SNC-Lavalin reports backlog of $15.2 billion in 2018 second quarter results
Canada’s largest engineering and design firm, SNC-Lavalin, recently released its second quarter 2018 results. The firm reported a swelling backlog of $15.2 billion in contracts. The firm, however, is experiencing expanded risk from freezing diplomatic ties between Canada and Saudi Arabia.
Montreal-based SNC-Lavalin is one of the world’s largest design and engineering professional services firms. Founded in 1911, the firm provides solutions in capital investment, consulting, design, engineering, and construction to clients across infrastructure, oil & gas, mining, clean power, nuclear, and others. The firm has about 50,000 employees in offices across 50 countries. SNC-Lavalin had revenues of $9.3 billion in 2017.
The firm’s second quarter results revealed a strong contract backlog of $15.2 billion – up 45.8% from the $10.4 billion reported at year end. The firm reported total bookings of $4.1 billion in the second quarter of 2018. Other notable figures included a Q2 2018 adjusted net income from Engineering & Construction of $113.5 million, up 77% from Q2 2017, as well as $83 million in net income attributable to company shareholders.
"We are very pleased with our first six months' performance, which is in line with our expectations, and reached a milestone of over $15 billion of backlog," said Neil Bruce, President and Chief Executive Officer, SNC-Lavalin Group Inc. "We are entering the third quarter of 2018 with a strong backlog, a number of recently signed master service agreements and a high quality prospects list across our key sectors and geographies; poised for a strong second half of 2018."
“The integration of Atkins business continues to progress well and we have been able to share technologies, data and knowledge that is improving and broadening our services to clients.
In 2017, SNC acquired Atkins, which was at the time the UK’s largest engineering consultancy. It had 18,000 employees across 29 countries and revenues of £1.862 billion in 2016. The firm’s footprint included significant operations in Asia Pacific and the Middle East.
According to SNC’s quarterly report, its operational integration of Atkin is now complete. The firm says it is on track to deliver the projected cost synergies of $120 million by the end of 2018.
Reported revenues from Engineering & Construction (E&C) amounted to $2.5 billion compared to $1.9 billion in Q2 2017. The increase was due to the Engineering and Design Project Management (EDPM) and Nuclear segments, with increased incremental revenues from Atkins. The gains were partially offset by decreases in Oil & Gas and Thermal.
SNC maintains its projection of $2.60 to $2.85 adjusted diluted earnings per share (EPS) in 2018 from E&C. As a result of synergies and restructuring savings from the Atkins acquisition, the company expects growth in total segment earnings before interest and tax (EBIT). “EDPM, Mining & Metallurgy, Nuclear and Thermal Power segments are expected to increase, while the Oil & Gas and Infrastructure segments are expected to be mainly in line compared to 2017, with Clean Power to be slightly lower,” said the company statement.
The company also revealed that it is looking into selling 6.76% of its 16.77% ownership stake of Greater Toronto Area toll highway 407 in order to create further shareholder value.
Saudi Arabia
A diplomatic spat between Canada and Saudi Arabia has spooked SNC investors, with freezing relations putting a higher level of risk on the company’s business in Saudi Arabia – which accounts for 11% of sales. Following criticism of Saudi Arabia’s human rights record, the Middle East nation recalled its Ottawa ambassador and threatened to pull thousands of its students and patients from Canadian universities and hospitals. The country has also frozen new business deals from Canada.
SNC has about 10,000 employees in Saudi Arabia and has annual revenues of $1 billion in the country. The firm recently signed a five-year engineering services contract with oil giants Saudi Aramco and Kuwait Gulf Oil Co.
“We are not able at this time to fully assess the effect on the SNC-Lavalin Group's current and future business opportunities in the Kingdom of Saudi Arabia,” said a company statement released on August 8. “If a widespread commercial embargo on Canadian commercial interests in the Kingdom of Saudi Arabia were to be implemented on a prolonged basis, there will be an impact on our future financial performance.”
