SNC-Lavalin Drops Most in More Than Year as Profit Goal Cutby
SNC-Lavalin Group Inc. fell the most in almost 14 months after Canada’s biggest engineering and construction company reduced its forecast for 2016 profit because of cost overruns on two oil and gas projects in the Middle East.
Adjusted earnings from engineering and construction this year will be C$1.30 (99 cents) to C$1.60 a share, compared with a previous outlook of C$1.50 to C$1.70, Montreal-based SNC said Thursday in a statement. Third-quarter results will include “unfavorable cost and revenue reforecasts” on the two projects, which SNC didn’t identify.
The revised forecast will likely hurt investor “confidence in the new management team, which had reported consistently solid results” since the appointment of Neil Bruce as chief executive officer a year ago, Benoit Poirier, a Desjardins Capital Markets analyst, said in a note to clients. The cut also will increase concern over whether the company can meet its 2017 outlook, he said.
SNC continues to aim for adjusted earnings before interest, taxes, depreciation and amortization of 7 percent of revenue next year.
SNC dropped 5.3 percent to C$52.03 at 10:29 a.m. in Toronto. Earlier the stock dipped as much as 6.1 percent, its biggest intraday decline since Aug. 6, 2015. SNC had gained 34 percent this year through Wednesday, exceeding the 13 percent gain of Canada’s benchmark S&P/TSX Composite Index.
Talks are taking place to resolve the “commercial issues” in the two contracts, SNC also said.