August 5, 2008

Missing out on major highway jobs not a concern for SNC-Lavalin, CEO says

MONTREAL

Global engineering powerhouse SNC-Lavalin Group Inc. said it’s not embarrassed to have lost large highway construction projects in its backyard to foreign competitors.

“We don’t mind losing a job — we don’t want to lose money on projects, that’s by far the number one priority,” CEO Jacques Lamarre said during a recent conference call to discuss the company’s strong second-quarter results.

Montreal-based SNC nearly doubled its quarterly profit, earning $75.4 million in the period ended June 30, up from $41.1 million a year ago.

Earnings were boosted by strong results from the company’s Infrastructure and Environment segment as well as its Mining and Metallurgy division.

Revenues were $1.7 billion, up slightly from $1.69 billion last year.

SNC Lavalin recently came in second in bidding for marquee projects such as the public-private partnership extension of Highway 30 near Montreal and the Edmonton ring road.

Lamarre told analysts the losses don’t signal errors in the company’s pricing approach.

“We feel that we’re really in the ballpark.”

SNC employees aren’t paid incentives to win projects, removing pressure to sign deals just to pad the top line, he said.

The company has grown into a global construction giant despite the lack of government support by using the same open competition that has now benefited some foreign competitors, Lamarre said.

“We have been able to develop to the size we are by being able to compete in a very open market and that is quite an achievement because many Canadian industries have been protected.”

All of SNC Lavalin’s sectors contributed to the company’s quarterly success.

Its revenue backlog was $9.4 billion at the quarter’s end, down from $10.5 billion a year earlier. It had cash and cash equivalents were $946 million.

“The operating income in most of our segments is up compared to last year, our cash position remains solid and our list of prospects remains promising,” he said.

“We remain optimistic for the upcoming quarters and maintain our 2008 outlook for substantial growth in profitability compared to 2007.”

Lamarre said SNC has strong confidence in the mining sector this year despite Rio Tinto Alcan’s recent decision to put its Coega smelter in South Africa on hold. He pointed to the company’s plans to expand development of smelter in the Saguenay region of Quebec.

Canadian Press

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