SNC has fallen more since 1992 amid the serious problem – in the mine unit



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SNC-Lavalin Group Inc. fell further in at least 27 years after the builder warned it would lose its year-round profit target due to a "serious problem" with a mining contract. He also noted the value of his power unit at $ 1.24 billion amid a diplomatic row between Canada and Saudi Arabia.

The engineering and construction company said it would incur additional costs in the fourth quarter on an unidentified mining and metallurgy project and could not "reach agreement" with the customer to account for the revenue, according to a statement released Monday -market. Worst than expected, the challenges of oil and gas negotiations in the Middle East – and Saudi Arabia in particular – also weighed on fourth quarter results, SNC added. The company is weighing a possible exit from Saudi Arabia as a result.

The announcement shows the strain on SNC following last year's refusal by Canadian prosecutors to reach a negotiated settlement with the company over previous allegations of corruption. The lack of an agreement with Canada has probably cost SNC more than $ 5 billion in lost revenue and continues to undermine its reputation internationally, Chief Executive Neil Bruce told BNN Bloomberg TV in an interview last month.

"It's tremendously disappointing that you see issues with a project happening because the risk management around it was inadequate," Chris Murray, an analyst at AltaCorp Capital, said in a telephone interview from Toronto. "The immediate impact lies in investor confidence. The long-term issue is whether they can stabilize the oil and gas business or whether they need to divest it at the end of the cycle. "

In Stock

SNC plunged 27 percent to $ 35.33 at 1.42 p.m. In Toronto. Earlier, stocks fell as much as 31%, its biggest intraday decline since at least January 1992, according to data compiled by Bloomberg. The fall eliminated about $ 2.4 billion in market value and pushed stocks to a three-year low.

Adjusted engineering and construction profit will be $ 1.15 to $ 1.30 per share in 2018, SNC said on Monday. This is below a previous earnings forecast of up to $ 2.85 per share. Total profit for the year will be $ 2.15 to $ 2.30 per share, below the $ 3.60 to $ 3.85 range that the Montreal-based company provided in November.

The SNC announcement means the company will not be able to reach its adjusted profit target of $ 5 per share by 2020, Bruce said. "In terms of the company's progression and the growth in EPS, we feel we've come back a year a year and a little bit," he said in a teleconference with analysts.

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As a result of its latest setback, SNC will consider selling assets – including a possible exit from Saudi Arabia – to focus on businesses that have the most predictable results.

"Maybe some of our companies do not fit the required category, so let's take a look at that," Bruce said. "We will also see customers, countries and regions where we are working to ensure much more predictable results in the future."

Unacceptable

The troubled mining project is scheduled to be completed by the start of the second quarter, Bruce said Monday. Asked by an analyst about the call, if the project in question was linked to Chilean copper miner Codelco, the CEO declined to comment.

"This isolated incident is unacceptable and I intend to take appropriate measures to mitigate the financial impact on the company," Bruce said. SNC did not identify the problem project, only saying that the contract was awarded in 2016. A Codelco smelter agreement was signed with SNC that year. Codelco employees declined to comment.

SNC plans to "aggressively" pursue project claims through contract protocols "up to and including engaging in a dispute resolution process."

Frozen Ties

A diplomatic row with Saudi Arabia is also having an impact on SNC's operations. Saudi Arabia froze diplomatic ties and new business with Canada in August after a request by Canada's Foreign Minister Chrystia Freeland for Saudi human rights activists to be released from prison.

The dispute prompted SNC to write down the fair value of its oil and gas segment at $ 7.06 per share as a result of impairment tests. "Intergovernmental relations between Canada and Saudi Arabia, coupled with unpredictable commodity prices and uncertain client investment plans, have led to the deterioration in our short-term outlook that we can not ignore," SNC said.

The write-off represents less than 50 percent of the value of the oil and gas business, Chief Financial Officer Sylvain Girard said, without being more specific.

More than 15% of the company's global workforce is employed in Saudi Arabia, which has been a major source of revenue growth in recent years.

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