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Denis Jasmin, CPA, CA

Vice-President, Investor Relations

+1 514-393-8000 ext. 57553

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New Strategic Direction for SNC-Lavalin

On July 22, 2019, SNC-Lavalin announced its new strategic direction to enable the Company to focus more effectively on its most profitable work: engineering, design, project management and construction management services, O&M and Capital. The Company’s new strategic direction is centered around:

  • Creating a simplified and more predictable business;
  • Generating more consistent earnings, increased cash flow, and profitability;
  • Lowering the Company’s risk profile; and
  • Enabling an improved strategic focus on better margin markets in which the Company has clearly differentiated capabilities.

SNC-Lavalin’s new strategic direction has two main focal points. The first is a focus on the high-performing and growth areas of the business and exiting LSTK construction contracting. The second is to reorganize into two separate business lines:

  • SNCL Engineering Services 
  • SNCL Projects

SNC-Lavalin believes that this simplified business model will allow it to generate increased profitability while minimizing its exposure to downside risk, subject to the risks and limitations described in Section 15 of the Company’s 2019 annual Management Discussion and Analysis (MD&A) and as updated in the first quarter 2020 MD&A.

Simplify, Focus, Grow

The Company’s strategic review was led by its President and CEO, Ian L. Edwards, and builds upon the actions first announced in March 2019 to simplify, focus, and sustainably grow the business. SNC-Lavalin’s new strategic direction involves focusing on what the Company does best – providing world-class services and integration of large, complex projects – while reducing its risk profile, and growing from this position of strength.

Simplify 

SNC-Lavalin’s new, more simplified, focused business approach reduces the Company’s risk profile by no longer bidding on LSTK construction projects. This is due to the challenges in executing such contracts, which typically transfer many risks (known and unknown, manageable or not) from the project owner to the Company. 

The Company will, however, continue its unique, repetitive Engineering, Procurement and Construction (“EPC”) offerings that are lower-risk, standardized solutions for: i) district cooling plants; and ii) power substations executed through its Linxon subsidiary. The Company may also continue to work on projects based on risk-sharing contracts between the project owner and suppliers, where the Company can limit its downside exposure.

Focus & Grow

SNC-Lavalin has been reorganized into and operates as two distinct businesses that are reported on and managed separately.

SNCL Engineering Services

SNC-Lavalin intends to grow where it is strongest and has a differentiated market position, which is the focus of its SNCL Engineering Services business line. The SNCL Engineering Services business line consists of the Company’s EDPM and Nuclear segments, Linxon, the services portions of the Company’s previous Infrastructure segment (namely O&M, District Cooling and Clean Power services), and Capital. The former Infrastructure segment is shifting its focus toward becoming a program integrator with a greater emphasis on Program and Project Management and Construction Management services. 

SNC-Lavalin’s objectives for the Engineering Services business are:

  • Become recognized as a market leader, or expand its market leadership, in the following areas:
    • Advisory, design and project management services for infrastructure projects globally.
    • Nuclear services, including life extension, decontamination and decommissioning (“D&D”), and remediation.
    • Project Management / Construction Management / Operations & Management / Project integration in transportation, especially in rail and transit.
    • Capital – Ownership and management of infrastructure assets.
    • Clean power – Global electrical AC substation projects and renewables engineering services.
    • Linxon (supplier of power substations).
  • Establish more predictable and strong financial performance and restore investor confidence by delivering:
    • Industry leading EBITDA margins.
    • Strong cash flow results to build a sustainable future.

SNC-Lavalin will continue to be a strong player in the advisory, engineering and design space with EDPM, and expects to maintain its global market-leading position in rail and transit. Rail and transit remains a key focus area for the Company’s infrastructure business, where market growth is expected to be above GDP growth levels in the Company’s core markets, creating ongoing opportunities for SNC-Lavalin’s revised offering.

The Company also has a well-established position in nuclear plant life extension, including a leading position in CANDU-related services and products, and a demonstrated ability to successfully act as a Project Manager/Construction Manager and to provide Operation & Maintenance for complex transportation projects and social infrastructure. Sustained concerns of climate change are also driving the need for clean energy, and thus a need for life extension in nuclear power plants.  Directly and through Comprehensive Decommissioning International, LLC, its joint venture company with Holtec International, the Company is addressing a growing need for nuclear decommissioning along with sustained need for nuclear clean-up services. 

SNCL Projects

The SNCL Projects business consists of the Company’s current Resources segment and the EPC portion of its former Infrastructure segment. The focus of this business is very straightforward:

  • Continue ongoing operations of the business;
  • Complete the Company’s obligations to our customers; 
  • Work to mitigate risks of future losses;
  • Aggressively pursue resolution of the Company’s claims collection and recoveries; and 
  • Assess the Company’s future options for the services part of Oil & Gas and Mining & Metallurgy. (see update below on resources services) 

SNC-Lavalin believes that accelerating the pace of risk reduction and organizational effectiveness activities will result in the Company delivering stronger operational and financial performance on a more consistent basis. 

Further, SNC-Lavalin will continue to right-size the Company and concentrate on streamlining its overhead costs. SNC Lavalin is also reducing its geographic footprint to reduce risk and complexity by focusing on its core growth regions: Canada, the U.S., and the U.K., along with regional markets such as the Middle East and Asia Pacific and exiting unprofitable operations in certain countries.

Update July 31, 2020:  SNC-Lavalin announced plans to transform and restructure its Resources Services business. Please see the detailed press release