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Hard-hit SNC-Lavalin wins another contract

Tags: SNC-Lavalin
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SNC-Lavalin Group Inc. (SNC-T) announced its second contract win in three days on Monday, a sign that the Canadian engineering company's prospects remained positive despite last week's shock announcement of an internal investigation, analysts said.

SNC, which lost 20 percent of its market value last week after revealing the probe, said it had been awarded a contract to retrofit and modernize mining group Vale's nickel smelter complex in northern Ontario.

The win follows last Thursday's announcement from SNC and construction company Aecon Group Inc. (ARE-T) that they had been chosen to refurbish all four nuclear reactors at Ontario's Darlington generating station.

Although he expects "near-term uncertainty" to overhang SNC's shares until the company finishes its investigation, Desjardins analyst Pierre Lacroix said in a note to clients that the contract announcements should "remind investors of its expertise, track record and solid prospects".

SNC last Tuesday revealed it was investigating 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.

SNC, which also delayed releasing its quarterly and full-year results, did not say if the internal probe was related to its extensive business dealings with the government of now-deposed Libyan dictator Muammar Gaddafi. Canadian newspapers have in recent months revealed ties between the company and the family of the Libyan leader.

SNC did not say how much the Vale contract was worth but analysts estimated it to be about $200 million over three years. That came on top of the nuclear contract, the initial portion of which analysts estimate is worth about $450 million to SNC between 2012 and 2016.

"In our opinion, SNC's momentum in geographies other than Libya continues to be very robust," said Alta Corp analyst Maxim Sytchev in a note to clients, encouraging them to buy the bombed-out stock.

Libyan business contributed about 6 percent of SNC's $6.3 billion in revenue in 2010.

SNC also confirmed that a motion to bring a $250-million class action lawsuit against it has been filed in its home province of Quebec. SNC said it denies liability of the claims and intends to oppose them.

Québec-based law firm Siskinds, Desmeules filed the proposed class action alleging that SNC made statements that were materially false and misleading in regard to its code of conduct, legal compliance, and internal controls.

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