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Montreal-based engineering and construction firm SNC-Lavalin Group Inc. (SNC-T) has turned to an outsider to revive fortunes that were badly dented by allegations of improper payments, naming a veteran from a competing firm as its next chief executive.
New CEO Robert Card takes over on October 1 at the company, whose shares are down more than 25 percent since the start of the year after a steep fall in February when it said it was probing tens of millions of dollars of mysterious payments. The stock edged lower on Monday.
Card is a long-time executive with privately-held U.S. rival CH2M Hill Cos Ltd and was chief operating officer for a CH2M joint venture that helped manage the construction of London's Olympic venues and infrastructure. He was under-secretary for the U.S. Department of Energy from 2001 to 2004.
"I think the market was expecting -- and needed -- someone to come in from the outside," said Canaccord Genuity analyst Yuri Lynk. "He's going to be able to take a fresh look at the company."
But Lynk said investors would not pass judgment before hearing more from Card, who was named to the job in a company news release after markets closed on Friday.
SNC, like CH2M Hill, does business all over the world, in a wide range of industries, from mass transit to mining, water management and nuclear power. Quebec-based SNC has a market capitalization north of $5 billion, making it one of the province's biggest companies.
Card does not speak French, which could raise hackles in the French-speaking province, where language is a major political issue, and the separatist Parti Quebecois leads in opinion polls ahead of the September 4 elections.
Company spokeswoman Leslie Quinton said in a statement that Card, who will be based in Montreal, plans to learn French.
"It obviously would have been an ideal situation to find a candidate who spoke French to be the next leader of this great Quebec institution," she said. "However, at a time when the company requires strong, decisive and insightful leadership, the most important criterion was to hire the best overall candidate with significant international experience."
Asked about Card's lack of French, Parti Quebecois leader Pauline Marois said: "I'm asking SNC Lavalin to make sure he takes French lessons so he can become at least bilingual."
SNC's last chief executive, Pierre Duhaime, resigned in March after an internal investigation found he had broken company rules by authorizing $56 million in payments on construction projects that did not exist.
SNC has handed over information from its internal probe to the RCMP. It says it does not know who received the money or what it was used for, but has stressed it was the work of "a relative few."
In a separate matter, two former SNC executives, accused of bribing officials in Bangladesh for a bridge project, have a preliminary court hearing set for next year.
"Investors will be pleased to see that (the) SNC-Lavalin Board of Directors decided to go with an outsider," said AltaCorp Capital analyst Maxim Sytchev in a note to clients.
"Instilling a perception of a clean start is critical in re-establishing investor confidence in company's shares."
Lynk said investors would look to Card to strengthen internal controls, and to bolster the company where it is weakest.
In early August, SNC said massive project cost overruns led a sharp drop in quarterly profit. Blaming higher costs at two projects, in Tunisia and Russia, it cut its outlook for the year.
"I don't want to say their execution is weak because that's not true, but they are having some issues there at the moment," said Lynk.