SNC-Lavalin eyes growth in Middle East without early opportunities in Iran

MONTREAL – The partial lifting of sanctions against Iran is unlikely to present any business opportunities in the short term, SNC-Lavalin said Thursday even as the engineering and construction firm seeks to expand its oil and gas work in the Middle East.

“We see that as quite a longer play,” CEO Neil Bruce told shareholders during the company’s annual meeting.

“Once our clients are there and well-established then we’ll look at the opportunities. But frankly we don’t see real tangible opportunities there in the short term, over the next two to three years.”

A landmark deal between Iran and world powers last year led to the lifting of international sanctions in exchange for Tehran agreeing to curb its nuclear activities.

The Montreal-based company (TSX:SNC) is bullish on oil and gas, saying that business will be one of its two main profit generators this year.

The main focus is on countries such as Abu Dhabi, Dubai, Saudi Arabia, Qatar and Kuwait, along with working with international oil companies in Iraq.

Bruce said SNC-Lavalin is still working to rebuild trust with clients in the region four years after its reputation was shattered by alleged corruption by former executives.

While he acknowledged the scandal prompted a few customers around the world to close their doors to SNC, many have been reassured by efforts to inform them about its management overhaul and strong compliance and ethics rehabilitation.

“That process has helped us move past some of that into more normal relationships in the Middle East so we have less of an issue there,” he said at a news conference.

Bruce said SNC-Lavalin hasn’t pursued any new projects in Algeria over the last three years but hasn’t ruled out doing business in any particular country. Instead, it conducts a risk assessment reviewing security and corruption indications before deciding whether to pursue business in each market.

SNC-Lavalin has also been unable to bid on some business because several affiliates are under a bidding ban by the World Bank for up to 10 years. But, as a percentage of overall business, the numbers of projects is relatively small, Bruce added.

The company said it got $3.4 billion in new contract awards in the first quarter, including $1.8 billion from SNC’s oil and gas segment.

SNC’s overall net income was $122.1 million or 81 cents per share for the three months ended March 31. That included a net gain of $51.1 million or 34 cents per share from asset disposals, primarily the sale of SNC’s share of the Malta International Airport business. Overall net income in the 2015 first quarter was $104.4 million.

Adjusted net income was $97.04 million, up from $94.2 million a year earlier.

Revenue was $1.9 billion, down from $2.2 billion in the first quarter of 2015.