- $195.6 million of net income
attributable to SNC-Lavalin shareholders for the first nine months
of 2014, compared to a net loss of $56.8
million for the same period in 2013;
- Results for first nine months of 2014 included
acquisition-related costs, integration costs and financing costs,
due to the Kentz acquisition, and restructuring costs, totalling
$76.3 million (after taxes);
- $30.7 million
EBIT(1) from Kentz since its acquisition on August 22, 2014 (approximately five
weeks);
- 8.3% EBIT(1) margin on revenues for the first
nine months of 2014 (9.6% excluding restructuring costs,
acquisition-related costs and integration costs);
- $12.5 billion revenue
backlog;
- $1.1 billion in cash and cash
equivalents;
- 2014 EPS guidance revised to a range of $0.40 to $0.55, which now includes contribution
from Kentz and all acquisition-related costs, integration costs and
financing costs, as well as the costs of the actions announced
today.
MONTREAL, Nov. 6, 2014 /CNW Telbec/ - SNC-Lavalin Group
Inc. (TSX: SNC) announces its results today for the third quarter
and nine-month period ended September 30,
2014.
|
|
|
(in thousands of Canadian dollars,
unless otherwise indicated) |
Third Quarter |
Nine months ended September 30 |
|
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Revenues by activity |
|
|
|
|
|
Services |
723,202 |
626,794 |
1,785,392 |
2,000,555 |
|
Packages |
726,007 |
819,837 |
1,961,183 |
2,280,194 |
|
O&M |
311,576 |
318,838 |
970,783 |
1,000,074 |
|
ICI |
243,346 |
179,726 |
703,385 |
507,994 |
|
2,004,131 |
1,945,195 |
5,420,743 |
5,788,817 |
|
|
|
|
|
Net income (loss) attributable to SNC-Lavalin
shareholders |
|
|
|
|
From E&C |
(19,963) |
(128,392) |
(36,020) |
(214,486) |
From ICI |
88,930 |
55,675 |
231,645 |
157,717 |
Net income (loss) attributable to
SNC-Lavalin shareholders |
68,967 |
(72,717) |
195,625 |
(56,769) |
|
|
|
|
|
Net income attributable to
non-controlling interests |
744 |
253 |
911 |
523 |
Net income (loss) |
69,711 |
(72,464) |
196,536 |
(56,246) |
|
|
|
|
|
Diluted earnings (loss) per share
($) |
0.45 |
(0.48) |
1.28 |
(0.37) |
|
|
|
|
|
|
|
|
As at
September 30,
2014 |
As at
December 31,
2013 |
Revenue backlog by
activity |
|
|
|
|
|
Services |
|
|
4,325,900 |
1,629,600 |
|
Packages |
|
|
6,085,400 |
4,429,700 |
|
O&M |
|
|
2,102,600 |
2,228,500 |
|
|
|
12,513,900 |
8,287,800 |
|
|
|
|
|
Cash and cash equivalents |
|
|
1,143,649 |
1,108,694 |
"During the quarter, we closed our landmark
acquisition of Kentz, which has transformed our oil and gas
capabilities and provided a platform for accelerated
growth. Kentz's strong and immediate contribution to
SNC-Lavalin reflects the logic of the transaction, and we look
forward to continuing to grow the business and gain market share in
the higher margin oil and gas sector, as well as leverage their
expertise across other SNC-Lavalin sectors," said Robert G. Card, President and Chief Executive
Officer, SNC-Lavalin Group Inc.
"We remain committed to capturing maximum value
from our portfolio, including leveraging our ICI assets to build
value for our E&C business, as evidenced by our recent
AltaLink, Astoria power plant and Groupe Immobilier Ovation
transactions. We have made good progress toward establishing an
efficient, global operating model, with a solid backlog,
world-class project execution and strict compliance standards, and
we look forward to continuing to execute our growth strategy to
create increased value for shareholders," he added.
Third Quarter Results
For the third quarter of 2014, SNC-Lavalin reported a net income
attributable to SNC-Lavalin shareholders of $69.0 million ($0.45 per share on a diluted basis), compared to
a net loss of $72.7 million
(-$0.48 per share on a diluted basis)
for the same period of 2013.
The Company reported a net loss from Engineering
& Construction and Operations & Maintenance ("E&C") of
$20.0 million, compared to a net loss
of $128.4 million for the third
quarter 2013. The net loss from E&C in the third quarter of
2014 is mainly due to $38.4 million
(after taxes) of financing, acquisition and integration costs
related to the acquisition of Kentz, which was completed on
August 22, 2014, and $10.2 million (after taxes) of restructuring
costs and goodwill impairment, as the Company continued its
restructuring actions to align its operations with its growth
strategy. Without these costs, third quarter 2014 net income from
E&C was $28.6 million versus
a comparative net loss from E&C of $66.0
million, resulting in a positive year-over-year variance of
$94.6 million. This positive variance
is due to a lower negative EBIT in the Infrastructure segment and
higher contributions from the REW and Power segments, compared to
the corresponding period last year.
The positive variance for the Infrastructure
segment is mainly due to a lower negative EBIT from the
Infrastructure & Construction sub-segment, principally due to
less unfavourable cost reforecasts in the third quarter of 2014,
compared to the corresponding period of 2013. The EBIT of the
Infrastructure & Construction sub-segment continued to be
affected by unprofitable legacy fixed-price projects, and included
a net negative impact on gross margin of $13.1 million in the quarter from the
combination of an additional loss on a major hospital project, and
of a favourable outcome on certain claims. The positive variance
for the REW segment is mainly due to a contribution of $30.7 million from the new Kentz sub-segment,
partially offset by lower contributions from the Mining &
Metallurgy, Oil & Gas and Environment & Water sub-segments.
Despite the positive variance from an improvement in its gross
margin to revenue ratio, the Power segment was affected in the
quarter by an unfavourable cost reforecast on an unprofitable
legacy fixed-price contract in North
Africa and additional reserves, for a total amount of
$23.6 million.
Net income from Infrastructure Concession
Investments ("ICI") increased to $88.9 million, compared to $55.7 million for the third quarter ended
September 30, 2013, mainly due to a
higher net income from AltaLink. The increase in net income from
AltaLink is mainly explained by an accounting requirement under
IFRS, for which the Company has ceased to depreciate and amortize
AltaLink's non-current assets starting May
1, 2014, resulting from the classification of AltaLink's
assets and liabilities as held for sale on that date.
Revenues for the third quarter of 2014 totalled
$2.0 billion, in line with the third
quarter of 2013, as the incremental Services revenues from Kentz
and the increase in ICI revenues were offset by the decrease in
Packages revenues.
Selling, general and administrative ("SG&A")
expenses for the third quarter ended September 30, 2014, totalled $204.3 million, compared to $175.7 million for the corresponding period of
2013. SG&A expenses for the third quarter of 2014 included
$18.3 million from Kentz and
$18.2 million from ICI. Excluding
these expenses, the remaining SG&A expenses from E&C were
in line with the third quarter of 2013, when the Company began its
effort to contain such expenses under its Value Up program and
implemented its restructuring plans.
Year-to-Date Results
For the nine-month period ended September
30, 2014, SNC-Lavalin reported net income attributable to
SNC-Lavalin shareholders of $195.6
million ($1.28 per share on a
diluted basis), compared to a net loss of $56.8 million (-$0.37 per share on a diluted basis) for the same
period of 2013.
The Company reported a net loss from E&C of
$36.0 million compared to a net loss
of $214.5 million for the first nine
months of 2013. The net loss from E&C is partly due to
$64.3 million (after taxes) of
financing, acquisition-related costs and integration costs related
to the acquisition of Kentz, which was completed on August 22, 2014, and $12.0
million (after taxes) of restructuring costs and goodwill
impairment. Without these costs, year-to-date 2014 net income from
E&C was $40.3 million,
versus a comparative net loss from E&C of $152.1 million in the corresponding nine-month
period in 2013, resulting in a positive variance of $192.4 million. This positive variance is due to
a positive EBIT in the Infrastructure and REW segments, compared to
a negative EBIT for the corresponding period last year, partially
offset by a lower contribution from the Power segment.
The positive variance for the Infrastructure
segment is mainly due to a lower negative EBIT from the
Infrastructure & Construction sub-segment, principally due to
reversals in 2014 of non-cash provisions on a Libyan project, as
well as less unfavourable cost reforecasts and provisions in the
first nine months of 2014 compared to the corresponding period of
2013, as well as a higher contribution in the O&M sub-segment.
The positive variance for the REW segment is mainly due to a lower
negative EBIT from the Oil & Gas sub-segment and to a
contribution of $30.7 million from
the new Kentz sub-segment, partially offset by lower contributions
from the Mining & Metallurgy and Environment & Water
sub-segments. The lower contribution from the Power segment is
mainly due to an unfavourable cost reforecast on an unprofitable
legacy fixed-price contract in North
Africa and additional reserves.
Net income from ICI increased to $231.6 million, compared to $157.7 million, for the first nine months of
2013, mainly due to a higher net income from AltaLink, as explained
above, as well as higher dividends received from Highway 407,
partially offset by a lower net income from SKH.
Revenues for the first nine months of 2014 were
$5.4 billion, compared to
$5.8 billion for the same period in
2013, as the incremental Services revenues in the third quarter
2014 from Kentz, and the increase in ICI revenues were more than
offset by the decrease in Packages revenues.
"We are making progress cycling through the
challenging legacy projects, and we are steadily replacing them
with higher-quality projects with better risk profiles. We were
also able to contain SG&A expenses in the quarter despite
additional costs related to the Kentz acquisition and we are taking
further steps to align our cost structure with our growth
opportunities. We remain confident that our current restructuring
program, outlined in this morning's announcement, will strengthen
our company and allow us to compete on a global scale," stated Mr.
Card.
SG&A expenses for the nine-month period
ended September 30, 2014, decreased
by 2.0% to $599.4 million, compared
to the corresponding period of 2013, despite $18.3 million of incremental expenses in the
third quarter from the Kentz acquisition. The decrease is mainly
attributable to costs savings resulting from the Company's
restructuring plans implemented in the second half of 2013, and the
Company's continued effort to contain these costs under its Value
Up program.
Cash and cash equivalents totalled $1.1 billion as at September 30, 2014, in line with December 31, 2013.
Revenue backlog totalled $12.5 billion at the end of September 2014, a 51.0% increase compared with
the end of December 2013. The
increase is mainly due to the Services and Packages revenue
backlog, which grew largely due to the addition of Kentz's revenue
backlog. The challenging legacy projects included in the Company's
backlog, the large majority of which are in the hospitals sector,
totalled $500.0 million as at
September 30, 2014, a 17% decrease
from $601.9 million as at
June 30, 2014.
2014 Outlook
The Company is revising its 2014 Earnings per Share ("EPS")
guidance range to $2.15 to $2.40,
from its previous guidance of $2.80 to
$3.05. This revised guidance does not take into account (i)
the impact of the acquisition of Kentz completed on August 22, 2014 or the acquisition costs relating
thereto, or (ii) the charges from the actions announced today. In
the event the acquisition of Kentz (including acquisition-related
costs, integration costs and financing costs) and the charges from
the actions announced today were taken into account, 2014 EPS would
be expected to be in the range of $0.40 to
$0.55. None of the guidance revisions set out above take
into account the eventual gain on the sale of the Company's
interest in AltaLink. The revised outlook is principally based on
the expectations that challenges will continue in the Mining &
Metallurgy sub-segment, which continues to be affected by the
softening of the commodity markets, and in the Infrastructure &
Construction and pre-Kentz Oil & Gas sub-segments, mainly due
to certain challenging legacy projects, as well as in the
Environment & Water sub-segment. It is also expected that the
ICI segment and the O&M sub-segment should increase their
contributions. This outlook assumes that SG&A expenses will
continue to decrease, mainly as a result of new initiatives and
ongoing activities associated with SNC-Lavalin's company-wide Value
Up profit improvement program, as well as the actions announced
today.
The above outlook continues to be based on the
assumptions and methodology described in the Company's 2013
Management's Discussion and Analysis under the heading "How We
Budget and Forecast Our Results", which should be read in
conjunction with the "Forward Looking Statements" section below and
is subject to the risks and uncertainties summarized therein, which
are more fully described in the Company's public disclosure
documents.
Quarterly Dividend
The Board of Directors today declared a cash dividend of
$0.24 per share, payable on
December 4, 2014, to shareholders of
record on November 20, 2014. This
dividend is an "eligible dividend" for income tax purposes.
About SNC-Lavalin
Founded in 1911, SNC-Lavalin is one of the leading engineering and
construction groups in the world and a major player in the
ownership of infrastructure. From offices in over 50 countries,
SNC-Lavalin's 45,000 employees provide EPC and EPCM services to
clients in a variety of industry sectors, including mining and
metallurgy, oil and gas, environment and water, infrastructure and
clean power. SNC-Lavalin can also combine these services with its
financing and operations and maintenance capabilities to provide
complete end-to-end project solutions. www.snclavalin.com
Forward-looking Statements:
Reference in this press release, and
hereafter, to the "Company" or to "SNC-Lavalin" means, as the
context may require, SNC-Lavalin Group Inc. and all or some of its
subsidiaries or joint arrangements, or SNC-Lavalin Group Inc. or
one or more of its subsidiaries or joint arrangements.
Statements made in this press release that
describe the Company's or management's budgets, estimates,
expectations, forecasts, objectives, predictions, projections of
the future or strategies may be "forward-looking statements", which
can be identified by the use of the conditional or forward-looking
terminology such as "aims", "anticipates", "assumes", "believes",
"cost savings", "estimates", "expects", "goal", "intends", "may",
"plans", "projects", "should", "will", "synergies", or the negative
thereof or other variations thereon. Forward-looking statements
also include any other statements that do not refer to historical
facts. Forward-looking statements also include statements relating
to the following: (i) future capital expenditures, revenues,
expenses, earnings, economic performance, indebtedness, financial
condition, losses and future prospects; and (ii) business and
management strategies and the expansion and growth of the Company's
operations and potential synergies resulting from the Acquisition.
All such forward-looking statements are made pursuant to the
"safe-harbour" provisions of applicable Canadian securities laws.
The Company cautions that, by their nature, forward-looking
statements involve risks and uncertainties, and that its actual
actions and/or results could differ materially from those expressed
or implied in such forward-looking statements, or could affect the
extent to which a particular projection materializes.
Forward-looking statements are presented for the purpose of
assisting investors and others in understanding certain key
elements of the Company's current objectives, strategic priorities,
expectations and plans, and in obtaining a better understanding of
the Company's business and anticipated operating environment.
Readers are cautioned that such information may not be appropriate
for other purposes.
The 2014 outlook referred to in this press
release is forward-looking information and is based on the
methodology described in the Company's 2013 Management's Discussion
and Analysis under the heading "How We Budget and Forecast Our
Results" and is subject to the risks and uncertainties described in
the Company's public disclosure documents. The purpose of the 2014
outlook is to provide the reader with an indication of management's
expectations, at the date of this press release, regarding the
Company's future financial performance and readers are cautioned
that this information may not be appropriate for other
purposes.
Forward-looking statements made in this press
release are based on a number of assumptions believed by the
Company to be reasonable as at the date hereof. The assumptions are
set out throughout the Company's 2013 Management's Discussion and
Analysis (particularly, in the sections entitled "Critical
Accounting Judgments and Key Sources of Estimation Uncertainty" and
"How We Analyze and Report our Results" in the Company's 2013
Management's Discussion and Analysis), as updated in the Company's
Third Quarter 2014 Management's Discussion and Analysis. The 2014
outlook also assumes that previously disclosed amounts relating to
a claim in Algeria will not be
reversed and does not take into account the eventual gain on the
sale of the Company's interest in AltaLink. If these assumptions
are inaccurate, the Company's actual results could differ
materially from those expressed or implied in such forward-looking
statements. In addition, important risk factors could cause the
Company's assumptions and estimates to be inaccurate and actual
results or events to differ materially from those expressed in or
implied by these forward-looking statements. These risks include,
but are not limited to: (a) the outcome of pending and future
claims and litigation could have a material adverse impact on the
Company's business, financial condition and results of operation;
(b) the Company is subject to ongoing investigations which could
subject the Company to criminal and administrative enforcement
actions, civil actions and sanctions, fines and other penalties,
some of which may be significant, which, in turn, could harm the
Company's reputation, result in suspension, prohibition or
debarment of the Company from participating in certain projects,
reduce its revenues and net income and adversely affect its
business; (c) further regulatory developments could have a
significant adverse impact on the Company's results, and employee,
agent or partner misconduct or failure to comply with anti-bribery
and other government laws and regulations could harm the Company's
reputation, reduce its revenues and net income, and subject the
Company to criminal and administrative enforcement actions and
civil actions; (d) if the Company is not able to successfully
execute on its new strategic plan, its business and results of
operations would be adversely affected; (e) a negative impact on
the Company's public image could influence its ability to obtain
future projects; (f) fixed-price contracts or the Company's failure
to meet contractual schedule or performance requirements may
increase the volatility and unpredictability of its revenue and
profitability; (g) the Company's revenue and profitability are
largely dependent on the awarding of new contracts, which it does
not directly control, and the uncertainty of contract award timing
could have an adverse effect on the Company's ability to match its
workforce size with its contract needs; (h) the Company's backlog
is subject to unexpected adjustments and cancellations, including
under "termination for convenience" provisions, and does not
represent a guarantee of the Company's future revenues or
profitability; (i) SNC-Lavalin is a provider of services to
government agencies and is exposed to risks associated with
government contracting; (j) the Company's international operations
are exposed to various risks and uncertainties, including
unfavourable political environments, weak foreign economies and the
exposure to foreign currency risk; (k) there are risks associated
with the Company's ownership interests in ICI that could adversely
affect it; (l) the Company is dependent on third parties to
complete many of its contracts; (m) the Company's use of joint
ventures and partnerships exposes it to risks and uncertainties,
many of which are outside of the Company's control; (n) the
competitive nature of the markets in which the Company does
business could adversely affect it; (o) the Company's project
execution activities may result in professional liability or
liability for faulty services; (p) the Company could be subject to
monetary damages and penalties in connection with professional and
engineering reports and opinions that it provides; (q) the Company
may not have in place sufficient insurance coverage to satisfy its
needs; (r) the Company's employees work on projects that are
inherently dangerous and a failure to maintain a safe work site
could result in significant losses and/or an inability to obtain
future projects; (s) the Company's failure to attract and retain
qualified personnel could have an adverse effect on its activities;
(t) work stoppages, union negotiations and other labour matters
could adversely affect the Company; (u) the Company relies on
information systems and data in its operations. Failure in the
availability or security of the Company's information systems or in
data security could adversely affect its business and results of
operations; (v) any acquisition or other investment may present
risks or uncertainties; (w) the Company may be unable to
successfully integrate the businesses of SNC-Lavalin and Kentz and
realize the anticipated benefits of the Acquisition; * a
deterioration or weakening of the Company's financial position,
including its cash net of recourse debt, would have a material
adverse effect on its business and results of operations; (y) the
Company may have significant working capital requirements, which if
unfunded could negatively impact its business, financial condition
and cash flows; (z) an inability of SNC-Lavalin's clients to
fulfill their obligations on a timely basis could adversely affect
the Company; (aa) the Company may be required to impair certain of
its goodwill, and it may also be required to write down or write
off the value of certain of its assets and investments, either of
which could have a material adverse impact on the Company's results
of operations and financial condition; (bb) the Company's
indebtedness following completion of the Acquisition is
substantial. This indebtedness could have adverse consequences for
the Company, including reducing funds available for other business
purposes; (cc) global economic conditions could affect the
Company's client base, partners, subcontractors and suppliers and
could materially affect its backlog, revenues, net income and
ability to secure and maintain financing; (dd) fluctuations in
commodity prices may affect clients' investment decisions and
therefore subject the Company to risks of cancellation, delays in
existing work, or changes in the timing and funding of new awards,
and may affect the costs of the Company's projects; (ee) inherent
limitations to the Company's control framework could result in a
material misstatement of financial information, and; (ff)
environmental laws and regulations expose the Company to certain
risks, could increase costs and liabilities and impact demand for
the Company's services. The Company cautions that the foregoing
list of factors is not exhaustive. For more information on risks
and uncertainties, and assumptions that would cause the Company's
actual results to differ from current expectations, please refer to
the sections "Risks and Uncertainties", "How We Analyze and Report
Our Results" and "Critical Accounting Judgments and Key Sources of
Estimation Uncertainty" in the Company's 2013 Management's
Discussion and Analysis, and as updated in the Company's Third
Quarter 2014 Management's Discussion and Analysis.
The forward-looking statements herein reflect
the Company's expectations as at the date of this press release and
are subject to change after this date. The Company does not
undertake any obligation to update publicly or to revise any such
forward-looking statements whether as a result of new information,
future events or otherwise, unless required by applicable
legislation or regulation.
(1) EBIT is defined herein as income
before net financial expenses and income taxes. Segment and
sub-segment EBIT is defined herein as income net of non-controlling
interest, before restructuring costs, goodwill impairment,
acquisition-related costs, integration costs, net financial
expenses and income taxes. The term EBIT does not have any
standardized meaning under IFRS. Therefore, it may not be
comparable to similar measures presented by other issuers. EBIT is
a non-IFRS financial measure which is an indicator of the entity's
capacity to generate income from operations before taking into
account management's financing decisions. Management uses this
measure as a more meaningful way to compare the Company's financial
performance from period to period. Management believes that, in
addition to conventional measures prepared in accordance with IFRS,
certain investors use this information to evaluate the Company's
performance.
SOURCE SNC-Lavalin