Press Release

SNC-Lavalin reports fourth quarter and year-end results

  • Feb 22, 2019
  • Snc-Lavalin

Reported 2018 IFRS net loss attributable to SNC-Lavalin shareholders of $1.3 billion, (or $7.50 per diluted share), mainly due to a non-cash after-tax goodwill impairment charge of $1.2 billion relating to the Company’s Oil & Gas segment. This compares to a net income of $382.0 million (or $2.34 per diluted share) in 2017. 

2018 adjusted net income from E&C(1) of $43.1 million (or $0.25 per diluted share), compared to $351.3 million (or $2.15 per diluted share) in 2017, mainly due to the underperformance of a major EPC Mining & Metallurgy project and the Oil & Gas segment.

Strong backlog(8) of $14.9 billion at the end of December 2018, with bookings of $2.2 billion in Q4 2018.

2019 Outlook: adjusted diluted EPS from E&C(2) in the range of $2.00 to $2.20 and adjusted consolidated diluted EPS(5) in the range of $3.00 to $3.20, with an adjusted E&C EBITDA from E&C(7)  in the range of $900 million to $950 million.

Quarterly dividend decrease to $0.10 per share.

SNC-Lavalin Group Inc. (TSX: SNC) today announces its results for the fourth quarter ended December 31, 2018.

“The year 2018 was a disappointing year, as our Mining & Metallurgy and Oil & Gas segments underperformed,” said Neil Bruce, President and Chief Executive Officer, SNC-Lavalin Group Inc. “Due to a deterioration of the Oil & Gas segment’s near term prospects caused by various factors, including difficult inter-governmental relations between Canada and Saudi Arabia, unpredictable commodity prices and uncertain client investment plans, we were required to record a goodwill impairment in the quarter. With respect to the previously announced issue affecting a project in our Mining & Metallurgy segment, we expect potential future recoveries to come back as a positive contribution. Now it is time to look ahead. Our Infrastructure, EDPM and Nuclear businesses had a strong quarter and we expect these to continue to do well going forward. The Company has billions of dollars’ worth of assets, a strong backlog and very talented employees who are proud to design and engineer the world around us.” 

“The Board reiterates its confidence in the executive leadership team to move forward into 2019, to execute the strategy as outlined in the MD&A and to deliver maximum value to shareholders,” said The Honourable Kevin Lynch, Chairman of the Board.


Q4 2018 reported IFRS net loss attributable to SNC-Lavalin shareholders was $1.6 billion, or $9.11 per diluted share, compared with a net income of $52.4 million, or $0.30 per diluted share, for the corresponding period in 2017. Q4 2018 net loss included a non-cash after-tax goodwill impairment charge of $1.2 billion, net charges related to restructuring and other of $48.8 million (after taxes), amortization of intangible assets related to business combinations of $42.9 million (after taxes), a non-cash Guaranteed Minimum Pension equalization expense of $20.8 million (after taxes) and acquisition-related and integration costs of $16.1 million (after taxes).

The Q4 2018 non-cash after-tax goodwill impairment charge of $1.2 billion relates to the Oil & Gas Segment and reflects lower growth than was originally estimated in the Company’s financial model when it acquired Kentz in 2014, caused by various factors, including well-documented macro challenges and some Company specific headwinds (refer to the Company’s January 28, 2019 press release). 

The Q4 2018 net charges related to restructuring and other of $48.8 million (after taxes) is mainly related to the Company’s “Operational Excellence” program launched in 2016, a program whose objective is to sustain a culture of continuous improvement. Operational Excellence is a long-term, structured approach that focuses on improving every aspect of the business. 

Adjusted net loss from E&C(1) was $284.1 million in Q4 2018, or $1.62 per diluted share, compared with an adjusted net income from E&C(1) of $137.8 million, or $0.78 per diluted share for Q4 2017. This variance was mainly due to a negative total Segment EBIT(6), as Mining & Metallurgy and Oil & Gas recorded losses, and higher corporate selling and general and administrative expenses in Q4 2018, compared to Q4 2017, partially offset by lower income taxes and net financial expenses.

The Nuclear and Infrastructure segments continued to perform well, delivering higher Segment EBIT(6) and margins in Q4 2018, compared to Q4 2017. EDPM had another strong quarter with an 11.2% Segment EBIT(6) margin.

Mining & Metallurgy recorded a $349.3 million negative Segment EBIT(6) in the quarter, mainly due to a forecasted loss of approximately $346 million on a major EPC project in Latin America (refer to the Company’s January 28, 2019 and February 11, 2019 press releases). Oil & Gas recorded a $23.2 million negative Segment EBIT(6) in the quarter, mainly due to an unfavorable impact of approximately $47 million related to a preliminary decision of an arbitration process related to a specific element of a multi-year project in Australia, as well as lower revenue recognition on some costs incurred on projects, in respect of which the Company did not reach the required level of agreement at this time with its clients to meet the IFRS 15 conditions for revenue recognition (refer to the Company’s January 28, 2019 press release). 

Adjusted net income from Capital(3) increased to $54.4 million in Q4 2018, or $0.31 per diluted share, compared with $34.9 million, or $0.20 per diluted share for the corresponding period in 2017, mainly due to a higher contribution from certain other Capital investments and an increase in dividends received from Highway 407 ETR. 

E&C revenue for the fourth quarter ended December 31, 2018 was $2.5 billion, compared with $2.9 billion in the fourth quarter of 2017. The variation was mainly due to lower revenues in Oil & Gas, due to near completion and completion of major projects, and in Thermal Power (a market which the Company has exited), mostly offset by an increase in the Infrastructure segment. 


The Company’s backlog(8) totaled $14.9 billion as at December 31, 2018. Total bookings for the year ended December 31, 2018 totaled $10.4 billion, representing a 1.1 book-to-bill ratio. Total bookings for Q4 2018 amounted to $2.2 billion, representing a 0.9 book-to-bill ratio. Q4 2018 bookings included $0.9 billion in EDPM (1.0 book-to-bill ratio), $0.6 billion in Oil & Gas (1.1 book-to-bill ratio) and $0.2 billion in Clean Power (1.6 book-to-bill ratio). 


As of December 31, 2018, the Company had $634.1 million of cash and cash equivalents, $2.3 billion of recourse debt and $2.1 billion in unused capacity under its $2.6 billion committed revolving credit facility.

The Company’s Net Recourse Debt to EBITDA ratio, in accordance with the terms of its Credit Agreement, was 2.9.  

Operating cash flows for the fourth quarter of 2018 were ($112.2) million. This was below expectations mainly due to the unexpected net loss for the quarter and some delays of reaching milestones on certain large contracts.


The Company’s process for the potential sale of a portion of its interest in Highway 407 ETR continues to progress. 


In order to strengthen the Company’s balance sheet, the Board of Directors has reduced the quarterly dividend by $0.187 per share. On an annual basis, this would allow SNC-Lavalin to retain approximately $131 million of cash, which will be used to deleverage the balance sheet and give the Company additional flexibility in the future. Therefore, the Board of Directors today declared a cash dividend of $0.10 per share, payable on March 22, 2019, to shareholders of record on March 8, 2019. This dividend is an “eligible dividend” for income tax purposes. The Board of Directors will continue to assess potential future dividend levels on a quarterly basis, as required.


For 2019, management intends to focus on earnings and cash flow generations and deliver on its strategy, which is disclosed in the Company’s 2018 MD&A. This strategy includes the following: i) continue the Company’s progress in operational excellence; ii) repay debt and maximize cash flow efficiency; iii) sell a portion of the Company’s interest in Highway 407 ETR; and iv) deliver an expanded integrated and focused innovation and technology agenda, including a digital roadmap. 

The table below summarizes our 2019 financial guidance targets. The Company’s 2019 guidance incorporates the non-cash impact of IFRS 16, Leases (“IFRS 16”). Financial results for 2018 will not be restated for the new accounting standard. If the Company excluded the adoption of IFRS 16, adjusted EBITDA for 2019 would have been approximately $132 million lower, and the net financial expenses would have been $27 million lower mainly offset by a lower EBIT for a similar amount. 

2019 Guidance

Adjusted EBITDA from E&C (7,9) $900M - $950M

Adjusted diluted EPS from E&C (2,9) $2.00 - $2.20

Adjusted consolidated diluted EPS (5,9) $3.00 - $3.20

Effective tax rate on adjusted E&C earnings ~20%

Weighted average number of shares ~175.8M

On a quarterly basis, the Company expects that the Q1 2019 adjusted diluted EPS from E&C(2) be the lowest of the year and anticipates a gradual increase throughout the remainder of the year. 

The Mining & Metallurgy Segment EBIT(6) is expected to be impacted by a lower revenue level in 2019, compared to 2018, as the Company’s management took the strategic decision to concentrate on Mining & Metallurgy services mandates and stop bidding on lump-sum Mining & Metallurgy EPC projects (refer to the Company’s February 11, 2019 press release). The Company expects that the Oil & Gas Segment EBIT(6) to be higher in 2019, compared to 2018 and anticipates higher Segment EBIT(6) from its Infrastructure and Nuclear segments, mainly due to their strong backlog and prospects list. The EDPM Segment EBIT(6) should be in line with 2018. 

This outlook is based on the assumptions and methodology described in the Company’s 2018 Management’s Discussion and Analysis under the heading, “How We Budget and Forecast Our Results” and the “Forward-Looking Statements” section below and is subject to the risks and uncertainties summarized therein, which are more fully described in the Company’s public disclosure documents. 


SNC-Lavalin will hold a conference call today at 1:30 p.m. EST to review results for its fourth quarter. A live audio webcast of the conference call and an accompanying slide presentation will be available at The call will also be accessible by telephone, please dial toll free at 1 888 394 8218 in North America, or dial 647 484 0475 in Toronto, 438 968 3558 in Montreal, or 080 0358 6377 in the United Kingdom. A recording of the conference call will be available on our website within 24 hours following the call.


The Company reports its financial results in accordance with IFRS. However, the following non-IFRS measures and additional IFRS measures are used by the Company: Adjusted net income from E&C, Adjusted diluted EPS from E&C, Adjusted net income from Capital, Adjusted diluted EPS from Capital, Adjusted consolidated diluted EPS, EBITDA, Adjusted E&C EBITDA, Segment EBIT and 2017 backlog. Additional details for these non-IFRS measures and additional IFRS measures can be found below and in SNC-Lavalin’s MD&A, which is available in the Investors section of the Company’s website at Non-IFRS financial measures do not have any standardized meaning as prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with IFRS, these non-IFRS measures provide additional insight into the Company’s financial results and certain investors may use this information to evaluate the Company’s performance from period to period. However, these non-IFRS financial measures have limitations and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.