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SNC-Lavalin issues new profit warning on Latin America contract

SNC-Lavalin issues new profit warning on Latin America contract
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SNC-Lavalin Group Inc. issued a profit warning for the second time in two weeks after the Canadian company failed to reach an agreement over a dispute with a client in mining project in Latin America.

SNC now sees 2018 diluted adjusted earning from engineering and construction of between $0.20 and $0.35 (Canadian) per share for the year, the Montreal-based company said Monday in a statement. That compares with $1.15 to $1.30, after outlining the problem on Jan. 28 and announcing a writedown on its business with Saudi Arabia.

The shares fell 4.8 per cent to $34.94 in Toronto, after plunging 28 per cent, the most in at least 27 years, on the initial warning in January.

SNC didn’t identify the project but analysts are pointing the finger at a copper mine run by Codelco, Chile’s state-owned producer. SNC said the project will have up to a $350 million negative drag on the company’s mining and metallurgy fourth quarter earnings before interest and taxes.

SNC and its client agreed to settle the dispute through an accelerated arbitration process, out of which the company “expects significant recoveries in the future,” SNC said.

Separately, SNC-Lavalin’s lenders agreed to increase the company’s maximum leverage ratio, and will consider the issue a “nonrecurring item, up to a maximum of $310 million.” SNC-Lavalin reiterated, it has no plans to raise equity, as it continues to have nearly $1.8 billion drawings available under its credit facility.
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