(Reuters) - Struggling construction and engineering firm SNC-Lavalin Group Inc (SNC.TO) on Monday withdrew its forecast for 2019, citing significantly lower results as it considers options for its resources unit and exits fixed-price contracts.
FILE PHOTO: The SNC Lavalin logo is pictured outside a company building in Montreal, Quebec, Canada, May 5, 2019. REUTERS/Dario Ayala
A little over a month ago, the Canadian company had announced a strategic review and appointed Chief Operating Officer Ian Edwards as its interim boss.
Montreal-based SNC-Lavalin has been facing a trial in Canada over fraud and corruption charges related to allegations that former executives paid bribes to win contracts in Libya under Muammar Gaddafi’s regime, which fell in 2011. The company’s unsuccessful attempts to reach a settlement led to a political scandal engulfing Prime Minister Justin Trudeau.
SNC, which in February forecast 2019 earnings of C$3 to C$3.20 per share, said on Monday it would reorganize the company’s resources and infrastructure construction segments into a separate business following continued poor performance of the units.
The company added that it was exploring all options, including a sale, for its resources segment, particularly its oil & gas business.
“Lump-sum, turnkey projects have been the root cause of the company’s performance issues,” Edwards said in a statement.
Under lump-sum, turnkey contracting, a fixed price is agreed for the execution of a project or part of a project and once the final development is completed it is handed over to the client.
“By exiting such contracting ... we are tackling the problem at the source, and as a result we expect to see a material improvement in the predictability and clarity of our results,” the interim CEO said.
Shares of the company have fallen more than 44% in 2019, pressured by trade challenges in Saudi Arabia, headwinds in metals and mining and the corruption trial.
To calm investors and boost shareholder value, SNC has been looking to cut costs and earlier this year announced its exit from 15 countries.
SNC now expects to post a second-quarter adjusted core loss of C$150 million ($114.77 million) to C$175 million in its main engineering and construction business.
The company had posted a surprise loss in the unit in the first quarter, sending its shares to a decade low.
SNC-Lavalin also said it would take C$1.9 billion pretax charges related to goodwill impairment and intangible assets in its oil and gas business.
Reporting by Debroop Roy and Arathy S Nair in Bengaluru; Editing by Maju Samuel