The CEO of SNC-Lavalin said he doesn’t have much hope the company will be offered a chance to make a deal with federal prosecutors and is now focused on defending itself in court.“Our innocent employees are being used as a puck in a political hockey game and, frankly, they don’t deserve it and we’ve had enough,” Neil Bruce said on a conference call on Friday afternoon to discuss the Montreal-based company’s annual results.“We have done nothing wrong as a company and none of our current employees have done anything wrong,” he said. “We have never asked for the charges to be dropped, we have never asked for anything to be circumvented outside the judicial system. Did we ask for the remediation agreement that was enacted by parliament to be applied in our case? Yes.”The prosecution of the engineering and construction firm — the largest in Canada — has caused a scandal in Ottawa after allegations emerged former attorney-general Jody Wilson-Raybould was pressured by the Prime Minister’s Office to reach a deal with the company that would see it avoid prosecution — and demoted when she refused.Bruce said he believes the remediation agreement would ensure the company’s employees, pensioners, shareholders and suppliers would not be harmed by a prosecution. If the company is convicted, it could be banned from bidding on federal contracts for 10 years.Bruce said he’s confident the company will win in court, though he said that process could take a decade.SNC reported a net loss of $1.3 billion in 2018 on Friday, down from a profit of $382 million in 2017.That was because of a net loss of $1.6 billion in the fourth quarter, down from a net income of $52.4 million in the fourth quarter of 2017.The losses came despite an increase in revenue, from $9.3 billion in 2017 to almost 10.1 billion in 2018.For the first time in 27 years, the company said it is cutting its dividend, from 28.7 cents a share to 10 cents a share, effective immediately.The move will save SNC about $131 million a year in cash, which will be used to repay debt and provide “additional flexibility.”The company has $600 million in cash and cash equivalents and does not need to raise any type of equity, CFO Sylvain Girard said on the call.Much of the loss recorded in the fourth quarter was “due to a deterioration of the oil and gas segment’s near-term prospects,” Bruce said.That deterioration forced the company to record a “goodwill impairment” — an acknowledgment the 2014 acquisition of Kentz, an engineering and construction company that SNC-Lavalin’s oil and gas division, will not lead to the revenue growth that “originally estimated in the company’s financial model.”The company said that was the result of tension between Canada and Saudi Arabia, lower oil prices and “uncertain client investment plans.”However, Bruce said SNC remains “fully committed to the Saudi market” and was in the kingdom twice this week.About 15 per cent of the company’s employees work on projects in the country.
Tensions between Canada and Saudi Arabia will not affect projects the company is currently working on “but it does place major uncertainties” on “future prospects,” Bruce said.The company’s mining and metallurgy division had losses of $349.3 million, before interest and taxes, during the quarter, “mainly due to a forecasted loss of approximately $346 million” from a mining project in Chile.That expected loss led the company to issue its second profit warning in two weeks on Feb. 11.The issue came after project managers made commitments to suppliers without getting the customer to agree first, Bruce said.Bruce said he has personally met with the client and the two companies have entered into arbitration, which could reduce the losses.“We are certain that this is an isolated case,” Bruce said. “There is no known evidence that any similar issues exist on any other projects, we acted quickly and decisively and transparently.”The earnings report comes one day after Michael Sabia, the president and CEO of the Caisse de dépôt et placement du Québec, SNC-Lavalin’s largest shareholder, said the provincial pension manager would “be a rock in support” of SNC-Lavalin.Adjusted earnings before interest, taxes, depreciation and amortization — which excludes one-time charges — were almost $385.6 million for the year, down from $629 million in 2018 for the company’s engineering and construction business.It expects that to grow to between $900 million and $950 million in 2019.The company still has a backlog of more than $14.9 billion in orders.Bloomberg News contributed to this report.Related