SNC-Lavalin Group Inc. has announced that its full year 2018 results will be lower than expected.
“A serious problem has just come to light in relation to a single project in the mining and metallurgy segment,” said Neil Bruce, president and CEO of the company. “The contract was awarded in 2016 and its year-end under-performance relative to internal budgets will materially affect our Q4 results, and therefore our full year 2018 results. This isolated incident is unacceptable and I intend to take appropriate actions to mitigate the financial impacts for the company.”
The Mining & Metallurgy Segment EBIT will be lower in 2018 than the company expected due to “the under-performance of aforementioned project, mainly due to the fact that we cannot meet the required level of agreement at this time with our client in order to meet the IFRS standards for revenue recognition, as well as the substantially increased costs in Q4 associated with delivering this project. This unfavourable cost re-forecast surfaced as we were closing 2018.”
Bruce goes to state that the company “will be aggressively pursuing our project claims through the contract protocols up to and including engaging in a dispute resolution process.”
Compounding the problem are “worse than expected trading challenges in oil and gas in the Middle East, and Saudi Arabia in particular,” the potential impact of which was highlighted in the company’s August disclosure: www.snclavalin.com/en/media/press-releases/2018/snc-lavalin-comments-canada-kingdom-saudi-arabia-commercial-relations.aspx.
Since that announcement, relations between Saudi Arabia and Canada have further deteriorated.
“Over 15 per cent of our global workforce is employed on work in Saudi Arabia, which has been an important source of revenue growth for our Company in recent years,” Bruce points out.
Craig Muir will be taking the reins in April as president of the oil & gas segment of the company.
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