Last year was challenging enough for SNC-Lavalin Group Inc. and 2013 is not looking much better.
The Montreal-based engineering firm offered a muted outlook for the year ahead on Friday, forecasting lower profit growth and many more months of dealing with an array of scandals and police investigations.
“We’re fully aware that it’s not as exciting a guidance as it should be,” SNC’s chief executive Robert Card told analysts on a conference call Friday.
The outlook and less-than-pleasing earnings from 2012 sent SNC’s share price down more than 6 per cent on the Toronto Stock Exchange, closing at $43.01.
SNC said net income will grow by 10 per cent to 15 per cent in 2013, far below most analysts’ expectations. The company is also continuing an internal investigation into a host of issues that have plagued it for a year, many involving allegations of bribery and missing money.
The company’s former chief executive, Pierre Duhaime, and former construction head, Riadh Ben Aissa, have recently been charged with fraud, conspiracy and bribery over allegations involving a $1.3-billion hospital project in Montreal.
Swiss police have also been investigating Mr. Ben Aissa, who is being held in Switzerland, and the World Bank has been probing an SNC project in Bangladesh.
None of the allegations have been proven in court and SNC has said that it is co-operating with all of the investigations.
“While recent news has been disturbing and should not be minimized, it appears to be related to the information the company pro-actively disclosed a year ago,” said Mr. Card, who became CEO in October.
“While I am pleased with our progress and optimistic about putting this issue behind us, it will likely mean the continuation of some extra costs and management distraction for the balance of the year.”
Mr. Card added that he believes the company has seen the worst of the scandals. “I’m not expecting big surprises, personally. Who knows what’s going to happen, but I think we’re getting a pretty good handle on this,” he told analysts.
SNC reported a jump in fourth-quarter profit to $94.8-million, up 24 per cent from the same period a year earlier.
Revenue also increased 14 per cent, to $2.4-billion. But that fell below many analysts’ expectations and for 2012 as a whole, profit fell to $309.5-million from $387.3-million for the previous year. Revenue increased 12 per cent to $8.1-billion.
The company’s results have been negatively affected by two projects in particular, a power plant in North Africa and a hydrocarbon facility in Russia. Both are nearing completion, Mr. Card said, but remain challenging, along with some others. “We have a number of challenged projects that are significant drags on the bottom line,” he said.
He noted that SNC still has about $1-billion in cash and $10-billion in backlogged projects, adding: “There is plenty of business in our pipeline to give investors a great result if we can deliver the work.”
Mr. Card has spent months reviewing the company’s operations and is planning to announce a strategic review at its annual meeting in May.