MONTREAL – SNC-Lavalin Group Inc. delivered more harsh news for shareholders Thursday, cutting its quarterly dividend for shareholders by 80 per cent as the troubled engineering giant grapples with a $2.12-billion net loss in its second quarter.
The dividend drop to two cents per share from 10 cents per share came after a third straight quarter of losses and amid a major strategic shift under the company’s new CEO, whose predecessor left in June following the company’s controversial handling of a high-profile court case that has embroiled the Trudeau government.
SNC-Lavalin’s share price fell more than five per cent to $19.77 after markets opened Thursday.
On a conference call, interim chief executive Ian Edwards admitted “there is no question that SNC-Lavalin is experiencing some difficult challenges.”
“In recent quarters we have provided guidance on our financial results that we did not deliver. This is unacceptable. It’s unacceptable to me and it’s unacceptable for our stakeholders who place trust in the company to do what we say we will do,” he said.
Edwards last week announced the company is quitting the competitive field of fixed-price contracts – where general contractors eat any cost overruns – and pivoting toward a more stable business model revolving around engineering services.
He said volatility and cost issues at so-called lump-sum turnkey projects were “the root cause of the company’s underperformance.”
Edwards also reiterated his aim of “exploring all options” for SNC’s resources segment, including selling its flagging oil and gas business, a “high” near-term priority.
On top of a daunting shift in strategy, the company faces a trial after allegedly paying $48 million in bribes to officials under Moammar Gadhafi and defrauding Libyan organizations of some $130 million between 2001 and 2012.
The company was at the centre of a drawn-out political controversy earlier this year following accusations by former attorney general Jody Wilson-Raybould that top government officials pressured her to overrule federal prosecutors in the Libya case and negotiate a deferred prosecution agreement, a kind of plea deal that would have seen the firm pay a fine rather than face prosecution.
The latest quarter’s net loss included a non-cash charge totalling $1.8 billion to reflect the reduced value of its goodwill and other intangible assets.
The Montreal-based company said its net loss attributable to SNC-Lavalin shareholders was equal to $12.07 per diluted share, which compared with a year-earlier profit of $83 million or 47 cents per share.
SNC’s net loss from its core engineering and construction business was $2.18 billion or $12.44 per share, partially offset by $65.5 million, or 37 cents per share, of earnings from SNC Capital.
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