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SNC-Lavalin Falls Most in Five Months on Earnings Miss

SNC-Lavalin Group Inc. fell the most in three months after second-quarter profit missed analysts’ estimates as revenue declined and the company booked costs in connection with the June agreement to acquire Kentz Corp.

Net income attributable to shareholders amounted to C$32.1 million ($29.3 million), or 21 cents a share, Canada’s largest engineering company said in a statement. That compared with a loss of C$37.7 million, or 25 cents, a year earlier. The average of estimates compiled by Bloomberg was 66 cents.

Chief Executive Officer Robert Card is sharpening SNC’s focus on its core engineering and construction operations in an effort to boost profit margins. After agreeing to sell its AltaLink power-transmission unit to Warren Buffett’s Berkshire Hathaway Inc. for C$3.2 billion in May, Montreal-based SNC struck a deal to buy Kentz, an oil-services company, for $1.97 billion.

“Results, particularly on the core engineering and construction side, look disappointing at first blush,” Leon Aghazarian, an analyst at National Bank Financial, said today in a note to clients. Still, “we remind investors that the heavy lifting in terms of cost cutting, backlog ‘clean-up,’ major acquisition and ICI divestiture is well underway and we continue to look towards 2015 for the realization of these benefits.” He rates the shares sector perform.

The stock fell 2.8 percent, the biggest decline since May 9, to C$56.91 in Toronto. It has risen 19 percent so far this year.

Results in the period include C$25.9 million of costs related to the Kentz deal, SNC said. Of that amount, C$20.4 million is a non cash, mark-to-market adjustment on foreign exchange hedging.

SNC recorded a C$46.9 million loss in its engineering and construction business, while profit in its infrastructure concession investments -- such as AltaLink -- climbed to C$78.9 million from C$67 million.

Sales fell 13 percent to C$1.7 billion, short of the C$1.81 billion average forecast.

SNC also reaffirmed a forecast for 2014 per-share profit of C$2.80 to C$3.05.

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