Issues with multiple sinkholes on the site of Metro Vancouver's Evergreen Line is swallowing profits for construction giant SNC Lavalin.
According to its quarterly earnings report SNC-Lavalin Group Inc. reported second- quarter profits that failed to meet analysts' estimates, due to losses in the engineering and construction unit. The sale SNC's investment in the AltaLink electricity business in Alberta was also cited as a contributor to the poor performance.
Analysts had predicted earnings of 37 cents a share on average. But the company's net income dropped 17 per cent to $26.5 million (17 cents a share). Experts had estimated earnings of 37 cents a share on average. Revenue went up 33 percent to $2.3 billion, topping the $2.25 billion average forecast.
According to the report, the loss was mainly due to "challenging soil conditions relating to the tunnel portion of a mass transit project and additional costs to secure the completion date on a major highway project, both in Canada."
The company did not specify which highway project it was referring to.
Despite the setbacks, SNC Lavalin remains optimistic.
"Despite some challenges in the second quarter in our infrastructure segment, we believe that historical volatility in the backlog will dissipate," said CEO Robert Card in a statement. "We are maintaining our current outlook for 2015, and believe the company is well positioned to deliver a strong second half, as we continue to focus on our operations and leveraging our platform for growth."
Crews tunneling for the rapid transit project have experienced four sinkholes, despite efforts to improve soil conditions. Executive project director Amanda Farrell said part of the issue is due to the geology of the area which contains fine, sandy material. Workers have attempted to building stabilizing walls and dewater the soil. The last sinkhole occurred in early June during maintenance on the tunnel boring machine. The other sinkholes also formed during maintenance.
The Company is also continuing its efforts to complete its "restructuring and right-sizing plan," which is expected to result in approximately $40 million (after taxes) in charges over the next 8 months. The plan is expected to result a 9 percent reduction of SNC-Lavalin's workforce by 2016 while integrating last year's $2.1 billion acquisition of Kentz Corp.