SNC-Lavalin CEO Neil Bruce steps down after a nearly four-year tenure that saw company stock fall by roughly 50%.
58-year-old Neil Bruce, CEO of beleaguered engineering giant SNC-Lavalin Group Inc., will be succeeded on an interim basis by Chief Operating Officer Ian Edwards, effective immediately.
The board of directors has asked Edwards to review “the strategic direction of the company on an expedited basis” and develop a new plan “for sustainable success,” the company said in a press release.
Experts say the change at the top boosts the appeal of selloffs at the Montreal-based company’s costly construction unit, with a renewed focus on engineering and design.
After hitting successive 10-year lows since late January, the company’s stock jumped 6.5% to $25.25 in late afternoon trading Tuesday.
SNC-Lavalin said Bruce is retiring and returning to live in the UK with his family. He is expected to remain an adviser until the end of the year.
“Neil Bruce was supposed to be the savior, but now there’s no credibility,” said David Taylor of Toronto-based Taylor Asset Management, an SNC shareholder. “It’s time to move on. It’s not that they’re liars. Neil Bruce just couldn’t predict what his own business was capable of doing.”
Bruce, who took the helm in October 2015 and steered SNC through its purchase of WS Atkins in 2017, has struggled to move beyond a difficult period in the company’s history, despite bolstering its backlog by more than $15 billion. Its reputation has taken a beating over fraud and corruption charges related to its work in Libya that preceded Bruce’s tenure, and the company has found itself ensnared in political controversies both home and abroad.
The firm became the casualty of a diplomatic feud between Canada and Saudi Arabia — a key source of oil and gas revenue — last August, when Foreign Affairs Minister Chrystia Freeland tweeted her support for jailed dissidents, prompting the Saudi regime to suspend new trade and investment ties with Canada. SNC subsequently slashed its 2018 guidance twice in three weeks, more than halving its profit forecast and halting all bidding on future mining projects.
In May, the company announced plans to wind down its operations in 15 countries and reported a $17 million loss in its latest quarter. It also recently announced the sale of a bigger-than-expected chunk of 407 International Inc., a move opposed by some prominent shareholders who sought to retain the lucrative Ontario toll road.
Canaccord Genuity analyst Yuri Lynk said in a note to investors that a fresh face in the corner office “could spur a much-needed strategic shift.”
“In terms of this move, the writing was on the wall in… January 2019 when Edwards was appointed as COO,” Lynk said. The appointment came the same day the company announced about $350 million in unexpected cost overruns on its project with Codelco, Chile’s state-owned copper mining company, which has since cancelled the contract.
Analysts said the path to profit lies in SNC’s lower-risk engineering services, which generate about 75% of revenue, and scaling down or divesting construction activities, plagued by cost overruns on fixed-price contracts.
Edwards, who was named COO in January, has more than 30 years of experience with infrastructure and construction projects across Europe and Asia, the company said. He joined SNC-Lavalin in 2014 following six years in senior roles with the Leighton Group, a civil engineering firm with 20,000 employees across 14 countries.