Aecon paints a rosy picture of year ahead, despite fourth quarter profit drop
Despite drop in profits, Aecon raised its quarterly dividend 10%
Aecon Group Inc. is forecasting another year of income growth on the heels of record annual revenue, as the construction firm continues to shore up its backlog of infrastructure projects.
Chief financial officer David Smales predicted revenue growth “in the single digits, but still relatively strong,” for 2020.
Smales cited a full order book and high demand for infrastructure and public-private partnerships in Canada, including urban transit and nuclear refurbishment projects.
Aecon expects more than 40% of its $6.79B backlog – roughly in line with 2018 – will be worked off in 2020, building on a 6% boost in 2019 revenues to $3.46 billion.
The rosy picture prompted the company to raise its quarterly dividend 10%, despite weaker fourth-quarter results.
The Toronto-based firm will pay 16 cents per share on April 2, up from 14.5 cents previously.
“We always say don’t look at one quarter in isolation,” Smales said. “Over the course of the year, margins continue to move in the right direction.”
Analyst Frederic Bastien of Raymond James said Aecon “Continues to execute admirably, enjoys healthy demand for its core services, and benefits from reduced global and domestic competition.”
The fourth quarter saw Aecon earn 28% less in profits but score three major contracts with a total value $690 million, and the company’s share valued at $420 million.
The trio comprises pipeline construction in Alberta for Trans Mountain Corp., piping installation for NOVA Chemicals in Ontario and a joint venture to upgrade a pair of highways on Vancouver Island and B.C.’s Lower Mainland.
On Feb. 10, Aecon signed off on a 50-50 joint venture with Spanish conglomerate Acciona SA to replace the Pattullo Bridge in the Lower Mainland, a project valued at $967.5 million.
One week earlier Aecon announced a $30-million deal to acquire Voltage Power, an electrical transmission and substation contractor based in Winnipeg.
In 2019, new contract awards of $3.43B were booked compared to $5.84B in 2018.
A sizable chunk of that comes from a $639.8M fixed-price construction contract, signed in April, to widen Highway 401 between Mississauga and Milton in the Greater Toronto Area, with Aecon granted a 50 per cent stake.
Chief executive Jean-Louis Servranckx told analysts on a conference call Wednesday that the novel coronavirus has not interrupted work or supply chains.
This report by The Canadian Press was first published March 4, 2020.