Pedestrians walk past the offices of SNC-Lavalin in Montreal in this file photo.Ryan Remiorz/The Canadian Press
SNC-Lavalin Group Inc. says it does not want to go through a prolonged legal battle over federal corruption charges and expects to engage the Canadian government in talks on settling the matter without admitting guilt.
The comments Thursday by SNC-Lavalin chief executive Robert Card came as the company reported better-than-expected earnings for its first quarter and disclosed plans to buy back up to 10 per cent of its common shares in a bid to boost its stock price. The shares jumped 5 per cent in Toronto trading to $45.33.
"I'm told by our lawyers that it's three to five years to get through this process. We don't intend for it to go that long," Mr. Card told reporters after the company's annual meeting Thursday. "We want to get something changed in advance. I can't imagine a happy ending to a guilty plea or being found guilty."
Later, on a conference call with analysts, Mr. Card said he'd promoted executive Neil Bruce to chief operating officer in part to leave him more time to deal with the legacy legal issues and that they would require "a lot of socialization" to get resolved.
"We're gearing up to avoid the full court process," Mr. Card said. "We've got a lot of good momentum going … At this point, we feel confident that we have the window of opportunity – it might take us 18 months or so – but to get this done."
The RCMP in February laid rare corruption and fraud charges against Montreal-based SNC-Lavalin, Canada's largest engineering firm, related to its business in Libya. The company acknowledges there was wrongdoing by executives who've since left the company, but says it has since reformed ethics and compliance procedures to among the toughest in the world. It is suing the same executives to recoup the allegedly embezzled funds and maintains the company itself did nothing wrong and should never have been charged.
Unlike the United States and other countries, Canada does not have so-called "deferred prosecution" or "non-prosecution" agreements by which prosecutors can obtain fines from companies facing bribery allegations while sparing them a trial or guilty plea that would trigger further reputational damage. Mr. Card wants to win some kind of similar deal for SNC, arguing that any admission of guilt in this case by the company would jeopardize a significant portion of SNC's current work, as well as thousands of jobs.
Mr. Card welcomed Ottawa's announcement in its latest budget that it would change federal procurement regulations to bring them more in line with other countries. But he said it doesn't resolve the issue completely because it deals only with Canadian federal contracts.
Under Canada's current Integrity Framework regulations, federal departments can ban companies from doing business with the government for 10 years if they or their affiliates are convicted of a list of crimes, such as bribery, anywhere in the world. The procurement rules make no allowance for steps companies take to fix the wrongdoing, as SNC has done.
Ottawa said it would look to change the rules. But Mr. Card said SNC's work outside Canada, and with other non-federal clients in Canada, would still be in jeopardy if it admitted guilt. He said a more comprehensive solution is required to resolve SNC's situation, adding there could be several ways to achieve that.
Meanwhile, Montreal-based SNC hired Bank of Montreal and HSBC as financial advisers to help sell its stake in Toronto toll road Highway 407. It hopes to begin a formal sales process before the end of the year.
The company also said it will purchase for cancellation up to 13.3 million shares under a normal course issuer bid starting around June 5. Its public float stands at about 133.1 million shares. The shares are currently trading at about $43, meaning the company could spend upward of $570-million on the buyback at current prices.
"It's big," said Dundee Capital Markets analyst Maxim Sytchev, adding the move was not anticipated. "It signals that the stock is undervalued, that they're very mindful about capital allocation. So it's a very positive gesture."
Mr. Card is helming a five-year strategic plan for the company that has seen it bulk up its oil and gas capability with the purchase of Britain-based Kentz Corp. while cleaning up underperforming areas of the business.
The company is on the tail end of cutting 4,000 jobs, or about 9 per cent of the work force, as it moves from a multisectorial service provider to one more focused on resources, power and infrastructure.
In 2013, Mr. Card was talking about doubling the size of SNC by the end of 2018. But the company has faced continued pressure from unprofitable legacy contracts. And the corruption charges have stoked fears about the future of its government business, depressing its share price.
"Recovery from past events has taken longer than we would have hoped," SNC chairman Lawrence Stevenson told shareholders.
SNC on Thursday reported net income of $104.4-million, or 68 cents a share, for the first quarter on revenue of $2.3-billion as its oil and gas business generated higher earnings and a major power project benefited from a favourable reforecast.
Adjusted net income, excluding restructuring and other charges and gains, was $56.8-million, or 38 cents a share. On that basis, analysts had been expecting 26 cents.
The company maintained its previous profit outlook for the year for its core business of $1.30 to $1.60 earnings per share. The backlog stood at $11.6-billion.
The order book stands to balloon over the coming weeks after confirmation last month that a consortium led by SNC-Lavalin has won a multi-billion dollar deal to build and operate Montreal's new Champlain Bridge. A separate SNC group was picked by the Ontario government as the preferred bidder for Toronto's Eglinton light rail transit contract, according to reports that remain to be substantiated.
Nicolas Van Praet