SNC-Lavalin Inc. posted strong first-quarter earnings on lower revenue and is revising upwards its 2014 guidance to reflect the sale of its stake in Alberta electricity transmission company AltaLink.
The Montreal-based engineering and construction firm said it booked net profit of $94.6-million or 62 cents per share in the first quarter, compared with $53.6-million or 35 cents in the year-earlier period.
Revenues were $1.7-billion compared with $1.9-billion.
Earnings per share of 62 cents handily beat analysts’ consensus estimate of 46 cents.
The performance was helped by a higher contribution from the infrastructure unit on a reversal of a risk provision previously recorded on a Libyan project, a higher dividend from Toronto’s Highway 407 toll road and higher net income from AltaLink.
Canada’s largest engineering company is undergoing a major transformation under president and chief executive officer Robert Card after a series of corruption and bribery scandals at home and abroad, including allegations of unethical dealings in Libya and Algeria.
SNC-Lavalin said on Thursday it is revising its previously announced 2014 guidance, with EPS now expected to be in the range of $2.80 to $3.05, up from $2.25 to $2.50.
The revision results from an accounting requirement following the agreement to sell the equity stake in AltaLink that will see the company stop depreciating and amortizing non-current assets of AltaLink on a prospective basis.
The new outlook does not take into account the eventual gain on the sale of the AltaLink stake, SNC-Lavalin said.
The revised guidance, however, continues to be based on the expectation that challenges remain in the infrastructure and construction as well as oil and gas divisions, largely because of certain problematic legacy projects and a softer commodities market that has affected the mining and metallurgy segment, said the company.
Offsetting these challenges are expectations that the power and infrastructure concession investments – as well as the operation and maintenance – sub-segments should increase their contributions, the company said.
“Despite decreased revenus, we have a steady backlog, recent project wins and a solid prospect list, and we are on track to meet our guidance and remain positive about the year ahead,” said Mr. Card.
The revenue backlog stands at $8.4-billion, with challenging legacy projects representing $728.8-million of that, a 19 per cent sequential decrease, said the company.
Dundee Capital Markets analyst Maxim Sytchev said in a research note that the cash position at the end of the quarter of $1.1-billion “remains very healthy.
“Despite the fears that working capital requirements to complete ongoing projects would materially impact the company’s balance sheet, we are not seeing that,” he said.
“In addition, the AltaLink monetization which was announced last week ... should add $2.9-billion (after tax) of cash onto the balance sheet by year-end, shoring up the company’s finances significantly.”
SNC-Lavalin has agreed to sell its position in AltaLink for $3.2-billion to Berkshire Hathaway Energy, controlled by legendary billionaire investor Warren Buffett.
Among other divestitures of the company’s concession investments the company is looking at are its 16.7 per cent interest in Highway 407.
The goal is to boost the company’s presence in oil and gas, infrastructure and power generation, and Mr. Card has previously stated that acquisition opportunities are being assessed.