Snc-lavalin gets new compass
It would be tough to say it’s business as usual — or what was usual — at engineering giant SNC-Lavalin Group.
After almost a year in, the new boss, Robert Card, is well into the process of restoring the reputation of the storied engineering company, which has included taking a hard look at all the business units and deciding what fits, and what doesn’t.
Card, the first non-francophone to be named to lead SNC, was in Calgary during Stampede Week to meet clients. It was also an opportunity to see how the event has changed in the years since he lived in Calgary, in the early 1980s, while involved with Suncor’s Fort Kent oilsands project.
Management consultants often say the behaviour of a company and its employees is inextricably tied to the “tone at the top.” If the CEO is leading by example and inspiring the ranks with integrity, vision and insight, chances are that company is in good shape.
If not, it’s only a matter of time before the balls start to fall off the table.
And that’s what happened at SNC.
The bribery scandals that rocked the company are well documented, but Card is committed to moving forward.
In February, he appointed Andreas Pohlmann as SNC’s chief compliance officer whose task it is to implement a new compliance program and have policies and procedures in place that provide the company and its employees with a new compass of how to do business.
Pohlmann was formerly in the same role at Siemens, where he spearheaded a similar process following that company’s 2007 corruption scandal.
Card’s challenge is that the SNC story is still being written and he has to manage through the background noise of a newsfeed that continues to play out; the arrest of former CEO Pierre Duhaime, who is charged with fraud, or the fact authorities in France are looking into payments that were to have been made in connection with projects in Europe but were allegedly funnelled elsewhere.
On the same day Card was being interviewed at the Palliser Hotel here, SNC launched a $2 million lawsuit against former consultant Cynthia Vanier and the company’s former executive vice-president, Riadh BenAissa.
To paraphrase legendary sportscaster Howard Cosell, this could go on a long time.
But Card is optimistic that not only will SNC come through all of this as a stronger company, but that many growth opportunities lie ahead. He also believes SNC-Lavalin can become a bigger player on the global engineering stage. Were that not possible, Card says he would not have taken the job.
What does SNC need to do to climb the global engineering rankings?
“Scale has been proven important in our industry in the last decade and a half,” says Card. “The industry is doubling every five to 10 years and if you are not in that pace it becomes a question of how long can a company still be relevant?”
The engineering business, Card points out, has become an acquisitive one because that’s one way to capture market share. But as companies get bigger, the acquisitions need to be paired with organic growth in strategic markets.
And one of those markets is the energy business, where Card sees opportunity despite current uncertainty in the sector.
“We want to move into the upper tier in oil and gas globally and maintain first tier status in mining, transit and clean power,” he said.
With the right amount of growth — and a deliberate approach to integrating acquisitions — Card believes SNC can capture a larger share of the global market and avoid becoming ‘someone’s subsidiary.
“To the extent we can maintain SNC-Lavalin as a Canadian champion, that’s a key goal for me.”
Another goal — in fact, one of his bucket list items — was to become fluent in a second language. The opportunity at SNC meant learning more French than what he was exposed to during his university years.
But even here he has realistic expectations.
“If I was to give one gift to Quebec, I’d rather it be a growing, big, thriving SNC-Lavalin with the worst French in the world versus a struggling SNC-Lavalin with unbelievably impeccable French.… I do have a tutor and I do spend time with it, but it isn’t progressing as fast as I’d like.”
As an avid cyclist, Card understands the grade on the road he’s now travelling is rather steep.
SNC is involved in a wide range of businesses, and it’s not a very well understood company.
How many people, Card asks, know SNC has 6,000 people working in South America and is the largest supplier to Colombia’s national oil company, Ecopetrol?
And he’s more than just proud of SNC’s expertise in the rail business.
“Rail is a particular sweet spot for us. Not too many firms that can do what do — study, design, build, operate and finance all in under one roof,” he said.
Card realizes one of his tasks is to overcome that information gap, a process that will likely result in the company ultimately being rebranded (not renamed) once the legal issues involving former employees are resolved.
The question, of course, is how much patience the market might have for Card to get through his “to do” list.
He is more than aware of the increased presence of activist shareholders who have shaken up a few Canadian companies. Does he think about it? Card says he has to. But he also points out that SNC is a people business and an activist shareholder who “got it wrong” would find themselves with a company without the necessary people to do the work — and a lot of empty office space.
“We are working very hard to provide stable, effective long-term returns for our shareholders. That’s my No. 1 job day and night,” he said. “There are shareholders that suggest our assets aren’t fairly valued in our portfolio and we are taking it very seriously.”
Does that mean crystallizing value from some existing operations?
Definitely not out of the question from Card’s perspective.
“As we announced in our strategy, we are not going to hold onto these assets for life. We are looking for ways to maximize value and leverage them into the growth strategy (we) have talked about,” he said.
One of those assets is AltaLink, which operates about half of Alberta’s highvoltage transmission grid and is 100 per cent owned by SNC.
A research report by CIBC World Markets said AltaLink “could ultimately prove the most valuable asset” and estimates it is worth about $12 to SNC’s share price. It’s not out of the question it could be sold in an initial public offering and generate a tidy sum to fund future growth.
But for now, the shortterm focus is on building a corporate culture that all stakeholders — employees, customers and shareholders alike — can believe in.
“What’s the business case for being clean? It’s a damn good business case,” says Card.