Canadian Manufacturing

SNC-Lavalin CEO names ‘project oversight’ executive in effort to rein in costs

The effects of the newly created oversight project office in the United Kingdom may not be seen for another year, says analyst

June 19, 2019  The Canadian Press

MONTREAL – The new head of SNC-Lavalin Group Inc. has named a senior executive to oversee big-ticket contracts in an effort to keep a lid on costs at the beleaguered company, which announced further streamlining Tuesday.

Interim chief executive Ian Edwards has appointed Nigel White as executive vice-president of a newly created oversight project office in the United Kingdom that reports directly to the CEO.

The oversight function will underpin all four sectors of the engineering and construction giant to assess risk and troubleshoot project issues, Edwards said in a release.

“This new role will be integral to ensuring we meet our project delivery and execution across all our operations,” he said.

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Analyst Maxim Sytchev of the National Bank of Canada said White’s arrival could bode well for investors, though they may not feel his presence for another year or so.

“First of all, he’s starting on August 1st, then it’s going to take six to nine months to get up to speed, so I think the real impact is going to be in 2020-21,” Sytchev told The Canadian Press.

“Given what transpired with mining and oil and gas over the last nine months, it’s about time there’s enhanced oversight on large-scale projects. Obviously it’s welcomed.”

Last August, the firm became the casualty of a diplomatic feud between Canada and Saudi Arabia – a key source of oil and gas revenue – when Foreign Affairs Minister Chrystia Freeland tweeted her support for jailed dissidents, prompting the Saudi regime to suspend new trade and investment ties with Canada.

SNC subsequently slashed its 2018 guidance twice in three weeks, more than halving its profit forecast and halting all bidding on future mining projects.

White’s arrival comes four months after the company announced about $350 million in unexpected cost overruns on its project with Codelco, Chile’s state-owned copper mining company, which has since cancelled the contract.

The new vice-president, who is leaving his job as executive director at Hong Kong-based Gammon Construction Ltd., has more than three decades of experience, including more than 20 years at British construction company Balfour Beatty, SNC-Lavalin said.

“I think his title says it all: project oversight,” said AltaCorp Capital analyst Chris Murray. “It’s about making sure they manage risk appropriately inside the organization…making sure things remain on track and on schedule.”

Edwards, who took over the top spot last week when Neil Bruce abruptly stepped down, said Tuesday the firm will also fold the power sector of Atkins – the U.K. engineering powerhouse SNC-Lavalin bought in 2017 – into SNC’s infrastructure unit.

The change raises the odds SNC will sell off construction and resource-based businesses to return the firm to its roots in engineering and design, said RBC Dominion Securities analyst Derek Spronck.

Last month, the Montreal-based company announced plans to stop bidding on fixed-price contracts and wind down operations in 15 countries.

It did not immediately respond to whether streamlining will mean layoffs.

SNC-Lavalin shares jumped more than four per cent at $26.97 in afternoon trading on the Toronto Stock Exchange.

 


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