SNC SNC Lavalin Group Inc

2015 First Quarter Highlights

• Net income of $104.4 million, or $0.68 per diluted share;
• Adjusted net income from E&C⁽¹⁾ of $56.8 million, or $0.38 per diluted share;
• Revenue backlog at March 31, 2015, of $11.6 billion;
• Cash and cash equivalents at March 31, 2015, of $1.1 billion; and
• Maintains outlook for 2015 adjusted EPS from E&C⁽²⁾.

MONTREAL, May 7, 2015 /CNW Telbec/ - SNC-Lavalin Group Inc. (TSX: SNC) announces its results today for the first quarter ended March 31, 2015.

"We are pleased to report first quarter results that have begun to reflect the capability and strength of our focused E&C platform. With a strong backlog, we are continuing to leverage our expanded expertise in oil and gas, as evidenced by the two recently announced sustaining capital contracts with a major oil company in the Middle East. We are also very pleased that Signature on the St. Lawrence Group, which includes SNC-Lavalin, has been selected by the Government of Canada as the preferred proponent for the design, build, finance, operation, maintenance and rehabilitation of the new bridge for the St. Lawrence corridor project," said Robert G. Card, President and Chief Executive Officer, SNC-Lavalin Group Inc. "We also recently announced organizational changes to drive operational execution. With Neil Bruce in the newly created position of Chief Operating Officer, our enhanced proposal review and approval process and more efficient cost controls, we will further improve operational execution and delivery of commitments to all stakeholders as we better align our business structure with our markets. We also remain focused on our strategy of monetizing mature assets within our ICI portfolio. We are continuing to move forward in a deliberate manner on the sale of Highway 407 and have hired financial advisors to assist with the process. Concurrently we are accelerating our process to extract the maximum value from our remaining ICI assets, and optimize our financial asset management structure as we further develop this sector of our business."

"In the first quarter, we bought back some of our shares, and we expect to be more active on our current repurchase program, as permitted by law and subject to market conditions. We also announced today our intention to renew and increase our normal course issuer bid, subject to regulatory approval. Under the current circumstances, we believe that the purchase of common shares is an effective use of our funds and in the best interest of the Company and its shareholders," added Mr. Card.

First Quarter Results
For the first quarter of 2015, SNC-Lavalin reported a net income attributable to SNC-Lavalin shareholders of $104.4 million ($0.68 per share on a diluted basis), compared to $94.6 million ($0.62 per share on a diluted basis) for the same period in 2014.

Net income from Engineering & Construction and Operations & Maintenance ("E&C") for the first quarter of 2015 was $67.0 million, or $0.44 per diluted share, compared to $30.8 million, or $0.20 per diluted share, for the first quarter of 2014. The first quarter 2015 E&C results included:

• $37.0 million ($32.6 million after taxes, or $0.21 per diluted share) for a one-time net foreign exchange gain;
• $21.0 million ($16.0 million after taxes, or $0.11 per diluted share) of amortization of intangible assets in connection with the acquisition of Kentz;
• $7.9 million ($6.0 million after taxes, or $0.04 per diluted share) of acquisition-related costs and integration costs in connection with the acquisition of Kentz; and
• $0.5 million ($0.4 million after taxes, or $0.00 per diluted share) of charges relating to the restructuring and right-sizing plan announcement of November 6, 2014.

The first quarter 2014 E&C results included:

• $1.2 million ($0.7 million after taxes, or $0.00 per diluted share) of restructuring costs, mainly for the reorganization of the Company's European activities, including the disposal and closure of certain offices.

Adjusted net income from E&C for the first quarter of 2015, excluding the above-mentioned items, was $56.8 million, or $0.38 per diluted share, compared to $31.5 million, or $0.20 per diluted share, for the corresponding period in 2014. The increase is mainly due to a higher contribution from the Oil & Gas, Power and Mining & Metallurgy segments, partially offset by a lower contribution from the Operations & Maintenance sub-segment. The Infrastructure & Construction sub-segment recorded a negative EBIT in the first quarter of 2015 compared to a positive EBIT in the first quarter of 2014, as the 2014 results included the reversal of a risk provision that had been previously recorded on a Libyan project. The increase in Oil & Gas was mainly due to the incremental EBIT from Kentz, the acquisition of which was completed on August 22, 2014. The increase in Power was mainly due to a favourable reforecast on a major project, and the increase in Mining & Metallurgy was mainly due to a decrease in SG&A.

Net income from Infrastructure Concession Investments ("ICI") and Adjusted net income from ICI for the first quarter ended March 31, 2015, were $37.4 million, or $0.24 per diluted share, compared to $63.8 million, or $0.42 per diluted share, for the corresponding quarter of 2014. The decrease was mainly due to the disposal of AltaLink and Astoria in 2014, resulting in no net income from these disposed assets in 2015, partially offset by a higher dividend received from Highway 407.

Revenues for the first quarter of 2015 increased by 31.2% to $2.3 billion, mainly due to an increase in the Oil & Gas segment, as incremental Services and Packages revenues were generated by Kentz, the acquisition of which was completed on August 22, 2014, as well as an increase in the Power segment, as the Company is no longer required to eliminate E&C revenues generated between the Company and AltaLink, since its disposal in the fourth quarter of 2014. This increase was partially offset by a decrease in ICI revenues, principally due to the disposal of our AltaLink investment.

Selling, general and administrative ("SG&A") expenses for the first quarter ended March 31, 2015, totalled $206.7 million, compared to $186.8 million for the corresponding period in 2014. The increase was mainly due to the incremental SG&A expenses from Kentz, the acquisition of which was completed on August 22, 2014.

In the first quarter of 2015, the Company recorded $0.5 million ($0.4 million after taxes) of charges relating to the restructuring and right-sizing plan announcement of November 6, 2014, to align its operations with its growth strategy and end-market economics. The Company is continuing its efforts to complete this restructuring and right-sizing plan, which is expected to result in approximately $45 million (after taxes) in charges over the next 11 months.

Cash and cash equivalents totalled $1.1 billion as at March 31, 2015, compared to $1.7 billion at the end of December 31, 2014.

Revenue backlog totalled $11.6 billion at the end of March 2015, compared to $8.4 billion at the end of March 2014 and $12.3 billion at the end of December 2014. The increase compared to March 2014 is mainly due to the Services and Packages revenue backlog, which grew largely due to the addition of Kentz's revenue backlog, partially offset by a slight decrease in O&M.

2015 Outlook
The Company is maintaining its previously announced 2015 outlook for the adjusted EPS from E&C⁽²⁾, which is expected to be in the range of $1.30 to $1.60.

The adjusted EPS from E&C guidance excludes a one-time net foreign exchange gain of $33 million (after taxes) recorded in the first quarter of 2015, charges related to the restructuring and right-sizing plan, as well as amortization of intangible assets and acquisition-related costs and integration costs incurred in connection with the acquisition of Kentz in 2014. The amortization is expected to result in an after-tax expense of approximately $65 million, while charges related to the restructuring and right-sizing plan and acquisition and integration costs are expected to be approximately $60 million (after taxes).

The 2015 outlook is principally based on the expectation that the Oil & Gas and Power segments, mainly due to the acquisition of Kentz and based on their current backlog, will be the main contributors to net income, while the Infrastructure & Construction sub-segment will continue to face challenges throughout 2015.

The Company is increasing its 2015 outlook for the reported IFRS EPS to a range of $1.80 to $2.10, from a range of $1.60 to $1.90, to reflect the one-time net foreign exchange gain recorded in the first quarter of 2015.

The above outlook continues to be based on the assumptions and methodology described in the Company's 2014 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 $0.25 per share, payable on June 4, 2015, to shareholders of record on May 21, 2015. This dividend is an "eligible dividend" for income tax purposes.

Annual Shareholders' Meeting and Conference Call
SNC-Lavalin's Annual Shareholders' Meeting will be held at 11:00 a.m. Eastern Daylight Time (EDT) today at Théâtre St-James, 265 St-Jacques West, Montreal, Quebec. The event will be webcast live and will be available at http://www.icastpro.ca/esnc150507.

SNC-Lavalin will also hold a conference call today at 2:45 p.m. EDT to discuss the first quarter results. The telephone numbers to access the conference call are 1 866 530 1553 in North America: 416 847 6330 in Toronto: 514 223 0614 in Montreal: 080 0279 0444 in the United Kingdom: and 180 099 2284 in Ireland. A presentation of the 2015 first quarter results will be available on the "Investors – Investor's Briefcase" section of the SNC-Lavalin website at www.snclavalin.com approximately one hour prior to the call. A recording of the conference call will also be available on our website within 24 hours following the end of the call.

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 employees provide EPC and EPCM services to clients in a variety of industry sectors, including mining and metallurgy, oil and gas, 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

⁽¹⁾ See Figure 1

⁽²⁾ Adjusted EPS from E&C is defined as net income attributable to SNC-Lavalin shareholders from E&C, excluding one-time net foreign exchange gains, charges related to restructuring and right-sizing, as well as amortization of intangible assets, and the acquisition and integration costs incurred in connection with the acquisition of Kentz in 2014, per SNC-Lavalin common share. E&C is defined in the Company's 2014 financial statements and Management's Discussion and Analysis. The term "Adjusted EPS from E&C" does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Adjusted EPS from E&C is a non-IFRS financial measure which is an indicator of the entity's financial performance of its E&C activities. 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.

⁽³⁾ EBIT is defined herein as income before net financial expenses and income taxes. Segment and sub-segment EBIT is defined herein as gross margin less i) directly related selling, general and administrative expenses; and ii) non-controlling interests before taxes. Corporate selling, general and administrative expenses not directly related to projects or segments, restructuring costs, goodwill impairment, acquisition-related costs and integration costs, as well as amortization of intangible assets are not allocated to the Company's segments. The term EBIT, segment EBIT and sub-segment EBIT do not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. EBIT, segment EBIT and sub-segment 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.

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", "synergies", "will", 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 2015 outlook referred to in this press release is forward-looking information and is based on the methodology described in the Company's 2014 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 2015 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 2014 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 2014 Management's Discussion and Analysis), as updated in the Company's First Quarter 2015 Management's Discussion and Analysis. The 2015 outlook also assumes that the federal charges laid against the Company and its indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc. on February 19, 2015, will not have a significant adverse impact on the Company's business in 2015. 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) on February 19, 2015, the Company was charged with one count of corruption under the CFPOA and one count of fraud under the Criminal Code (Canada), and is also subject to other 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. These charges and investigations, and potential results thereof, 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) 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; (cc) 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; (dd) inherent limitations to the Company's control framework could result in a material misstatement of financial information, and; (ee) 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 2014 Management's Discussion and Analysis, as updated in the Company's First Quarter 2015 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.

SNC-Lavalin's Consolidated Financial Statements and Management's Discussion and Analysis and other relevant financial materials are available in the Investors section of the Company's website at www.snclavalin.com. These and other Company reports are also available on the website maintained by the Canadian Securities regulators at www.sedar.com.

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