Engineering firm SNC-Lavalin Group Inc. lost more than a quarter of its market value after revealing a major problem in its mining division and a weak outlook for its energy business, partly because of Canada’s diplomatic spat with Saudi Arabia.
The Montreal company said Monday it will write down its oil and gas division by $1.24-billion after-tax, or about $7 a share. The company said its Saudi business is doing worse than expected, and that and volatile oil prices “have led to deterioration in our near-term prospects which we cannot ignore,” creating the accounting charge. SNC shares lost 28 per cent, or nearly $2.4-billion in market capitalization.
The setbacks extend a difficult run for SNC. Until recently, the company seemed to be turning the corner after a multiyear overhaul, but since last summer its shares have taken a beating. It is one of the few Canadian companies with a sizable operation in Saudi Arabia, which accounts for more than 10 per cent of its revenue.
Canada and Saudi Arabia have been in a diplomatic deep freeze since August, when the federal government called for the release of some detained Saudi dissidents.
The kingdom responded by expelling the Canadian ambassador and putting on hold all new trade and economic ties between the two countries. Ottawa’s decision to accept Rahaf Mohammed, a high-profile Saudi asylum seeker who said she was fleeing the country because of its oppressive attitudes toward women, has exacerbated the tension.