SNC-Lavalin says it remains Quebec company despite new U.K.-based super unit

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MONTREAL – SNC-Lavalin is shaking up its senior management team and creating a new organizational structure for the global engineering company as it tries to turn the page on a controversy that has sullied its reputation.

The most significant change is the creation of a new Resources and Environment unit to be headed by Neil Bruce, a former operations chief at AMEC.

London-based AMEC (LSE:AMEC) is a rival to SNC-Lavalin as one of the world’s leading engineering, project management and consultancy companies, with 29,000 employees and customers in the oil and gas, mining, clean energy, environment and infrastructure sectors.

Bruce will be based in London and oversee SNC-Lavalin’s largest and most diverse business unit focused on hydrocarbons and chemicals, mining and metallurgy, environment, and water — with about 38 per cent of total company revenues.

SNC-Lavalin International becomes the Global Operations group, headed by Christian Jacqui, formerly executive vice-president, Europe. The London-based position will oversee the globalization of the company’s operations.

Patrick Lamarre, who has been executive vice-president of SNC’s Global Power division, has resigned but will remain available to the company until June 1. Lamarre will be replaced on an interim basis by Scott Thon, president of its AltaLink subsidiary.

The changes were announced by Robert Card, an American who was appointed CEO in October, as the engineering giant struggles with a series of financial scandals.

“These changes represent part of our ongoing effort to further strengthen the company’s management structure and extend its scope,” Card said in a news release.

“These announcements are an opportunity to unroll some of the company’s preliminary strategic orientation, of which there will be more to follow in the months to come.”

The organizational changes announced Friday come more than a month after the SNC-Lavalin suspended payments to former CEO Pierre Duhaime and said there would be changes to its board of directors.

Duhaime initially received a $5-million payout after he stepped down as president and CEO last March amid an internal accounting investigation. Most of the payments were due to be paid over two years, including $1.9 million in salary continuance and benefits and $1.7 million in incentives.

He was arrested in connection with alleged fraud involving one of Montreal’s huge new superhospitals. The arrest warrant alleged Duhaime and Riadh Ben Aissa, another former top executive, conspired to commit fraud and falsified documents in connection with a contract pertaining to the multibillion-dollar McGill University Health Centre.

On the Toronto Stock Exchange, SNC-Lavalin’s shares briefly reached their highest level Friday since it first disclosed $35 million in questionable payments to foreign agents last February. The shares hit $44.91 before closing at $44.36, up 33 cents from Thursday’s close.

Even though key segments of the business will shift to London, SNC-Lavalin (TSX:SNC) will remain headquartered in Montreal where it will have its corporate functions.

Company spokeswoman Leslie Quinton said SNC-Lavalin will remain a Quebec-based company with a “strong” francophone presence.

Four of the 13 members of the office of the president are francophone Quebecers, including chief financial officer Gilles Laramee who will head a new business unit overseeing infrastructure, concessions and investments. The others are Jean Beaudoin of integrated management systems, general counsel Rejean Goulet and human resources chief Darleen Caron.

“SNC-Lavalin is a global company with its roots in Quebec. We are enormously proud of this heritage and the part it plays in who we are today and will be in the future,” Quinton said in an email.

Still, the face of the company is vastly different from when Quebecers headed the operations and several key operating segments.

Other changes will see Michael Novak become executive vice-president for global government, aboriginal and economic affairs, based in Montreal.

Dale Clarke, executive vice-president mining and metallurgy, and Ric Sorbo, acting executive vice-president hydrocarbons and chemicals, will report to Bruce.

SNC-Lavalin said Bruce has more than 30 years in the oil and gas, mining, and energy industries worldwide, with extensive experience in “change management and organizational development” to create operational efficiencies and strategic growth.

“With his excellent customer relationships and knowledge of the resources and environment sectors, as well as key stakeholders worldwide, Mr. Bruce is well-positioned to assume leadership of this group and to focus on building a strong platform on which to increase long-term global net income and growth.”

Maxim Sytchev of Alta Corp Capital said the appointment of Bruce suggests that Card envisages a future for SNC that mirrors AMEC.

“Bob Card is making hiring reorganization decisions to properly align SNC-Lavalin structure with the reality of a new world — engineering is a global business and the company’s divisions have to be aligned likewise,” he wrote in a report.

Sytchev said the pedigree of the company’s two top executives should make investors “increasingly more comfortable with the turnaround/strengthening potential of company’s engineering and construction business.”

Pierre Lacroix of Desjardins Capital Markets said the addition of Bruce is “significant” and could be “useful in developing the SNC franchise, especially in oil and gas.”

Before becoming AMEC’s chief operating officer, Bruce led the expansion of the British company’s natural resources division, which accounted for about 60 per cent of its revenues and operating profit.

“From a trading perspective, we expect investors to react positively to today’s appointments,” Lacroix wrote.

SNC-Lavalin is one of the world’s largest engineering companies, with 32,000 employees and operations in more than 100 countries around the world.

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