Search site Search ticker symbol

Are you looking for a stock?

Try one of these

SNC-Lavalin stock tumbles after probe

Tags: SNC-Lavalin
A
A
 

Shares of SNC-Lavalin Group Inc. (SNC-T) tumbled on Tuesday after it revealed a probe into tens of millions of dollars of mysterious payments and warned that the impact of Libya's civil war would push its 2011 profit well below earlier forecasts.

The Canadian engineering and construction company, which also may delay the release of quarterly financial results, did not say whether the internal probe was in any way related to its extensive business dealings with the now-deposed regime of former Libyan dictator Muammar Gaddafi. SNC lost about a quarter of its market value after the Tuesday announcement.

Earlier this month, Montreal-based SNC suspended two company executives who Canadian newspapers said had ties with the family of the Libyan leader, who was killed by rebel forces after being driven from power.

In a carefully word statement on Tuesday, SNC said it expected to record payments of about $35 million "relating to certain payments" in the fourth quarter that were linked to construction projects that were unrelated to the expenses.

SNC's board has started an independent investigation into the payments, and the company has retained lawyers. A company spokeswoman declined to comment further.

"The investigation's current findings support the company's accounting treatment of these payments," SNC said in the statement. The company's board is taking steps to implement changes and "further appropriate actions" arising from the investigation, it said.

SNC, one of the world's biggest engineering and construction companies, said it expected 2011 profit would come in about 18 percent below the company's earlier forecast, or $80 million less than targeted.

"If none of the charges were related to Libya, we could view this development in a less negative light," Macquarie Capital Markets analyst Gareth Tingling said in a note to clients. "We are becoming concerned that 2011's events may affect SNC's ability to win business in 2012 and possibly beyond," he said.

LOSS ON LIBYAN PROJECTS

SNC said earlier this month that two executives, Riadh Ben Aissa, an executive vice-president, and Stephane Roy, a vice-president of finance, were no longer working for the company.

Canadian media said the two had ties to Gaddafi's son, Saadi Gaddafi, and Ben Aissa had worked extensively in the North African country.

On Tuesday, SNC said it expects to record a loss of about $23 million on projects in Libya in the fourth quarter as it revises its "net financial exposure" to the North African country.

During last year's civil war, SNC suspended work in Libya, which includes a prison, an airport and a large water project, but it has said it plans to restart operations.

Revised cost forecasts on some projects in its infrastructure and environment and chemicals and petroleum units added to pressure on its profit forecast, the company said.

RESULTS EXPECTED BEFORE MARCH 30

SNC, which before Tuesday's stock fall had a market value of more than $7 billion, said it was working toward releasing its fourth-quarter and full-year 2011 results "as soon as reasonably possible" and at least before March 30. The company was scheduled to release its earnings on Friday.

At least one analyst said the sharp drop in its share price was overdone.

"We are trying to dissociate the Libyan impact from the rest of the business...," Alta Corp Capital analyst Maxim Sytchev said. "Looking out to 12-24 months, I think the earnings power of the rest of the businesses is very strong," he said.

The company, which has operations in about 100 countries, generated revenues of $6.3 billion in 2010.

DISLIKE
 
COMMENTS
 
CTV.ca CTV Two CTV News CTV News Channel BNN - Business News Network CP24