SNC-Lavalin profit falls in 3rd quarter, but beats estimates
Pedestrians walk past the offices of SNC Lavalin in Montreal. (Ryan Remiorz / THE CANADIAN PRESS)
Published Friday, November 2, 2012 10:20AM EDT
Last Updated Friday, November 2, 2012 1:22PM EDT
MONTREAL -- SNC-Lavalin Group Inc. third-quarter profits decreased from a year ago but still easily beat consensus estimates due to the strength of investments in infrastructure concessions.
Net income at the Montreal-based construction and engineering company dropped to $114.9 million or 76 cents per diluted share in the most recent period.
That was down from $127.6 million or 82 cents per share in the third quarter of 2011.
Revenue increased, however, to $1.98 billion from $1.78 billion.
SNC-Lavalin (TSX:SNC) was expected to earn 65 cents per share in net profits on $2 billion of revenues in the third quarter, according to analysts polled by Thomson Reuters.
Excluding the contribution from the company's investments in infrastructure concessions, SNC's net income was $84 million or 56 cents per share compared with $98.9 million or 66 cents per share in the corresponding 2011 period. Analysts had expected adjusted EPS excluding concessions would equal 46 cents per share.
Net income from the infrastructure concessions investments, or ICIs, increased to $30.9 million from $25.6 million. ICIs include holdings in airports, toll roads, bridges, cultural and public service buildings, power, mass transit and water systems.
SNC maintained its outlook for net income for all of 2012 in the range of $325 million to $340 million.
It says the main drivers of profit will be SNC's power, mining and metallurgy and ICI segments.
The hydrocarbons and chemicals segment and the infrastructure and environment segments "will continue to be challenging throughout 2012," it said.
The quarter preceded Robert Card's first day as chief executive earlier this month.
Card started on the job amid reports that about $22.5 million of $56 million in questionable payments to undisclosed foreign agents was used to win the Montreal superhospital project.
Disclosure of the payments resulted in the replacement of former CEO Pierre Duhaime and several other leading executives and a substantial decrease in the company's share price.
"Since I arrived, I have been very impressed by the great capacity of SNC-Lavalin's employees and their dedication to our clients," Card said in Friday's earnings release.
"Over the coming months I will continue to review our strategy with the goal of ensuring this company continues to grow and be successful by serving the needs of its clients, employees and shareholders."
Maxim Sytchev of Alta Corp Capital said the results demonstrated that SNC's core engineering and construction business continued to perform despite negative news about the company.
"We see tremendous value in company's concession portfolio and SNC's balance sheet is in a great shape," he wrote in a report.
"SNC-Lavalin sports a hallmark of a true value story," he said, adding that the results look particularly good when compared those of rival Fluor released Wednesday night.
Pierre Lacroix of Desjardins Capital Markets said investors will welcome the results and the company's maintained guidance for the year.
"In light of the challenges the company has faced in recent quarters, we believe this morning's results further support our belief that SNC will be able to translate its backlog growth into solid profitability as margins normalize going into 2013 and 2014," he wrote.
"Recent awards continue to demonstrate that SNC remains well positioned to win lucrative new contracts as clients place critical importance on the firm's strong track record and capacity to execute large-scale projects."
Among the recently announced contracts is an upgrade processing equipment at a copper mine in Chile and a potash feasibility project in New Mexico.
A consortium headed by SNC-Lavalin has also been selected by the B.C. government as the preferred bidder to design and build the $1.4-billion Evergreen Line Rapid Transit project.
The project, to be integrated into the existing SkyTrain system, will link Burnaby, Port Moody and Coquitlam with an 11-kilometre advanced light rapid transit line.
SNC-Lavalin is one of the leading engineering and construction groups in the world with offices across Canada and operations in some 100 countries.
On the Toronto Stock Exchange, SNC's shares were up $1.59, or 3.95 per cent, at $41.87 near midday Friday.