SNC Appoints New CEO to Overhaul Embattled Engineering Firm

(Bloomberg) -- SNC-Lavalin Group Inc. is looking for a new strategy under a new boss as the Canadian engineering firm struggles to recover from a string of setbacks that have wiped out about 60% of its market value in the past year.

The Montreal-based firm, which found itself at the heart of Canada’s biggest political scandal in years, said Tuesday that Chief Executive Officer Neil Bruce is retiring. His interim successor, Chief Operating Officer Ian Edwards, was tasked with establishing a plan “for sustainable success” at the company, which has 52,000 employees in 50 countries.

The board wants Edwards to come with a proposal “that de-risks and simplifies our business model and generates consistent earnings and cash flow,” SNC said in a statement on Tuesday. “In doing so, he will also use the next 60 days to meet with key stakeholders to get their perspectives and strengthen relationships.”

SNC rose 7% to C$25.35 at 11:54 a.m. in Toronto, paring its loss in the past year to 57%.

The surprise announcement is the latest twist for the company, which is facing a trial in Canada for corruption charges, reported an unexpected loss last quarter and has stopped bidding on some mining projects after getting into a costly dispute in Chile. Even selling a stake in a Toronto toll road proved more complicated than initially planned and failed to stem the stock’s slide.

‘Dramatic Issues’

Maxim Sytchev, an analyst at National Bank of Canada, said the strategic review may offer SNC a glimmer of hope, adding that the “writing was somewhat on the wall” because of the stock performance.
“Typically the boards of directors tend to react to such dramatic issues,” Sytchev told BNN Bloomberg Television. “Shareholders as well have been rightfully upset. There is a dynamic where change was what was needed.”

There’s been no respite for SNC since late January. The company issued two profit warnings, wrote down the value of its Middle East energy business hurt by Canada’s diplomatic row with Saudi Arabia and had its credit rating downgraded by S&P Global Ratings. It was then dealt another blow when Chilean copper producer Codelco canceled a contract worth $260 million in a case that was sent to arbitration.

Political Controversy

To meet its 2019 forecast, the company is accelerating a cost-cutting program and moving away from unprofitable markets.

That’s on top of legal woes, which became the focus of a controversy that reached the office of Canadian Prime Minister Justin Trudeau. SNC has been charged with paying bribes related to work in Libya about a decade ago and if convicted could face a 10-year government ban in Canada.

Trudeau has said he supported a so-called deferred prosecution agreement for the construction firm -- a deal to avoid trial in exchange for a fine -- because the company employs 9,000 people in Canada.

Trudeau’s former attorney-general, Jody Wilson-Raybould, said the prime minister and some of his aides pressured her to intervene to help the construction firm obtain the out-of-court settlement. She later quit cabinet, along with another minister. A top Trudeau aide and the country’s top bureaucrat also left.

SNC, which is now preparing for a trial, has argued it no longer resembles the company it was. In March, Bruce gave a series of interviews stressing the risks of a takeover and of job losses in Canada. The company has retained legal and financial advisers to develop alternatives.

Edwards joined the company in 2014 and has been COO since January. Bruce had been with SNC since 2015 and oversaw the acquisition of WS Atkins of the U.K. for C$3.6 billion two years ago. He will remain an adviser to the board until the end of the year.

--With assistance from Paula Sambo and Stephen Wicary.

To contact the reporter on this story: Sandrine Rastello in Montreal at srastello@bloomberg.net

To contact the editors responsible for this story: Jacqueline Thorpe at jthorpe23@bloomberg.net, ;Crayton Harrison at tharrison5@bloomberg.net, Steven Frank

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