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SNC looks to the world for growth

MONTREAL -- After an uncharacteristic and costly stumble at one of its construction projects last year, SNC-Lavalin Group Inc. is back on track, pushing an ambitious growth strategy in 100 countries.

Creeping up on its 100th anniversary in 2011, Montreal-based SNC has quietly set about building itself into an engineering and construction powerhouse, largely through its ability to take on complex projects in some of the most remote places in the world.

SNC is honing its technical expertise and establishing more engineering bases in key areas globally. Its plans include everything from finding infrastructure opportunities in Algeria to helping with oil field development in Indonesia.

It will do so out from under the cloud cast by the Goreway power plant it is building in Brampton, Ont., where the bankruptcy of a key supplier led to a $267-million pretax operating loss in its power division last year.

While the plant likely won't be finished until the end of this year, the financial pain that its delays and cost overruns have caused are now over, Jacques Lamarre, the company's president and chief executive officer, told reporters after the company's annual meeting in Montreal yesterday.

Before the meeting, SNC released first-quarter results showing a profit of 47 cents a share compared with a year-earlier loss of 13 cents.

Moreover, prospects look strong this year due to factors including world demand for commodities, an increasing global focus on infrastructure investment, and SNC's lack of exposure to weak markets such as the United States and the real estate sector, Mr. Lamarre said after the meeting.

"It's tough in the U.S, especially in the real estate markets, but it's all markets where we are not there. Where we are, strangely enough, the market seems very strong," he said.

"All the sectors where we are, it seems that we are in a different world. We don't see the same kind of tension, or the same kind of recession, that we can see elsewhere."

SNC's main areas of expertise include oil and gas, mining and metallurgy, power and infrastructure.

Canada is still SNC's major market, and the source of 57 per cent of its $6.7-billion in revenue in 2007. Recent and ongoing projects here include Vancouver's Canada Line rapid transit system, the Brun-Way Highway in New Brunswick, and one of the world's few floating bridges, in Kelowna, B.C., which will be completed this month.

SNC also has a strong, and growing presence in Africa, which made up 16 per cent of last year's revenue, along with Europe and the Middle East at 9 per cent each.

The U.S. was responsible for just 3 per cent of SNC's revenue in 2007, about the same level that is expected this year, Mr. Lamarre said.

One of the markets SNC is heavily interested in right now is Algeria, which has earmarked a lot of money to restore its aging infrastructure, Mr. Lamarre said.

Algeria and other North African countries including Libya also want to add to their oil and gas production capacity, and are good markets for SNC alongside the Middle East and Western Canada, he added.

Enormous demand for nickel, iron ore and gold from China and the Middle East should also lead to more mining projects. One of SNC's current major projects in this area is the engineering and construction work on the Ambatovy nickel project in Madagascar.

A relatively new area of growth could be in the agricultural sector, particularly in light of growing global food shortages and soaring prices for rice and other staples.

SNC was recently hired to build an agricultural irrigation system in Venezuela,complete with supporting infrastructure including housing, schools and health care facilities.

"It's a good business for our people. This is something that was not so strong some time ago," Mr. Lamarre said.

Asked whether SNC is eyeing Cuba after the resignation of Fidel Castro, Mr. Lamarre said he likes the country, but doesn't see it as an area for major investment yet.

Mr. Lamarre also said SNC, which bought 18 companies last year, will continue to expand through cautious, "synergistic" acquisitions.

SNC-LAVALIN (SNC)

Close: $52, up $1.49SNC-Lavalin

Q120082007
Profit$70.8-million($19.8-million)
EPS47¢(13¢)
Revenue$1.8-billion$1.3-billion

Source: Company reports

© The Globe and Mail

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