MONTREAL - SNC-Lavalin Group Inc. (TSX: SNC) today announced its results for the second quarter ended June 30, 2020.
2020 Second Quarter Highlights
Net loss attributable to SNC-Lavalin shareholders of $111.6 million, or $(0.64) per diluted share, compared with a net loss of $2,118.3 million, or $(12.07) per diluted share for Q2 2019
Q2 2020 net loss includes $47.3 million of restructuring costs mainly related to the Resources Services transformation and EDPM.
SNCL Engineering Services; resilient through COVID-19, outlook provided
Total Segment Adjusted EBIT(3) of $132.5 million, representing a 9.0% margin. EDPM Segment Adjusted EBIT(3) of $78.8 million, representing an 8.4% margin.
SNCL Engineering Services revenue for the second half of 2020 forecast to decrease by a low to mid single digit percentage, compared to the second half of 2019, and Segment Adjusted EBIT(3) as a percentage of revenue expected to be between 8% and 10%.
SNCL Projects; backlog continued to reduce, results impacted by COVID-19
LSTK projects backlog reduced by $0.2 billion in the quarter to $2.7 billion, with $2.4 billion being Infrastructure EPC Projects.
Resources LSTK Backlog reduced to $0.2 billion and remains on track to be largely completed by end of 2020, considerably improving management's visibility on completion risks.
Total negative Segment Adjusted EBIT(3) of $141.3 million, which included a loss of $122.3 million in Resources and a loss of $19.0 million in Infrastructure EPC Projects.
Lower productivity from COVID-19 impacted LSTK projects in both Resources and Infrastructure EPC Projects resulting in project reforecasts, with Resources taking a $70 million charge related to client disputes on a project.
Strong financial position and operating cash flows
Cash and cash equivalents at $1.6 billion and net recourse debt to EBITDA ratio at 1.0x (calculated in accordance with Credit Agreement).
$129.8 million of net cash generated from operating activities during Q2, with SNCL Engineering Services generating $222 million.
Ian L. Edwards, President and CEO of SNC-Lavalin Group Inc., made the following comments: 'During the last quarter, our business has demonstrated resilience through the challenges posed by COVID-19. This would not have been possible without the commitment and efforts of our employees, to whom I offer my thanks and appreciation. The unprecedented economic situation precipitated by COVID-19 and the downturn in oil prices has demonstrated that we made the right decision in changing our business model and exiting LSTK contracting to focus on our core engineering services strengths. Our Engineering Services business in Q2 delivered solid financial results.'
'COVID-19 did have an impact on our LSTK projects productivity, contributing to project reforecasts; however, we do not consider these losses to be representative of future quarterly performance. The LSTK backlog continued to reduce and we are now in the final phases of closing out the Resources LSTK projects, improving management's visibility on completion risks. We are confident about transforming and resizing our Resources Services business, and its potential to add real value to our Professional Services and Project Management capabilities and to complement our existing Engineering Services focused strategy.'
Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with offices around the world. SNC-Lavalin connects people, technology and data to help shape and deliver world-leading concepts and projects, while offering comprehensive innovative solutions across the asset lifecycle. Our expertise is wide-ranging - consulting & advisory, intelligent networks & cybersecurity, design & engineering, procurement, project & construction management, operations & maintenance, decommissioning and sustaining capital - and delivered to clients in four strategic sectors: EDPM (engineering, design and project management), Infrastructure, Nuclear and Resources, supported by Capital.
Statements made in this press release that describe the Company's or management's budgets, estimates, expectations, forecasts, objectives, predictions, projections of the future or strategies may be 'forward-looking statements', which can be identified by the use of the conditional or forward-looking terminology such as 'aims', 'anticipates', 'assumes', 'believes', 'cost savings', 'estimates', 'expects', 'goal', 'intends', 'may', 'plans', 'projects', 'should', 'synergies', 'target', 'vision', 'will', or the negative thereof or other variations thereon. Forward-looking statements also include any other statements that do not refer to historical facts. Forward-looking statements also include statements relating to the following: i) future capital expenditures, revenues, expenses, earnings, economic performance, indebtedness, financial condition, losses and future prospects; ii) business and management strategies and the expansion and growth of the Company's operations and iii) the expected impacts of the ongoing COVID-19 pandemic on the business and its operating and reportable segments as well as elements of uncertainty related thereto. All such forward-looking statements are made pursuant to the 'safe-harbour' provisions of applicable Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of the Company's current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company's business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
Forward-looking statements made in this press release are based on a number of assumptions believed by the Company to be reasonable as at the date hereof. The assumptions are set out throughout the Company's 2019 annual MD&A (particularly in the sections entitled 'Critical Accounting Judgments and Key Sources of Estimation Uncertainty' and 'How We Analyze and Report our Results') and as updated in the first and second quarter 2020 MD&A. If these assumptions are inaccurate, the Company's actual results could differ materially from those expressed or implied in such forward-looking statements. In addition, important risk factors could cause the Company's assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by these forward-looking statements. These risks include, but are not limited to: (a) impacts of the COVID-19 pandemic and the elements of uncertainty related thereto; (b) results of the new 2019 strategic direction coupled with a corporate reorganization; (c) fixed-price contracts or the Company's failure to meet contractual schedule, performance requirements or to execute projects efficiently; (d) contract awards and timing; (e) remaining performance obligations; (f) being a provider of services to government agencies; (g) international operations; (h) Nuclear liability; (i) ownership interests in Capital investments; (j) dependence on third parties; (k) joint ventures and partnerships; (l) information systems and data; (m) competition; (n) professional liability or liability for faulty services; (o) monetary damages and penalties in connection with professional and engineering reports and opinions; (p) insurance coverage; (q) health and safety; qualified personnel; (s) work stoppages, union negotiations and other labour matters; (t) extreme weather conditions and the impact of natural or other disasters and global health crises; (u) intellectual property; (v) divestitures and the sale of significant assets; (w) impact of operating results and level of indebtedness on financial situation; (x) liquidity and financial position; (y) indebtedness; (z) security under the SNC-Lavalin Highway Holdings Loan; (aa) dependence on subsidiaries to help repay indebtedness; (bb) dividends; (cc) post-employment benefit obligations, including pension-related obligations; (dd) working capital requirements; (ee) collection from customers; (ff) impairment of goodwill and other assets; (gg) outcome of pending and future claims and litigations; (hh) ongoing and potential investigations; (ii) settlements; (jj) further regulatory developments as well as employee, agent or partner misconduct or failure to comply with anti-bribery and other government laws and regulations; (kk) reputation of the Company; (ll) inherent limitations to the Company's control framework; (mm) environmental laws and regulations; (nn) Brexit; (oo) global economic conditions and (pp) fluctuations and volatility in commodity prices.
The Company cautions that the foregoing list of factors is not exhaustive. For more information on risks and uncertainties, and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the sections 'Risks and Uncertainties', 'How We Analyze and Report Our Results' and 'Critical Accounting Judgments and Key Sources of Estimation Uncertainty' in the Company's 2019 annual MD&A and as updated in the first and second quarter 2020 MD&A, each filed with the securities regulatory authorities in Canada, available on SEDAR at www.sedar.com and on the Company's website at www.snclavalin.com under the 'Investors' section.
The forward-looking statements herein reflect the Company's expectations as at the date of this press release and are subject to change after this date. The Company does not undertake to update publicly or to revise any such forward-looking statements whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation.
The Company's unaudited condensed consolidated interim financial statements for the three-month and six-month periods ended June 30, 2020, together with its MD&A for the corresponding period, can be accessed on the Company's website at www.snclavalin.com and on www.sedar.com.