SNC-Lavalin's Q3 profit rises, backlog sags
Canadian engineering stalwart SNC-Lavalin Inc. posted significantly higher earnings for the third quarter despite slipping revenue and a declining book of business.
Montreal-based SNC earned $91.3 million, or 60 cents a share, for the three-month period ended Sept. 30. That represents a 43 per cent jump compared with the same quarter in 2007, when SNC made $63.7 million.
The results were even more robust for the first nine months of the year: For the January to September period of 2008, SNC posted a profit of $237.4 million, nearly triple the $84.5 million the company earned in the same time frame in 2007.
SNC said better showings in its mining and metallurgical division and in its crucial infrastructure arm were major factors underscoring the improved profit performance.
Three month TSX chart for SNC-Lavalin Inc."We achieved solid results in the third quarter of 2008, and I am pleased with our performance in the first nine months of 2008. We are on the right track for substantial growth in profitability in 2008 compared to 2007," SNC chief executive Jacques Lamarre said.
Soft winter?Even as the company posted rising earnings, there were still sore spots in its income statement.
SNC's third-quarter revenue slipped 5.6 per cent compared with the year-ago period, shrinking to $1.69 billion.
SNC said continued problems at the Goreway power project, located outside of Toronto, drove its overall revenue south. The company absorbed a $214.7-million operating loss on the project for the first nine months of 2007 after a major equipment supplier, Deltak, declared bankruptcy.
Revenue by group ($) % changeInfrastructure435.3 -4.6 Chemical336.4 12.7 Power 291.1-45.3Source: SNC-Lavalin's Q3Deltak has since emerged from receivership.
Still, SNC said it booked an additional loss in the third quarter of 2008 from the delays associated with the bankruptcy.
SNC also experienced lower sales in its infrastructure subsidiary.
SNC has a revenue backlog — representing projects in its business pipeline — for the next five years worth $9.74 billion at the end of September. That book of business, however, was flat compared with the same period last year and was down more than eight per cent compared with what SNC listed at the end of 2007.
The ongoing global financial crisis could exacerbate SNC's reduced project inventory, especially if companies and governments put new plant and new infrastructure building on hold.
ABCP writedownSNC took a small writedown on its share of outstanding asset-backed commercial paper. The company said Toronto's Highway 407 consortium, in which SNC holds an ownership share, has $154.2 million in this type of now-impaired debt.
SNC said the commercial paper is now worth $109.6 million, a reduction in value of 29 per cent.
The engineering firm said its share in Highway 407 was worth $18.4 million, of which the company is writing off $3.7 million.
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