As the political furor over whether SNC-Lavalin Group Inc. received special treatment from the Prime Minister dominates national headlines, the Montreal engineering and construction company has been suffering through its own, separate business drama — reshuffling much of its executive lineup this year in the face of losses and mishaps.
On Thursday, the Montreal-based engineering company announced an official restructuring of its business, and made three leadership changes adding to earlier turnover in its ranks.
The company framed the changes as an attempt to “de-risk” its business by consolidating certain business segments. It follows several damaging mishaps, including theloss of a $350-million contractin Chile earlier this month, and a cloud that moved over its oil and gas business particularly in Saudi Arabia, both of which led to major writedowns and earnings revisions.
“This new organizational structure will position us for further improving project delivery, driving sustainable growth and more consistent cash flow generation,” Neil Bruce, chief executive of SNC, said in a press release.
The company has twice slashed its profit forecasts this year and last month it reported a $1.6-billion loss for the fourth quarter. That prompted Standard & Poor’s Ratings agency to downgrade its credit from BBB to BBB minus, the lowest investment grade rating for its bonds to still be eligible for bank investment.
Part of its losses flowed from a dispute with the Chilean-run copper producer Codelco.
In January, Bruce said he was “deeply disappointed” in his mining team for cost overruns on the project, and the company’s chief financial officer said it would result in hundreds of millions of dollars in losses. Earlier this week, SNC confimed it had been fired from a $350-million contract to build acid plants for Codelco, and walked back claims that it hoped to resolve that dispute on an accelerated time frame.
That project was an engineering, procurement and construction contract, in which SNC agreed to design and build the project at a set price. Such contracts are higher risk as the company is responsible for cost overruns.
As part of the restructuring, SNC announced a new “project oversight” position to “foresee and fix project-related issues in a timely fashion,” that will report directly to Bruce.
He has stressed to investors that there won’t be any future debacles similar to what happened with Codelco on its outstanding EPC contracts.
“We have gone through 20 of our top contracts,” Bruce said during the last earnings call in February. “In terms of the work we do in this arena … we’ve done all the checks again to make sure that what we approved is what we signed and that they are on track and we don’t have anything of any similar nature whatsoever.”
This new organizational structure will position us for further improving project delivery, driving sustainable growth and more consistent cash flow generation
SNC CEO Neil Bruce
Per its restructuring on Thursday, the company is focusing on four core segments including nuclear, infrastructure, resources and lastly, engineering, design and project management, or EDPM.
SNC also announced new people to lead its EDPM, capital and resources segments — the last of which combines the old mining with the oil and gas segment.
This follows the appointment of a new chief operating officer Ian Edwards in January, a replacement named to succeed him as head of infrastructure, and the planned exit of its former head of the oil and gas business unit this summer.
Meanwhile, in Ottawa, the company has faced heightened scrutiny after former attorney general Jody Wilson-Raybould testified earlier this month that Prime Minister Justin Trudeau’s administration pressured her to reach a settlement with SNC on longstanding criminal charges that it bribed Libyan government officials.
The entire situation has lead to growing speculation about whether SNC may seek to break up some of its business, and sell certain units. Market reaction to the latest news was tepid, with the price barely moving from around $34.