August 1, 2019 / 11:48 AM / 17 days ago

SNC-Lavalin cuts dividend, posts wider-than-expected loss as costs run high

(Reuters) - SNC-Lavalin Group Inc (SNC.TO) cut its dividend on Thursday, the latest restructuring effort by the Canadian company, and reported a wider-than-expected loss in its main engineering and construction unit, hit by higher expenses.

FILE PHOTO: A pedestrian walks past the SNC-Lavalin logo outside the company headquarters building in Montreal, Quebec, Canada, May 5, 2019. REUTERS/Dario Ayala

Shares of the Montreal-based company fell as much as 5.6% to more than a 14-year low of C$19.71.

SNC, which named Chief Operating Officer Ian Edwards as interim boss in June, has been trying to turnaround the company after a series of issues, including a bribery allegation that caused a political scandal engulfing Prime Minister Justin Trudeau.

The company’s shares have more than halved in value this year, prompting top investor Caisse De Depot Et Placement Du Quebec to call for “decisive and timely action.”

In the last three months, SNC withdrew its 2019 forecast, announced plans to exit fixed price contracts and 15 countries, restructure its business into two reporting lines and explore options for its resources business.

The company said on Thursday that it would now pay a dividend of 2 Canadian cents per share, compared with 10 Canadian cents per share earlier, its second cut in 2019.

SNC maintained its expectations to save about C$100 million in costs by 2019-end.

“This was really (a) tough and disappointing quarter. In my view, however, it also marked a turning point for SNC-Lavalin..” interim Chief Executive Officer Ian Edwards said in a conference call with analysts.

The company’s backlog stood at C$15.7 billion as of June 30, compared with C$15.2 billion a year earlier, while bookings for the second quarter amounted to C$2.1 billion.

SNC posted a net loss attributable to shareholders of C$2.12 billion ($1.60 billion), compared with a year-ago profit of C$83.01 million, as it recorded an about C$1.8 billion goodwill impairment charge related to its resources unit.

Excluding items, the company reported net loss from engineering and construction of C$1.71 per share wider than the C$1.31 estimated by analysts, according to IBES data from Refinitiv.

The company’s SNCL Projects business line, which includes its underperforming resources and engineering, procurement and construction units, posted an operating loss of C$307.7 million, mainly due to higher costs on some of its projects in the Middle East and Canada.

Revenue dropped nearly 10% to C$2.28 billion and also missed estimates of C$2.45 billion.

Reporting by Shanti S Nair in Bengaluru; Editing by Maju Samuel and Shailesh Kuber

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