SNC – Lavalin Q2 Loss Narrows

SNC – Lavalin Group (SNCAF.PK) reported a second-quarter net loss attributable to shareholders of C$111.6 million or C$0.64 per share compared to a net loss of C$2.12 billion or C$12.07 per share in the prior year.

The latest-quarter results included restructuring costs of C$47.3 million, mainly related to restructuring activity in EDPM and Resources Services.

The prior year results included a non-cash goodwill impairment charge and an impairment of intangible assets relating to the company’s Resources segment totaling C$1.8 billion and unfavorable reforecasts on certain LSTK construction projects of approximately C$280 million.

Revenues for the quarter declined to C$1.95 billion from C$2.28 billion in the prior year.

The company now expects, assuming no significant deviation from the current COVID-19 worldwide situation, that SNCL Engineering Services revenue for the second half of 2020 should decrease by a low to mid single digit percentage, compared to the second half of 2019, and that its Segment Adjusted EBIT as a percentage of revenue should be between 8% and 10% for the same period.

The company declared a cash dividend of C$0.02 per share, unchanged from the previous quarter. The dividend is payable on August 28, 2020 to shareholders of record on August 14, 2020.

In a separate press release, SNC-Lavalin said it is transforming its Resources Business to focus on a Services offering in a limited number of existing primary markets.

The company announced in July 2019 that it would be exploring all options with regard to its Resources Business. It has since completed a strategic review of the Resources Business, with the decision to transform the Business to focus solely on the profitable parts of the service business and sell or close non-primary parts of the business, including the exit of multiple geographies.

The new Resources Services business will be a targeted service offering that management expects to be profitable in full year 2021.

The legacy Resources Projects business and associated LSTK projects will be largely wound down and the projects complete by the end of 2020.

The company said it is focus on the Americas and the Middle East, the primary energy and mining regions where the business has existing profitable relationships with long-standing customers, and clear visibility on opportunities.

Geographic footprint will be significantly reduced from 30 to 9 countries, exiting all non-primary markets through either sale or closure.

The agreements has been reached to dispose of the South African Resources business, with 1,800 employees, to local management, and divestment of the European Fertilizer business.

Headcount is expected to be reduced from about 15,000 to 8,000 by the end of 2020 and to 6,000 by the end of 2021.Revenue from Resources Services Business is expected to contribute approximately 10% of overall SNC-Lavalin total revenue in 2021.

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