SNC-Lavalin Group Inc. vows it will keep battling to win a corruption settlement deal like those available to companies in the United States, saying its employees are reacting with "determined hostility" to the bribery and fraud charges against it.
The comments came as Canada's largest engineering and construction firm issued a weaker-than-expected earnings forecast for 2015, sending the company's shares down 6.6 per cent. Two and a half years into chief executive Robert Card's effort to set the storied company back on course, SNC shares are trading at a lower price now than when he started.
"[This is] still a long road to recovery," said Desjardins Securities analyst Benoit Poirier.
The RCMP laid rare corporate fraud and bribery charges against the company Feb. 19 after lengthy negotiations with prosecutors failed to reach a settlement. The company maintains that any wrongdoing was the act of people it no longer employs and that it shouldn't have been formally accused.
"Of course, we'd rather have achieved a different outcome, but what happened is the process in Canada," Mr. Card said Thursday of the charges. "We had done our very best to have a different process and we're still going to do our very best to have a different process. That's my day and night focus. So never give up is my motto and I'm confident that we're going to get there."
SNC had been working behind the scenes to try to win a U.S.-style deal, but Canada has refused to use the so-called "deferred prosecution" or "non-prosecution" agreements common in the United States. Under such deals, prosecutors can wring multimillion-dollar fines from companies facing bribery allegations, while sparing them a trial or a guilty plea that would bring additional reputational fallout. Britain has introduced similar rules.
Canada's trading partners have struck a proper balance between punishing offenders and protecting the economy and innocent bystanders, Mr. Card said. "We'll continue to fight this vigorously until we achieve something like that," the CEO said. "The employee reaction that I've seen to a couple of weeks ago has been one of determined hostility."
Mr. Card is helming a five-year strategic plan for SNC-Lavalin that has seen it bulk up its oil and gas capability with the purchase of British-based Kentz Corp. while cleaning up underperforming areas of the business. The CEO is in the midst of cutting 4,000 jobs, or about 9 per cent of the SNC workforce, as he moves the company from a multisectorial service provider to one more focused on resources, power and infrastructure.
In 2013, SNC aimed to roughly double in size by the end of 2018. But Mr. Card faces continued pressure from money-losing contracts negotiated by his predecessors and the prospect that significant senior management resources will be directed at the company's legal defence in the months ahead.
SNC has said it intends to plead not guilty to the federal charges. If it is found guilty, it faces the prospect of a 10-year ban on federal public works contracts in Canada and a reputational fallout with other government clients in other countries. The firm banked 60 per cent of its overall revenue in 2014 from projects in Canada, from both public and private clients.
For the quarter ended Dec. 31, 2014, SNC said it earned $1.15-billion, or $7.51 a share, as it tallied a $1.3-billion gain on the sale of Alberta power transmission company AltaLink. Revenue was $2.8-billion.
Adjusted net income on its core engineering and construction business, not including special charges related to layoffs and acquisition costs, missed analyst estimates at $22.7-million or 15 cents a share.
The company also issued guidance for 2015 of between $1.30 and $1.60 earnings per share for its engineering and construction business, excluding special charges. That's significantly lower than the $2.22 analysts were expecting. The company said the forecast is based on its belief that its oil and gas and power businesses will drive net income while infrastructure and construction as well as environment and water businesses will continue to face challenges.
The engineering firm boosted its quarterly cash dividend 4 per cent to 25 cents, saying it expects to sell its stake in the Highway 407 toll road this year.