Engineering and project management company, SNC-Lavalin Group Inc. is exiting the lump-sum turnkey (LSTK) contracting business and plans to reorganize the company’s resources, which includes oil and gas and mining and metallurgy, and infrastructure construction segments into a separate business following continued poor performance in these areas. The company is also exploring all options for its resources segment, particularly its oil and gas business, including transitioning to a services-based business or divestiture.
The company reported second-quarter losses between $150 and $175 million due to LSTK construction project cost reforecasts from its resources and infrastructure segments. It will write down charges totaling approximately $1.9 billion.
“LSTK projects have been the root cause of the company’s performance issues,” said Ian L. Edwards, interim president and CEO, SNC Lavalin. “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.”
The decision to reorganize, Edwards explained, 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 as SNCL Projects, while providing separate ongoing operational and financial disclosure to the market on this business line.