- Bruce was hired by SNC in 2013 to run the environment unit
- Card steps down after leading company in wake of scandal
SNC-Lavalin Group Inc. promoted Chief Operating Officer Neil Bruce to succeed Robert Card as chief executive officer next month as Canada’s biggest engineering and construction company continues to restructure three years after a corruption scandal.
Bruce, now 55, was hired in 2013 to run SNC’s newly created resources and environment unit. Initially based in London, he moved to Montreal -- where SNC is based -- earlier this year. He will become CEO Oct. 5 while the 62-year-old Card stays on as adviser, SNC said Monday in a statement.
Since taking over in 2012, Card has worked to reshape Canada’s biggest engineering and construction company amid a federal corruption investigation into improper payments under Card’s predecessor. After naming a new team of executives, including SNC’s first-ever chief compliance officer, Card presided over the C$3.1 billion ($2.3 billion) sale of AltaLink to Warren Buffett’s Berkshire Hathaway Inc. and bought oil and gas services provider Kentz Corp. In August, SNC shares dropped the most in three years after profit missed analysts’ estimates because of cost overruns.
“While Bob Card, in our opinion, did excellent work steering SNC through the
toughest period in the company’s history,” the company’s higher costs may have accelerated the transition to Bruce, Yuri Lynk of Canaccord Genuity said in a note. Bruce, as COO, “is also associated with recent execution challenges and this could mute investor enthusiasm over his CEO appointment."
SNC fell 3.9 percent to C$37.63 at the close in Toronto. The stock has declined 15 percent this year.
"Our results on the engineering and construction side have not been acceptable," Lawrence Stevenson, SNC’s chairman, said Monday in a telephone interview. "We really need to improve our operational execution on projects. What we want to do is to have a lot more certainty and delivery on both the costs and profit that we expect from those projects, and we think that Neil is the right guy to be doing that. Bob fully agrees."
Under the new CEO, SNC will need to "focus on the blocking and tackling of engineering and construction -- delivering on time and on cost on those projects," Stevenson said. "Neil has done that literally for over 30 years."
In February, SNC was charged by Canada’s Royal Canadian Mounted Police with attempted bribery and fraud related to construction projects in Libya. SNC vowed to “vigorously defend itself,” saying that the case involves former employees who left “long ago.”
"Turning a large ship such as SNC is no easy task," Maxim Sytchev, a Dundee Securities Corp. analyst in Toronto, said Monday in a note to clients. "Robert Card’s arrival in 2012 positioned the company on a rigorous compliance and ethics drive to make sure that SNC persists through the legal and optics challenges."
SNC’s decision to replace Card’s with Bruce was expected, analysts Sara O’Brien of RBC Capital Markets and Chris Murray of AltaCorp Capital both said in notes to clients Monday. Bruce is an industry veteran with more than 30 years’ experience.
With SNC now in a phase of "stabilization," Bruce’s main task as CEO will be to improve the company’s financial performance, which has been "uneven," largely "afflicting the company’s infrastructure practice," Sytchev said.
SNC earlier this year hired financial advisers for a sale of its minority stake in 407 International Inc., the operator of a toll road in the Toronto area. The company plans to start the sale process in the fourth quarter, Card told analysts in August.
“Card was a vocal internal proponent of selling SNC’s stake in Highway 407,” Lynk said. “Bruce could have a different take on this move and it will be important for his views to be communicated to the market in a timely manner."
The change at the top doesn’t affect the timing of the 407 sale process, Stevenson said.
"What we need to do is to see good, stable performance in the engineering and construction business before we could conclude that sale," he said.
Bruce’s position as COO won’t be filled, the company said.
In August, SNC reported second-quarter net income of 17 cents a share that lagged the 37-cent average of analyst estimates compiled by Bloomberg.