 million), or 25 Canadian cents a share, compared with net
income of C$31.9 million, or 21 Canadian cents a share, in the
year-before quarter. Revenue rose 1.6 percent to C$1.94 billion.
Analysts, who had been expecting a profit, said SNC results
fell far short of consensus, even when excluding losses.
Going forward, the company said it now expects 2013 net
income to be in the range of C$220 million to C$235 million. In
March, SNC had forecast net income for the year would rise
between 10 percent and 15 percent from the C$309.1 million it
earned in 2012.
Losses would have been even greater if it weren't for the
company's concession asset business, which includes managing the
407 express toll highway that crosses just north of Canada's
Excluding SNC's Infrastructure Concession Investments unit,
net loss was C$104.7 million for the quarter, compared with net
income of C$1.2 million during the year-ago period.
The strength of this business segment and the expectation
the other segments will eventually turn around is one reason why
the stock is not reacting more negatively, Sytchev said.
"Right now it's just waiting for the difficult projects to
cycle through. Hopefully we're going to be done with that maybe
mid-next year. I think the bulk of them are going to be
completed," he said.
(Reporting by Solarina Ho; Editing by Gerald E. McCormick,
Peter Galloway and Leslie Adler)