Engineering firm SNC-Lavalin continues to be plagued by cost overruns related to its gradual withdrawal from the lump-sum project market and the settlement of disputes over past contracts.
Updated yesterday at 5:28 p.m.
Thus in its second quarter results, announced Thursday, net profit (from continuing operations) fell to only 1.6 million, or one cent per share, compared to the amount of 29.2 million or 17 cents per share. share that was recorded in the comparable quarter a year ago.
This marked decline in net profit occurred despite revenue growth to 1.87 billion in the second quarter, compared to the amount of 1.79 billion achieved a year earlier.
“I would like to be able to declare an ‘all clear’ signal on the investment thesis towards SNC-Lavalin as it continues to refocus on engineering consulting services. However, the impact of its abandonment of lump sum projects on its working capital remains negative,” commented analyst Maxim Sytchev, of National Bank Financial, in a note to his client-investors.
But from the point of view of SNC-Lavalin’s senior management, we obviously prefer to focus on the positive elements of this second quarter ended June 30.
“We had another strong period in the second quarter in the SNCL Services (engineering) business line, with organic revenue growth of around 6% compared to the corresponding period last year, as well order backlog at a record level,” said Ian L. Edwards, President and Chief Executive Officer of SNC-Lavalin.
“In addition, we continued to make progress in reducing our last fixed-price turnkey (CMPF) type projects by reducing their backlog by 13% during the second quarter, which corresponds to a reduction of 29 % for the first half of 2022. This achievement allows us to believe that our forecasts of potential financial losses related to the completion of our CMPF projects remain valid. »
On the stock market, investors in SNC-Lavalin shares have also reacted in a mixed way to another announcement of quarterly results obscured by restructuring costs in certain activities with a troubled past.
Down 4% at the start of the session, shortly after the announcement of quarterly results and the conference call of its senior executives with analysts, the value of shares of SNC-Lavalin slowly recovered thereafter to end the session in renewed strength. 0.8% to $23.62 per share.
In his note to investors, analyst Maxim Sytchev said he “continues to view SNC-Lavalin’s refocusing on its engineering consulting business as an attractive proposition for investors. The question that lingers, however, is whether they should be there now or whether they’d better wait a few quarters.
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