SNC-Lavalin reports $37.7m net loss for Q2 2013
The company's oil and gas segment lost $70.1 million over the quarter
SNC-Lavalin reported a net loss attributable to SNC-Lavalin shareholders of $37.7 million (-$0.25 per share on a diluted basis), compared to a net income of $31.7 million ($0.21 per share on a diluted basis) for the comparable quarter of 2012.
The Company reported a net loss excluding Infrastructure Concession Investments (“ICI”) of $104.7 million, compared to a net income of $1.2 million for the second quarter of 2012, mainly reflecting operating losses in the Oil & Gas and Infrastructure & Environment segments, due to unforeseeable and evolving political contexts, partially offset by higher contributions from the Power segment.
The operating loss in Oil & Gas results mainly from SNC-Lavalin recognizing a loss of $70.1 million relating to a recent confirmation of a claim received alleging late penalties under a fixed-price project in Algeria. To date the Company continues its discussions with the client and it intends to deploy all necessary actions to resolve these penalties, including taking further actions to recover the additional costs incurred by the Company.
The operating loss in Infrastructure & Environment is due to SNC-Lavalin having recorded in the quarter a risk provision of $47.0 million, following a recent unexpected attempt to draw this amount under letters of credit, covering advance payment and performance, previously issued in favour of a client on a Libyan project.
The Company is not currently aware of any claim relating to the advance payment or performance. The project has been halted since the civil unrest began in Libya. The Company is seeking to clarify the situation surrounding this attempt to draw on the letters of credit and will use all legal and other means available to prevent any draws.
Net income from ICI increased to $67.0 million, compared to $30.5 million for the quarter ended June 30, 2012, due to a higher net income from AltaLink and a higher dividend received from Highway 407, as well as a higher net income from Shariket Kahraba Hadjret En Nouss S.p.A. (“SKH”), as uncertainties on dividend collection were resolved.
The Company is revising its previously announced 2013 outlook for which it expected an annual growth in net income of between 10% and 15% in 2013 as compared to 2012. As a result of the losses related to the two projects in North Africa recorded in the second quarter of 2013, one in the Oil & Gas segment and one in the Infrastructure & Environment segment, the Company’s 2013 net income is currently expected to now be in the range of $220 million to $235 million.
“Due to a variety of unexpected factors, such as the ones we have experienced in the second quarter in North Africa, 2013 is proving to be a very challenging year for the Company, but also a year of important transition and improvements which we believe will be beneficial for 2014 and thereafter,” added Mr. Card.
Revenues for the second quarter of 2013 were substantially unchanged from revenues in the second quarter of 2012.