SNC-Lavalin announces solid earnings in Q2 2016, with a net income of $88.5 million

SNC-Lavalin announces solid earnings in Q2 2016, with a net income of $88.5 million

August 4, 2016

• Reported Q2 2016 IFRS net income of $88.5 million, or $0.59 per diluted share.
• Q2 2016 adjusted net income from E&C(1) of $71.4 million, or $0.48 per diluted share.
• Revenue backlog of $12.5 billion as at June 30, 2016.
• SG&A expense reduction of 10.1% versus Q2 2015, with annual anticipated benefits on track.
• Strong cash balance of $1.1 billion.
• 2016 Outlook maintained: adjusted diluted EPS from E&C(2) in the range of $1.50 to $1.70.

2016 first six months and Q2 results

SNC-Lavalin Group Inc. (TSX:SNC) announces its results today for the second quarter ended June 30, 2016.

“We are pleased with our results in the second quarter as we continue to drive consistency throughout our organization. Our efforts in delivering consistent execution continue to drive financial performance and sustained earnings improvements across the Company. Looking ahead, we see many opportunities across all our sectors, particularly in Infrastructure, Power and Oil & Gas,” said Neil Bruce, President and Chief Executive Officer, SNC-Lavalin Group Inc. “We are also pleased with the progress of our Operational Excellence program, which we launched at the end of the first quarter of this year. We are already seeing its impact across the organization in making us simpler, more agile and client-focused.”

• For Q2 2016, reported IFRS net income increased to $88.5 million, or $0.59 per diluted share, compared to a net income of $26.5 million, or $0.17 per diluted share, for the corresponding period in 2015.
• Adjusted net income from E&C(1) for Q2 2016 was $71.4 million, or $0.48 per diluted share, compared to $8.2 million, or $0.05 per diluted share, for the corresponding period in 2015. The increase was mainly due to an improved Segment EBIT(3) from Infrastructure.
• Total selling, general and administrative (SG&A) expenses in Q2 2016 decreased by 10.1% which builds upon the 18.7% reduction in Q1. These quarter-on-quarter reductions are mainly due to the successful implementation of the “STEP Change” program in 2015. As previously indicated, we will continue to take additional measures throughout the year, if required, to ensure we are as cost effective as possible.
• Adjusted E&C EBITDA(4) margin was 5.8% in Q2 2016, compared to 2.2% in Q2 2015.
• Total E&C revenue for Q2 2016 was $2.0 billion, compared with $2.2 billion in Q2 2015. The variation was mainly due to a decrease in the Mining & Metallurgy segment, which continues to be affected by the persistent softer commodity prices.
• Net income from Capital for Q2 2016 was $35.6 million, or $0.24 per diluted share, compared with $45.0 million, or $0.29 per diluted share for the corresponding period in 2015, attributable to an increase in business development expenses on new prospects and other SG&A.
• The revenue backlog totaled $12.5 billion at the end of June 2016. New contract awards for the quarter totaled $1.2 billion.
• The balance sheet remained strong at the end of June 2016 with cash and cash equivalents of $1.1 billion. This balance sheet resilience gives our customers and partners confidence in our ability to deliver on projects.
• The Operational Excellence program is expected to further improve and sustain a culture of efficiency and execution. We launched this initiative at the end of Q1 2016, as we are committed to our strategy and actions to deliver consistently improving financial performance.

Outlook

The Company is maintaining its previously announced 2016 outlook for the adjusted diluted EPS from E&C(2), which is expected to be in the range of $1.50 to $1.70.

We continue to expect that the Oil & Gas and Power segments will be the main contributors to net income, while Mining & Metallurgy will likely be the smallest contributor to net income. We also expect that the Infrastructure & Construction sub-segment will return to full year profitability in 2016.

The Company is also targeting to deliver an annualized adjusted E&C EBITDA(4) margin of 7% in 2017.

The above outlook is based on the assumptions and methodology described in the Company’s 2015 Management’s Discussion and Analysis under the heading, “How We Budget and Forecast Our Results”, which should be read in conjunction with 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.

Quarterly Dividend

The Board of Directors today declared a cash dividend of $0.26 per share, payable on September 1, 2016, to shareholders of record on August 18, 2016. This dividend is an “eligible dividend” for income tax purposes.

Conference Call / Webcast

SNC-Lavalin will hold a conference call today at 3:00 p.m. EDT to discuss the second quarter results. The telephone numbers to access the conference call are 1 866 530 1553 in North America, 416 847 6330 in Toronto, 514 223 0613 in Montreal, 080 0279 0444 in the United Kingdom, and 180 099 2284 in Ireland. Members of the media are welcome to participate on a listen-only basis. A live audio webcast of the conference call and an accompanying slide presentation will be available at investors.snclavalin.com. A recording of the conference call will be available on our website within 24 hours following the call.

About SNC-Lavalin

Founded in 1911, SNC-Lavalin is one of the leading engineering and construction groups in the world and a major player in the ownership of infrastructure. From offices in over 50 countries, SNC-Lavalin’s employees are proud to build what matters. Our teams provide engineering, procurement, construction, completions and commissioning services together with a range of sustaining capital services to clients in four industry sectors, oil and gas, mining and metallurgy, infrastructure and power. SNC-Lavalin can also combine these services with its financing and operations and maintenance capabilities to provide complete end-to-end project solutions. www.snclavalin.com

⁽¹⁾ Adjusted net income from E&C is defined as net income attributable to SNC-Lavalin shareholders from E&C, excluding one-time net foreign exchange gains, charges related to restructuring and right-sizing and other, as well as amortization of intangible assets, and the financing, acquisition-related costs and integration costs incurred in connection with the acquisition of Kentz in 2014. E&C is defined in the Company’s 2015 financial statements and Management’s Discussion and Analysis. The term “Adjusted net income from E&C” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management uses this measure as a more meaningful way to compare the Company’s financial performance from period to period. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance. See reconciliation below.

⁽²⁾ Adjusted diluted EPS from E&C is defined as the adjusted net income from E&C divided by the weighted average outstanding number of shares for the period.

⁽³⁾ Segment EBIT is defined herein as gross margin less i) directly related selling, general and administrative expenses; ii) corporate selling, general and administrative expenses that are directly related to projects or segments; and iii) non-controlling interests before taxes. Corporate selling, general and administrative expenses that are not directly related to projects or segments, restructuring costs, goodwill impairment, acquisition-related costs and integration costs and amortization of intangible assets are not allocated to the Company’s segments. The term “Segment EBIT” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management uses this measure as a more meaningful way to compare the Company’s financial performance from period to period. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance.

⁽⁴⁾ Adjusted E&C EBITDA is defined herein as earnings from E&C before net financial expenses, income taxes, depreciation and amortization, and excludes one-time net foreign exchange gains, charges related to restructuring and right-sizing and other, as well as the acquisition-related costs and integration costs incurred in connection with the acquisition of Kentz in 2014. The term “Adjusted E&C EBITDA” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management uses this measure as a more meaningful way to compare the Company’s financial performance from period to period. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance.

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