January 24, 2005

Aecon expects $10M pretax loss for 2004

TORONTO

Construction firm Aecon Group Inc. has warned that it expects to report a pretax loss of $10 million in 2004, despite previous guidance the company would return to profitability.

The results improve on Aecon’s 2003 pretax loss by $7 million, the company said, but show unanticipated declines in its buildings and industrial divisions.

Aecon, Canada’s largest publicly traded construction company, posted a net loss for 2003 of $13.9 million.

“Although improved year-over-year results are expected in five of Aecon’s seven operating divisions, it has recently become apparent that the decline in two divisions has been more significant than previously expected,” the company said in a release.

“While results are still preliminary, it is now expected that Aecon will report considerable declines in its buildings and industrial divisions.”

Aecon’s Quebec civil division, while showing improvement over 2003, is also expected to report significant operating losses for the year.

“Results were also dep-ressed by delays in claim settlements in Ontario and Quebec and a delayed contract closing and associated profits, all of which were expected to take place in the fourth quarter of 2004 but were pushed into the first quarter of 2005,” the company said.

Reduced profits at its industrial division reflect unplanned one-time contract costs on a large power project in New Brunswick as well as timing delays on fabrication and module assembly contracts.

Losses at Aecon’s buildings division, about $12 million, were caused by contract losses and “is reflective of the impact of past project management and cost control practices that have been substantially improved throughout the year as well as management and overhead costs that have now been restructured.”

The company said it expects substantial improvement in 2005.

“Overall, Aecon’s expected year-over-year improvement in five of our seven divisions reinforces management’s view that Aecon remains solidly on the path to recovery,” said chief executive John Beck.

The company said it is considering a review with its auditors over whether it should exercise a full or partial valuation allowance of up to approximately $30 million against net accumulated future tax assets.

Aecon expects to release its 2004 results March 17.

The Canadian Press

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