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Bloomberg
Canada’s biggest builder is keeping its focus at home even as US President Donald Trump pledges to ramp up infrastructure spending next door.
SNC-Lavalin Group Inc. is bidding on projects such as light-rail lines in Ottawa and Toronto and a $4.7 billion rapid-transit system for Montreal, as Prime Minister Justin Trudeau follows through on a pledge to invest C$120 billion on infrastructure over 12 years. Trump’s plan is “still to be confirmed,†said SNC Chief Executive Officer Neil Bruce.
“The Canadian infrastructure market is far more attractive for us, certainly in the short term, than the U.S. market,†Bruce said last week. “If you just look at the whole process, the commitment to do that, the US is starting two or three years behind Canada.â€
Bruce is looking to bolster SNC’s backlog of contracts after it tumbled 24 percent in a year to C$9.58 billion. While Canadian projects remain a major focus, the Montreal-based company is also adding to its international footprint with its C$3.6 billion purchase of the UK’s WS Atkins Plc, a deal that closed last month.
“If you take the bidding activity that we are involved in, plus our bid-to-win ratio, I’m confident of replenishing the backlog†in the second half, Bruce said.
SNC shares have dropped
7.3 percent this year through Friday, while Canada’s benchmark S&P/TSX Composite Index was little changed.
In the US, President Trump has promised a plan to invest $1 trillion over 10 years upgrading deteriorating roads, bridges, airports and other assets.
Potential Return
For SNC, potential contract wins both internationally and in Canada “position the stock for outsized returns in the foreseeable future,†Frederic Bastien, an analyst at Raymond James Financial Inc., said on August 4 in a note to clients. The shares have a potential return of 27 percent over the next 12 months, based on the average of analysts’ estimates compiled by Bloomberg. SNC has 10 buy recommendations, two holds and zero sells.
Canada made up a little more than 40 percent of SNC’s revenue last year, compared with about 11 percent for the US, according to data compiled by Bloomberg. Australia was the company’s second-biggest jurisdiction, accounting for 19 percent of 2016 sales. The addition of Atkins widens the company’s geographic reach and bolsters its capabilities outside the energy industry.
The purchase, which boosts SNC’s global workforce to about 50,000, will lead to cost savings
of C$120 million by the end of
next year.