SNC-Lavalin CEO outlines impact of Saudi-Canada diplomatic spat

CEO Neil Bruce said the Canadian infrastructure contractor is cautious about its future in the kingdom

A diplomatic spat has impacted the prospects of Canada's SNC-Lavalin in Saudi Arabia.
A diplomatic spat has impacted the prospects of Canada's SNC-Lavalin in Saudi Arabia.

The chief executive officer of SNC-Lavalin Group said ongoing diplomatic tensions between Canada and Saudi Arabia is denting the infrastructure firm’s profitability and threatening its ability to win future work in kingdom, which could result in a retrenchment of its Saudi business.

“We’ve seen just in the last six weeks a further cooling of the relationship between Saudi Arabia and Canada,” said SNC-Lavalin's chief executive officer, Neil Bruce, during an investor conference call on 28 January, 2019.

“We have had feedback from our clients there that, […] they want us to continue [projects that we're] currently working on. But our ability to secure significant future work is very much under review [and so we are] a lot more cautious about future work there – more so than normal.”

READ: SNC-Lavalin names Sohail Samdani head of mining in Middle East

More than 15% of SNC-Lavalin’s global workforce is employed on projects in Saudi Arabia, which has been an important source of revenue growth for the company in recent years. However, the diplomatic situation has affected the infrastructure heavyweight's prospects, with a reduction in Saudi headcount also on the cards.

“We haven’t had to reduce out headcount [in Saudi Arabia] dramatically yet,” Bruce said. “But if the relationship stays where it is and we have difficulty winning the same levels of work, then clearly revenues will come down and the headcount will come down through [2019].”

READ: SNC-Lavalin signs contract for Iraq's West Qurna oilfield

Asked whether SNC-Lavalin would consider selling its oil and gas business in Saudi Arabia, Bruce answered: “We’ve never explored that.”

However, he added that Ian Edwards, appointed as SNC-Lavalin's chief operating officer on 28 January, 2019, would be tasked with “looking at predictability of delivery and maybe some of our businesses that don’t fit into the required category”.

“We will also be looking at clients and countries in-region that we’re operating in to ensure that we have far more predictable outcomes in the future," he added. 

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