BUSINESS
02/11/2019 12:58 EST | Updated 02/11/2019 12:59 EST

SNC-Lavalin Slashes Profit Outlook Again, As Controversy Swirls In Ottawa

The company at the heart of the recent allegations that have taken Ottawa by storm says it's struggling with its mining operations.

The head office of SNC Lavalin in Montreal, Thurs. Feb. 19, 2015.

MONTREAL — SNC-Lavalin Group Inc. has cut its guidance again due to problems at an unidentified mining project in Latin America as the beleaguered engineering giant contends with problems at home and abroad.

The Montreal-based company said Monday it has agreed to settle a dispute with its client for the mining project through an accelerated arbitration process.

But the hit to its mining and metallurgy business will be bigger than what it had said on Jan. 28 because arbitration won't be completed in time to recognize the revenue in 2018 results, the company said.

Watch: SNC-Lavalin allegations leave Justin Trudeau facing questions. Story continues below.

SNC said adjusted diluted earnings per share from the division of its engineering and construction business for 2018 will now be in the range of 20 cents to 35 cents, down from an already reduced forecast of between $1.15 and $1.30 in January.

That translates into an expected fourth quarter loss of $350 million before taxes and interest for the mining and metallurgy segment, according to SNC.

The company said it expects "significant recoveries in the future."

Shares dropped four per cent to $35.31 shortly after markets opened Monday, as the company's legal and diplomatic hurdles continue to loom large.

Earlier on HuffPost Canada:

Last week, the Globe and Mail reported that Prime Minister Justin Trudeau's office had put pressure on former attorney general Jody Wilson-Raybould to help SNC avoid a criminal prosecution following heavy lobbying from the company.

Trudeau has denied that the minister "was ever directed by me or anyone in my office to take a decision in this matter."

Federal prosecutors announced in October they would not invite SNC to negotiate a remediation agreement over fraud and corruption charges that stemmed from alleged dealings with the Libyan regime under Moammar Gadhafi between 2001 and 2011.

Last month, SNC chief executive Neil Bruce said ongoing diplomatic tensions between Canada and Saudi Arabia was hurting business and forcing the company to consider a possible retreat from the oil-rich state.

The feud, as well problems with the mining project and an arbitration loss in Australia, prompted the company to cut its financial guidance which led to a drop in the company's shares.

'Unexpected conditions'

In its revised forecast Monday, SNC attributed the mining problems to subcontractors and factors out of its control.

"The challenges on this mining project are mainly due to unexpected site conditions, greater than expected environmental and safety measures and under-performance from subcontractors," the company said in a statement.

SNC called the issues an "isolated incident," however it said it has stopped all bidding on future mining projects and reviewed the management structure of its mining and metallurgy business.

Ian Edwards, the company's new chief operating officer, has also been asked to personally work on strengthening the local project team.

Adjusted consolidated diluted earnings per share for the company as a whole are expected to be in a range of $1.20 to $1.35.

In January, the company expected adjusted consolidated diluted earnings per share, overall, to be in the range of $2.15 to $2.30.

In November, the company had forecast adjusted diluted earnings per share from engineering and construction to be in the range of $2.60 to $2.85. Adjusted consolidated diluted earnings per share were expected in the range of $3.60 to $3.85.