Company advances focused plan to drive growth and build a
global Tier-1 E&C company
Activities aim to deliver approximately $100 million in annual after tax operational
efficiencies beginning in 2015
2014 EPS guidance revised to reflect actions, including
restructuring and right-sizing, Kentz acquisition and end-market
environment
MONTREAL,
Nov. 6, 2014 /CNW Telbec/ -
SNC-Lavalin (TSX: SNC) today announced that it will take a number
of steps to restructure and right-size certain areas of its
business as it continues to execute its five-year Strategic Plan to
build a global Tier-1 engineering and construction firm.
"Over the past two years, we have made
significant progress on our focused plan to become a global Tier-1
engineering and construction company, with industry leading
capabilities in the resources, power and infrastructure markets,"
said Robert G. Card, President and
CEO, SNC-Lavalin Group Inc. "We have substantially transformed our
business and rapidly met key milestones for creating shareholder
value."
SNC-Lavalin has implemented the following
initiatives over the past 24 months and will continue to execute
certain aspects of each program. The Company has:
- Built a major Oil & Gas business with the acquisition of
Kentz, allowing the Company to target increasing opportunities in a
sector that continues to expand on a global basis. The Kentz
transaction bolstered the Company's expertise and capabilities in
this sector, while strengthening its geographic mix, particularly
in the Middle East;
- Maintained its commitment to the highest standards of
governance, ethics and compliance, while substantially improving
safety, environmental and sustainability performance across the
organization at all levels;
- Improved efficiency and competitive positioning, by, among
other things, making key executive hires and reducing SG&A
expenses;
- Enhanced its project proposal review and approval processes, as
well as its efficiency around project cost controls; and
- Strategically rebalanced its ICI portfolio, while continuing to
evaluate how best to manage assets to position the Company to
continue to win business and deliver growth.
In the next phase of its plan, which aims to
deliver sustainable and long-term value for SNC-Lavalin
shareholders, the Company will enhance client focus and generate
greater cross-company efficiencies by further restructuring and
right-sizing its operations. These actions will enhance
SNC-Lavalin's agility, while improving its ability to address the
needs of its clients and compete on a global scale.
Accordingly, over the next 18 months,
SNC-Lavalin plans to scale back certain underperforming activities
and adjust, consolidate and streamline some of its operations and
corporate structure to improve efficiency, effectiveness and
competitive positioning. While some of the restructuring and
right-sizing will affect the Company's Canadian operations,
approximately three-quarters of the plan is directed at activities
outside of Canada, in sectors and
end markets that face a more difficult operating environment.
"We are taking definitive action to reshape our
platform and enhance our ability to deliver outstanding services to
clients, long-term value for our stakeholders and exciting
opportunities for our team. This is the next major phase in our
five-year Strategic Plan, and we will build on the tremendous
opportunity set created through the acquisition of Kentz and on the
successful execution of our Value-Up initiatives," added Mr.
Card.
"As we prepared for the next phase of our plan,
we took a hard look at our structure, portfolio and pipeline of
opportunities and decided that further action is required to align
our expertise and internal resources with the realities of our
markets and client needs. While we remain committed to maintaining
a leadership position in mining, a major global slowdown in the
sector has created a ripple effect through other industries, and is
combining with a general economic slowdown, particularly in the
BRIC countries. We must therefore improve our agility and client
focus in order to capitalize on the most promising opportunities in
key growth markets," concluded Mr. Card.
This restructuring and right-sizing, which is
expected to result in $200 million
(after taxes) in charges over the next 18 months, aims to deliver
approximately $100 million (after
taxes) in annual operational efficiencies beginning in 2015, and
will require a reduction of the Company's global workforce of about
4,000, or 9 percent, over this period. Simultaneously, the Company
is expected to record approximately $100
million (after taxes) in non-cash charges over this
time. The Company recognizes the impact of its decision to
reduce its workforce, but notes that the restructuring and
right-sizing actions are intended to ensure that SNC-Lavalin's
global employee base has a stronger platform from which to grow, as
well as access to an increasing number of professional
opportunities.
As announced today in our third quarter earnings
release, the Company revised its 2014 Earnings per Share ("EPS")
guidance range to $0.40 to $0.55.
This revised guidance takes into account the charges referred to
above, the impact of the acquisition of Kentz completed on
August 22, 2014, and the acquisition
costs relating thereto, the continuing downturn in the mining and
metallurgy sector and the heightened challenges of certain legacy
projects. The guidance revision does not take into account the
eventual gain on the sale of the Company's interest in
AltaLink.
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
Robert G. Card,
President and CEO and Erik Ryan,
Executive Vice-President, Strategy, Marketing, External Relations,
will be available for media questions immediately following today's
3 p.m. conference call to present the
Company's third quarter results. Journalists are therefore asked to
remain on the line for this interview period, which will last no
more than 30 minutes.
To join the conference, please dial toll-free at
1-866-530-1554 in North America,
or 416-849-1847 in Toronto, or
514-223-0614 in Montreal,
08002790444 in the United Kingdom
or 1800992284 in Ireland.
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.
The above 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
restructuring and right-sizing actions referred to above. The
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.
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.
SOURCE SNC-Lavalin