BUSINESS

Political unrest in Libya, Algeria pushes SNC to second-quarter loss

08/02/2013 09:24 EDT | Updated 10/02/2013 05:12 EDT
Political unrest in Algeria and Libya helped push SNC-Lavalin Group Inc. to a second-quarter loss, but the engineering giant says it hasn't been deterred from doing businesses in the North African nations.

"We're viewed as a major supplier to Algeria oil and gas, and our hope and aspiration is that we can work through all of the issues that we have," president and chief executive Robert Card told analysts Friday.

"We've got a great presence in the country, a good competitive advantage there, so we'd like to make that work out."

The Montreal-based engineering company (TSX:SNC) said a client in Algeria demanded payment after a plant was delayed due to a nearby terrorist attack in January.

The demand for payment forced SNC to record a $70.1-million loss provision during the quarter, hurting its oil and gas segment.

"Our team worked heroically under tightened security to continue to try to deliver this project, even though governments had banned their suppliers from participating with us in the completion," Card said.

The company said it's currently negotiating with the client to try to resolve the issue.

"This is a great client, and it's completely out of character," he said.

Meanwhile, a $47-million risk provision related to a project in Libya, which SNC attributed to that country's uneasy political situation, hurt its infrastructure and environment segment.

The project was halted when civil unrest broke out in the country.

"If we exclude these unusual events in North Africa, our overall engineering and construction performance, operationally, continues to improve," said Card.

The two loss provisions in Algeria and Libya forced SNC to lower its outlook for 2013.

The company said it now expects net income for the year to be in the range of $220 million to $235 million, down from $309.1 million in 2012. Previously, SNC had anticipated net income growth of 10 to 15 per cent.

SNC said it doesn't expect any more similar issues to arise, but it's impossible to predict.

"I can't sit here right now and promise you everything is smooth sailing from here on out," Card said.

"We have large amounts of upside and still significant downside opportunity out there... But we're moving heaven and earth to make sure we can try to bring some of this over onto the right side of the income statement and balance sheet."

SNC reported a net loss attributable to shareholders of $37.3 million, or 25 cents per share, during the second quarter.

That's a big turnaround from the year-earlier profit of 21 cents per share or $31.7 million net income.

The company said the loss would have been higher without the benefit of its investment income.

Without $67 million of income from its Infrastructure Concession Investments, which more than doubled from $30.5 million a year earlier, SNC would have had a $104.7-million net loss.

The ICI income includes dividends that SNC receives from its part ownership in the 407 toll highway near Toronto, the AltaLink electricity distribution system in Alberta and a thermal power plant in Algeria.