MONTREAL – SNC-Lavalin Group has decided to exit the lump sum turnkey (LSTK) contracting sector. Instead the company’s resources (oil and gas and mining and metallurgy) and infrastructure construction will be reorganized into a separate business unit.
Ian L. Edwards
The company says it is also exploring all options for its resources segment, particularly oil and gas, including transition to a services-based business or divestiture.
The decision to reorganize the company will allow SNC-Lavalin to focus on the high performing and growth areas of the business, which will be reported under SNCL Engineering Services. The company will fulfil the contractual obligations of its current LSTK projects, including full commitment to the Réseau express métropolitain (REM) and be reorganized as SNCL Projects, while providing separate ongoing operational and financial disclosure to the market on this business line.
The reorganization and exiting from LSTK contracting is the first step of the new strategic direction for SNC that is focused on de-risking the business and generating more consistent earnings and cash flow. Together with the recently announced sale of 10.01% of Highway 407 ETR for $3 billion, the goal is to strengthen the balance sheet and enhance financial flexibility, while removing volatility.
SNC-Lavalin will provide further detail on the strategy and host an investor day in early fall.
“Lump sum, turnkey projects have been the root cause of the company’s performance issues. By exiting such contracting and splitting it off from what is otherwise a healthy and robust business, we are tackling the problem at the source, and as a result we expect to see a material improvement in the predictability and clarity of our results,” said Ian L. Edwards, interim president and CEO.
To watch the You Tube video on the subject, click here. Or go to www.SNCLavalin.com.