CEO working hard to engineer turnaround in SNC- Lavalin image
Canadian football fans from the 1970s will remember a Canadian Pacific Ltd. ad campaign — aired during game broadcasts — that showcased the conglomerate’s many businesses — from forestry and airlines to hotels, shipping and mining. As the ad unfolded, the screen filled with images taken from its different businesses. The ad’s tag line was “a picture is worth a thousand words.”
It’s an approach recently adopted by engineering conglomerate SNC- Lavalin. For the past several months, it has run a series of ads highlighting the company’s wide range of Canadian infrastructure projects, including a brief glimpse of the west leg of Calgary’s LRT system. Not only do they capture viewers’ attention, the featured company also looks like a really cool place to work.
At the ads’ conclusion viewers discover the company helping to keep the country moving — SNC-Lavalin.
The campaign clearly targets all of the company’s stakeholders — employees, clients and investors.
SNC chief executive Robert Card, who was in Calgary last month over Stampede Week, said the campaign signals that much has changed in the years since the company was rocked by a fraud and corruption scandal.
The engineering and construction company, he said, is “at or near the gold standard for ethics and compliance.”
“With our ethics and compliance system now fully implemented, we believe that we have become a global benchmark in our industry and we intend to keep improving on that high standard,” Card said Thursday during the conference call to discuss SNC’s second- quarter results.
And, in light of rumours about the company possibly being restructured, broken up or acquired, it’s also a way to send a message to all Canadians of the role SNC has played in building infrastructure from coast to coast.
The campaign is effective, but is it enough to get SNC out from under the rock it’s been under since corruption and fraud charges were laid against the company starting in 2012?
A picture might be worth a thousand words, but it’s what has been going on behind the scenes at SNC in almost three years since Card took over as CEO that will allow one of the world’s biggest engineering and construction firms to finally leave the penalty box it’s been in.
While Card recognizes the company still faces challenges, he’s determined to continue rebuilding SNC’s brand and its physical presence around the world by winning contracts and making acquisitions.
His first big win in moving forward was buying Kentz Corporation for $ 2.1 billion in 2014. That deal vaulted the company into big leagues of the C& E side of the global energy business. Energy- related revenues account for 40 per cent of SNC’s business and about half of its employees.
All of the supply chain and engineering work sourced overseas comes back to Canada, with 5,000 jobs linked to work being done outside the country, says Card. Should SNC be acquired by a company based outside the country, those jobs could be at risk.
Card has previously said he was interested in building the company’s presence in the oilsands. SNC is involved at Imperial Oil’s Kearl project and with Conoco-Phillips at Surmont, but where he sees upside is in the liquefied natural gas business.
“We still want to grow more in Canada. We are the biggest player in the Gorgon LNG project ( in Australia) and the ( Ichthys) project. LNG has become a big part of what we do and we’re very enthusiastic about LNG moving forward in Canada,” Card said in an interview.
What was clear from the second- quarter numbers and Thursday’s conference call is that the Kentz acquisition put SNC in a favourable position in the Middle East, giving it contracts with both international and national oil companies.
“The particular area of strength for us is very much right across the Middle East, and that’s where a large proportion of our sustaining capital, our completions — commissioning and completions contracts with the national oil companies and some of our selected IOCs — are strong,” said SNC chief operating officer Neil Bruce.
SNC’s second- quarter net income fell short of expectations while revenues were up compared with the same 2014 period. The shortfall was attributed to the company’s infrastructure division, although the company was awarded two major projects — Montreal’s Champlain Bridge and Toronto’s Eglinton Crosstown LRT — that were not yet reflected in the numbers.
Card said on Thursday’s call that the impact of those projects would be visible in 2016. Investors, however, were looking for an excuse to unload SNC shares and sent the company’s share price tumbling more than eight per cent to a close of $ 40.05, even as management said full- year guidance was on track.
As Card continues to rebuild SNC’s reputation and look for opportunities to build SNC’s business he is of the view the current economic downturn could present some compelling buying opportunities, though there remains some uncertainty about how the federal government intends to apply its revised integrity framework.
The government last month issued revised guidelines that stated a government supplier charged with an offence such as bribery, extortion or money laundering could be suspended for up to 18 months. It can, however, grant an administrative agreement that shows the company is making the appropriate changes to its processes to ensure the transgressions don’t occur again.
What’s disconcerting is that even with the revised guidelines — particularly with respect to the suspension provision — is there appears to be a ‘ guilty until proven innocent’ approach from the federal government that could still affect SNC.
Other jurisdictions such as the United States and the U. K. approach things a bit differently in that they encourage companies to come forward if they uncover something amiss within their own organizations. When that happens something called a deferred prosecution agreement offers prosecutors an alternative to criminal charges.
That’s not the case under the revised federal policy guidelines. The government should want to encourage the rapid disclosure of bad behaviour, not discouraging it.
Card is so confident in the changes that have occurred under his watch, that just as SNC must submit safety plans with its bids, it should also extend to ethics and compliance.
“We think there should be an ethics plan, too. Ethics and compliance should be on the same footing as safety,” he said.
By all accounts — including the hiring of Andreas Pohlmann, who installed a best- in- class compliance system at Siemens, as chief compliance officer in March 2013 to establishing a new corporate culture — SNC is at or very close to where it needs to be on the corporate rehabilitation curve.
The stock price should only reflect the company’s results and its ability to win contracts and carry them out. The reputational cloud should lift. Maybe that will be in evidence come Stampede Week next year.
We still want to grow more in Canada. LNG has become a big part of what we do and we’re very enthusiastic about LNG moving forward in Canada.