SNC Lavalin says it is also exploring all options for its Resources segment, particularly its Oil & Gas business, including conversion to a services-based business or divestiture.

The company says it will take a $C1.9bn ($US 1.4bn) writedown on its second-quarter earnings to take account of the changes. The news was greeted by sharp drop in its share price.

Turnkey projects accounted for around 40% of SNC Lavalin’s revenue in 2018. Existing projects will not be affected by the decision.

This follows a net loss attributable to shareholders of $C 17.3m for the first quarter of 2019 compared with a net profit of $C 78.1m for the first quarter of 2018. SNC Lavalin expects the second quarter 2019 adjusted Ebitda from E&C to be in the range of negative $C 150m-$C 175m.

“Lump-sum, turnkey projects have been the root cause of the company’s performance issues,” says Mr Ian Edwards, SNC Lavalin’s interim president and CEO. “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.”

SNC Lavalin is currently a partner in three long-term rail projects in Canada:

  • Eglinton Crosstown LRT in Toronto, a 30-year $C 9.1bn finance-build-maintain contract awarded in 2015
  • Ottawa Confederation Line LRT, a $C 2.1bn design-build-finance-maintain contract awarded in 2013, and
  • Montreal Metropolitan Express Metro (REM) where SNC Lavalin is involved in both the engineering, procurement and construction contract, and the rolling stock, systems, operation and maintenance contract, which were awarded last year.