SNC bullish on nuclear division

Montreal — SNC-Lavalin is forecasting operating profits for its Candu Energy sector next year, a month after completing the acquisition of the commercial division of the Atomic Energy of Canada.

“Despite the challenge we face, we are confident that Candu Energy is well-positioned for 2012 given the opportunities in this sector as well as the quality and professionalism of our new 1,400 personnel,” CEO Pierre Duhaime said Friday in a conference call.

The company took on more workers than originally forecast, in part, because it won a contract to upgrade Argentina’s 27-year-old Embalse generating station. The $440-million deal followed five years of discussions. The total refurbishment will cost more than US$1.3 billion and take some five years to complete. Additional projects are possible in Ontario and Quebec, along with new build construction opportunities in Romania, Jordan and Ontario.

The Montreal-based engineering consulting giant’s revenue increased to $1.78 billion from $1.51 billion in the third quarter.

SNC-Lavalin’s net income dropped to $125.6 million, or 83 cents per share, from $128.1 million or 84 cents per share a year earlier. Results were up when excluding a $20-million gain from the sale of an asset last year, but still seven cents above the average expectation of analysts, according to Thomson Reuters.

“We are pleased with the quality of results. We have good revenue growth and a significant increase in our services backlog,” Duhaime said.

The company maintained its full-year guidance that adjusted net income will be in line with 2010 results.

“This outlook implies a significant earnings ramp-up in the balance of 2011,” Pierre Lacroix of Desjardins Capital Markets wrote in a report.

SNC continued to add new, higher-margin contracts to its backlog in the quarter, which reached a record $2.2 billion, a 32 per cent increase from the second quarter. It also hasn’t yet booked several contracts, including a rail extension in Edmonton and the Argentine nuclear project.

Chief financial officer Gilles Laramee said the company doesn’t want to over promise about results for the nuclear division, which were acquired for $15 million plus future royalties.

“At the fourth-quarter call, we’d love to see it positive, but we are optimistic about this acquisition,” he told analysts.

While SNC looks for new nuclear contracts, the federal government is looking to spend an additional $75 million in fund costs associated with reducing AECL’s workforce.
www.snclavalin.com