SNC-Lavalin CEO sick of being used as a ‘puck in a political hockey game’

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This article was published 21/02/2019 (2134 days ago), so information in it may no longer be current.

MONTREAL – Amid an ongoing scandal that has rocked the Liberal government in Ottawa, the head of SNC-Lavalin Group Inc. said he’s tired of seeing his employees “used as a puck in a political hockey game.”

“Frankly, they don’t deserve it. And we’ve had enough,” chief executive Neil Bruce said Friday after slashing the company’s dividend and reporting its biggest quarterly losses in at least two decades.

The beleaguered engineering and construction giant has been in the eye of a firestorm that erupted earlier this month when the Globe and Mail reported the Prime Minister’s Office pressured former attorney general Jody Wilson-Raybould to steer prosecutors toward negotiations with the company.

The company was looking to negotiate a deferred prosecution agreement in connection with fraud and bribery charges linked to business dealings with Moammar Gadhafi’s now-toppled regime in Libya.

Bruce said he wasn’t holding out much hope for a remediation agreement, which would allow SNC-Lavalin to avoid a criminal trial in exchange for fines and other penalties.

“That’s certainly at their discretion,” he said. “But frankly, it doesn’t look like that today.”

SNC-Lavalin chopped its dividend by 65 per cent Friday as it reported a fourth-quarter loss of $1.6 billion.

It will now pay a quarterly dividend of 10 cents per share compared with its earlier payment of 28.7 cents per share.

Bruce said problems at a mining project in Chile were “incredibly disappointing,” noting the company’s mining and metallurgy and oil and gas segments had underperformed, prompting a pair of profit warnings earlier this year.

Ongoing diplomatic tensions between Canada and Saudi Arabia have jeopardized future contracts in the Middle Eastern kingdom, Bruce said last month after announcing a $1.24-billion impairment charge related to SNC-Lavalin’s oil and gas business.

The Jan. 28 announcement, combined with news about delays at the Chilean mining project and an arbitration loss in Australia, sent shares plummeting 27 per cent to close at $35.01, their lowest since September 2012.

Analyst Derek Spronck of RBC Dominion Securities advised investors to “keep calm and carry on.”

“There remain lots of challenges ahead for SNC, but none of which we would view as insurmountable and more than reflected in the current share price,” he said in a research note Friday.

A criminal case could result in a ban of up to 10 years on bidding on federal contracts.

Bruce noted that until a conviction comes down, the company faces no bidding restrictions in Canada.

“Basically, they don’t penalize you until you’re found guilty.”

“This overhang continues to be there,” he added, “and competitors in the U.S….use that against us.”

Analysts pointed to a potential sale of some of the company’s 16.77 per cent stake in Ontario’s 407 ETR highway in 2019. The company has been mulling a partial sale for at least six months, which would hand it a slice of the $2.2 billion some analysts say the stake is worth.

The Montreal-based company’s loss for its fourth quarter amounted to $9.11 per diluted share. That compared with a profit of $52.4 million or 30 cents per diluted share in the fourth quarter of 2017.

Revenue totalled $2.56 billion, down from $2.92 billion.

On an adjusted basis, SNC reported a loss of $1.31 per diluted share compared with an adjusted profit of 98 cents per diluted share a year ago.

Analysts on average had expected a loss of $1.19 per diluted share, according to Thomson Reuters Eikon.

Companies in this story: (TSX:SNC)