The engineering firm now expects organic revenue growth of between 12% and 15% for fiscal 2023, more than double its previous forecast, which was for an increase of between 5% and 7%. (Photo: The Canadian Press)
SNC-Lavalin Group has revised its guidance for the current fiscal year upwards, as it reported healthy second-quarter revenue growth on Thursday, as well as a decline in contract losses for large railway projects.
The engineering firm said on Thursday it now expects organic revenue growth of between 12% and 15% for fiscal 2023, more than double its previous forecast, which called for an increase of between 5% and 7%.
The second quarter numbers appear to justify SNC’s confidence. Its Engineering Services grew 25.1% organically year-over-year to $1.47 billion in revenue, representing more than two-thirds of revenue company total.
Desjardins analyst Benoit Poirier compared SNC’s organic revenue growth to a home run in a note to clients.
Overall service bookings increased 9% year-over-year, driving backlog to record $12.4B, driven by demand for SNC’s engineering services in the States -United.
“In the United States, we continue to reap the rewards of our increased market presence and the government’s commitment to infrastructure spending,” Chief Executive Ian Edwards told analysts during a briefing. a conference call, calling the opportunities south of the border “abundant.”
Ian Edwards pointed to the massive injection of funds from the US government through the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. He also spoke of “key wins this quarter” related to electric vehicle battery factories.
Sustained demand has prompted SNC to hire 2,400 employees since the start of the year, said Ian Edwards.
Improvement for turnkey projects
Meanwhile, the company’s challenges with turnkey projects weighed less on its finances than in previous years, with the segment recording a loss of $13 million (M$) before interest and taxes, compared to 37 million. ($M) a year earlier. Analysts were expecting losses of $19 million in this regard.
SNC withdrew another $96M from its backlog of turnkey projects three months earlier, reducing it to $422M. This remains high, but shows a decrease from the $828M of the previous year.
Under the leadership of Ian Edwards since June 2019, SNC-Lavalin has focused on engineering and consulting services and moved away from lump sum projects — fixed price contracts under which companies must pay -even any cost overruns. It also sold the last of its declining oil and gas business in August 2021.
In recent quarters, the three fixed-price construction contracts that suffered the bulk of the company’s adjusted losses in its lump-sum turnkey projects segment were Toronto’s Eglinton Crosstown light rail system, the Ottawa Trillium line and the extension of the Greater Montreal REM light rail network.
“Testing and commissioning of our two Ontario projects are proceeding as planned. Our latest project, the REM, continues to progress well, with the South Shore section having successfully opened on July 31,” said Ian Edwards — although the inauguration was marred by three service interruptions in as many days. this week.
“As we finalize turnkey projects for our customers, we continue to pursue recoveries owed to us,” he added, citing disputes over additional costs accrued from labor disruptions related to the COVID-19, supply chain disruptions, inflation and strikes.
On Thursday, SNC posted net income of $63.8 million for the quarter ended June 30, which was significantly higher than the $1.6 million for the same period last year.
Revenues rose 14% to $2.13 billion in the second, from $1.87 billion a year earlier.
On an adjusted basis, SNC-Lavalin’s profit was 41 cents per share, after being 31 cents per share for the same quarter last year.
Analysts on average had expected an adjusted profit per share of 30 cents, according to forecasts compiled by financial data firm Refinitiv.
2023-08-03 21:20:55
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