Engineering and construction giant SNC-Lavalin Group Inc. posted an 8-per-cent drop in third-quarter profit on weaker returns from its infrastructure and environment units.
Net profit in the third quarter was $114.9-million or 76 cents per share, compared with $124.5-million or 82 cents in the same quarter of 2011, the company said in a news release Friday.
Revenue increased by 11 per cent to $2-billion.
The Montreal-based company – which has been shaken by a scandal related to improper payments through its international operations – says it’s sticking to its previously announced 2012 outlook, with profit in the range of $325-million to $340-million.
Main contributors to full-year profit will be the power and mining and metallurgy segments as well as the infrastructure concessions investments segment, the company said.
Newly appointed president and chief executive officer Robert Card said in a statement that he will continue with a strategic review of the corporate strategy “with the goal of ensuring this company continues to grow and be successful by serving the needs of its clients, employees, and shareholders.”
Mr. Card replaced Pierre Duhaime, who left in March after the scandal – the disclosure of $56-million in improper payments – came to light.
Criminal investigations are under way in Canada and Switzerland.
The company also launched its own independent review in February, led by the board’s audit committee.
In the notes to its third-quarter financial statements, the company says senior management and the board “have been required to devote significant time to the independent review and related matters which has been distracting from the conduct of the company’s daily business and significant expenses have been incurred in connection with the independent review including substantial fees of lawyers and other advisers.”
It says the review has not been able to come up with “direct and conclusive evidence” regarding the improper payments but adds that – “if additional facts that are adverse to the company became known” – sanctions related to “possible violations of law or contracts” could be brought against SNC-Lavalin.
A former SNC-Lavalin vice-president who ran the company’s international division, Riadh Ben Aissa, was arrested last spring in Switzerland. Mr. Ben Aissa, who has denied any wrongdoing, is alleged to have been connected to a series of payments to unknown commercial agents to help win construction contracts in North Africa.
Alta Corp. Capital analyst Maxim Sytchev said in a research note Friday that SNC’s third-quarter results beat consensus profit estimates and were largely in line on revenue.
The company’s backlog of $9.9-billion is robust “and we expect the pace of awards to pick up in Q4 [of 2012],” he said.
“Bottom line: today’s results are showing that company’s [engineering and construction] business continues to perform despite the negative newsflow. We see tremendous value in company’s concession portfolio and SNC’s balance sheet is in great shape.”
SNC’s shares on the Toronto Stock Exchange rose 3 per cent – or $1.21 – to $41.49 on the better-than-expected third-quarter results.
SNC is also dealing with a controversy related to management of a $1.2-billion bridge project in Bangladesh, where two of its former employees have been charged in connection with an alleged bribery scheme.
The RCMP is investigating the company’s involvement in projects in Bangladesh. The World Bank has suspended its loan for development of the project and excluded an SNC unit from bidding on any of new contracts it funds in Bangladesh pending the conclusion of its own investigation.
“The company is communicating with the World Bank and intends to provide a comprehensive response to the allegations in regard to this and any other World Bank funded projects that the World Bank is or may be investigating,” SNC says in the third-quarter notes.Report Typo/Error
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