MONTREAL – SNC-Lavalin’s chief executive assured shareholders Thursday he’s fixing the problems that have undermined the engineering company’s reputation and hammered its stock price.
In his first address to an SNC-Lavalin annual meeting, Robert Card thanked investors for sticking with the firm, adding he believes the problems were “compartmentalized.”
“Our key stakeholders believe this is limited and fixable and we have their trust and respect and that we’re on the right track,” he said.
While acknowledging that dealing with the fallout of accusations of corruption has been a costly distraction, he said clients continue to provide support.
Revenues and order backlog continued to grow despite the sluggish global economy.
Card said the company never entertained selling or merging the firm.
SNC-Lavalin (TSX:SNC) has accepted that a part of its operations won’t be able to bid on World Bank projects for a decade even though the CEO said the bribery allegations in Bangladesh and Cambodia haven’t been legally proven.
Card also doesn’t see why governments would prevent it from bidding on work.
“We’ve not been convicted or even indicted on anything so I would hope there would be some sort of due process there.”
He added that it would be “odd” for clients to put it on some black list when it is “on the road to becoming the most ethical company we’ve ever been.”
Card outlined his strategy Thursday for the future including the sale of non-core infrastructure assets and the possibly of reducing its stake in other large investments.
SNC-Lavalin’s main concession assets are 407 International and AltaLink, one of Canada’s largest power transmission companies. It also has ownership stakes in a series of projects including the new concert hall for the Montreal Symphony Orchestra and the new megahospital it is building in Montreal.
The assets provide financial stability but Card said they are also very attractive to potential partners.
The driving force behind the new direction is to accentuate SNC-Lavalin’s role in the resources sector, including energy, mining, water, transit and infrastructure.
“We see transformational growth to become a global resource sector leader,” he said.
In addition to focusing on Canada and Latin America, SNC-Lavalin will target opportunities in the U.S., Africa and the Middle East. Card also said there are great opportunities in China as it continues to modernize.
The new strategic plan at SNC-Lavalin follows a tumultuous year that saw the departure of chief executive Pierre Duhaime after the revelation of $56 million in improper payments to undisclosed agents.
Duhaime was later charged with fraud, along with former vice-president Riadh Ben Aissa, who is in a Swiss jail.
Outgoing SNC chairman Gwyn Morgan said changes enacted by the company should prevent a recurrence of ethical errors.
“The board’s actions were decisive,” Morgan said, adding that he sympathizes with shareholders who are perplexed about how such problems could have arisen in the first place.
But Morgan said it’s often difficult to detect a when a small number of people deliberately set out to falsify documents to hide bad behaviour.
SNC-Lavalin reported Thursday a first-quarter profit of $53.6 million or 35 cents per share, down from $66 million or 44 cents per share a year ago.
Analysts had expected it would earn 51 cents per share.
Revenue totalled $1.9 billion, up from $1.79 billion a year ago.
Excluding its infrastructure concession investments, the company said it earned $18.6 million for the quarter compared with $41.2 million in first quarter of 2012.
Infrastructure concession investments earned $35 million in the quarter, up from $25.1 million in the first quarter last year.
The decrease in net earnings was mainly due to about $32 million in additional costs on a major infrastructure project for which the company said it will try to recover.
Analyst Pierre Lacroix of Desjardins Capital Markets said the lower-than-expected earnings were disappointing but SNC’s decision to maintain its guidance for 2013 suggests that the results were expected by the company.
“Investors’ focus should continue to be geared toward the company’s strategic vision, which in our view suggests enhanced merger and acquisitions and ICI transaction activities,” he wrote in report.
On the Toronto Stock Exchange, SNC’s closed down $1.94 at $41.51 on Thursday.