MONTREAL - Construction giant SNC-Lavalin Group Inc. (TSX:SNC), already under fire over its connections to the former Gadhafi regime, launched an accounting probe Tuesday into $35 million in undocumented payments.
Montreal-based SNC also said it will delay reporting its financial results and now expects to see much lower profits for 2011 than it earlier forecast.
Investors punished the company and sent its shares down more than 20 per cent in trading on the Toronto Stock Exchange.
"Allegations of involvement with Saadi Gadhafi and other items have tarnished SNC's image," Versant Partners analyst Neil Linsdell wrote in a note to clients.
Linsdell cut his rating on the stock to "neutral" from "buy" with a $57 price target, down from $64.
"Investors will likely wait for reports on investigations before warming up to the stock," he said.
The global engineering and construction company said the audit committee investigation is looking into the circumstances surrounding $35 million in payments that were assigned to projects to which they did not relate.
"The company is working with its external auditors and legal advisers to resolve all issues relating to the investigation to permit the auditors to deliver their audit report on a timely basis," SNC said in a statement.
The company declined a request for further explanation.
The investigation came as SNC cut its 2011 profit forecast by 18 per cent or about $80 million and delayed the release of its fourth-quarter and full-year financial results.
In November, SNC said it expected its earnings for 2011 to be in line with 2010 after excluding the gains from asset and investment sales.
SNC earned about $391 million in 2010 after taking away the gains from the sale of Valener Inc. shares and Trencap Limited Partnership units and a gain on the sale of some technology assets.
In addition to the $35-million charge for 2011, SNC said it expected to include a loss of about $23 million in the fourth quarter related to its operations in Libya.
SNC said it also expects unfavourable cost changes on projects in its infrastructure and environment, and chemicals and petroleum businesses.
The company's involvement in Libya included a multimillion-dollar contract to build a prison as well as an airport and a massive irrigation project.
In 2010, Libya accounted for $418.2 million or about 6.6 per cent of SNC's revenue for the year, up from $278.8 million in 2009.
SNC parted ways with two of its executives earlier this year after acknowledging that the conduct of its employees had been questioned.
Executive vice-president Riadh Ben Aissa, who was responsible for the engineering and construction of infrastructure projects, and vice-president controller Stephane Roy left the firm.
Ben Aissa has said the company misrepresented his departure and that he chose to resign and was not forced out.
The executive departures came after a published report that said there was internal turmoil at the firm over the company's involvement with a Canadian woman facing charges in Mexico for allegedly trying to smuggle Moammar Gadhafi's son into the country.
The company said Tuesday it hopes to post its financial results "as soon as reasonably possible" and before March 30.
SNC shares closed down $9.94 at $38.43 on the Toronto Stock Exchange.
Note to readers: This is a corrected story. A previous version incorrectly said earnings were expected to be $80 million.