Montreal-based SNC-Lavalin expects significantly lower results in 2019 than previously anticipated, due to lump-sum turnkey (LSTK) construction project cost re-forecasts required at the end of Q2 on projects in the Resources (O&G and Mining & Metallurgy) and Infrastructure segments.
SNC-Lavalin expects that the Q2 2019 adjusted EBITDA from E&C to be in the range of negative $150 million to negative $175 million.
The company is exiting LSTK contracting and will reorganize its Resources (Oil & Gas and Mining & Metallurgy) and Infrastructure Construction segments into a separate business line following continued poor performance of these segments.
In a press release the company states that it is also exploring options for its Resources segment, particularly its Oil & Gas (O&G) business, including transition to a services-based business or divestiture.
The decision to reorganize will allow SNC-Lavalin to focus on the high-performing and growth areas of the business, which will be reported under SNCL Engineering Services.
Meanwhile, the company said it plans to fulfill contractual obligations of its current LSTK projects, including full commitment to the Réseau express métropolitain (REM) and be reorganized as SNCL Projects, while providing separate ongoing operational and financial disclosure to the market on this business line.
The reorganization and exiting from LSTK contracting is the first step of the new strategic direction as it focuses on de-risking the business.
Together with the recently announced sale of 10.01% of Highway 407 ETR for $3 billion, SNC-Lavalin’s goal is to enhance financial flexibility, while removing volatility.
Complete details of the Company’s Q2 2019 results will be released on August 1, 2019.