SNC-Lavalin Group is a Canadian based engineering and construction company, with 2007 revenues of C$6.7 billion. Packages business, or services and procurement associated with a particular construction activity, represented 54% of SNC's revenue in 2007, with service(engineering and design, but not construction activity) revenue, operation/maintenance revenue and infrastructure concession investments compromising the rest of SNC's earnings. The company is heavily tied to public infrastructure (26% of revenue), power (24% of revenue) and commodity markets. Over 25% of revenue in 2007 came from chemical, petroleum and mining related projects. Volatility in the commodities markets can cause demand for plants and other related projects to wane. SNC is also heavily tied to the North American, specifically Canadian market. In 2007, 57% of revenues came from Canada. However SNC is attempting to diversify its geographic revenue stream, expanding operations into emerging markets.
SNC is Canada's largest engineering and construction management companies. In addition to providing technical expertise related to managing and maintaining the operations of large construction projects, SNC also has key concession investments in which the company owns and operates infrastructure facilities, such as Highway 407, a private public partnership in Canada.
SNC was able to significantly grow revenue in 2007, primarily through growth in its Chemical & Petreoleum and Mining & Metallurgy segments. which each grew revenues in excess of 50%.
Financial Discussion: In 2007 SNC generated C$6.7 billion of revenue (Canadian dollars), while recording C$153 million of net income, which resulted in a profit margin of 2.3%. Revenue increased 31% from 2006, while net income decreased 3.2% year over year in 2007. Also, SNC's revenue backlog in 2007 was C$10.6 billion, up from C$10.4 in 2006.
The Infrastructure and Environment segment reported revenue of C$1.8 billion and operating income of C$93 million in 2007. This segment provides project management, procurement and construction services for a variety of infrastructure projects, such as airports, bridges and buildings. The environment part of the division provides environmental assessments and remediation.
The Power segment reported revenue of C$1.6 billion and an operating loss of C$267 million in 2007. This segment designs, builds and operates power facilities, focusing primarily on Hydroelectric energy, Nuclear Energy and thermal power generation. The loss in 2007 was mainly a result of the bankruptcy and subsequent work stoppage of a key supplier to the Goreway thermal power project in Canada.
The Chemical and Petroleum segment reported revenue of C$1.3 billion and operating income of C$126 million in 2007. This segment includes gas production, heavy and conventional oil production, onshore and offshore oil and gas, liquefied natural gas, pipelines, terminals and pump stations, refining and upgrading, bitumen production, and petrochemicals, biofuels, chemicals and fertilizers production.
The Operations and Maintenance segment reported revenue of C$1.1 billion and operating income of C$30 million in 2007. This segment provides operations, maintenance and logistics solutions for real estate, power plants, water supply and treatment systems, postal services, broadcasting facilities, highways, light rail transit systems, military camps and ships.
The Mining and Metallurgy segment reported revenue of C$449 million and operating income of C$68 million in 2007. This segment provides project management, engineering, procurement and construction services for each step in the mineral and metal recovery process, including mineral processing, smelting, refining, mine closure and reclamation.
The Infrastructure Concession Investments reported revenue of C$311 million and operating income of C$25 million in 2007. This segment designs, builds, owns, operates and maintains infrastructure facilities and systems. The segment also has the ability to structure capital transactions.
All Other segments grouped together reported C$283 million in revenue and C$19 million of operating income in 2007. Other segments includes agrifood, pharmaceuticals and biotechnology, and industrial. 
The rise of oil prices from 2002 to a peak of near $150 a barrel in the summer of 2008 in part contributed to the revenue growth in the Chemicals & Petroleum as well as Infrastructure segments, as it spurred infrastructure growth in Canada. Canada more than doubled its crude-oil exports over the past four years. Due to lower crude prices, oil companies have shelved investment plans worth close to 50 billion Canadian dollars, according to the Oil Sands Developers Group, an industry association. 
In January 2009, the Canadian government announced an infrastructure stimulus as part of the country's Building Canada government stimulus package. The plan includes over C$12 billion of new infrastructure spending in Canada over the next two years.  Since 57% of SNC's revenues are based in Canadian infrastructure projects, analysts believe the stimulus will benefit SNC and like infrastructure and construction stocks in Canada.
The opportunity for growth in emerging market countries in the Middle East and Africa is large especially since these regions are historically rich in petroleum and currently make up 25% of SNC's revenues. However geo-political risks are higher in these regions.
SNC generates revenue from clients through service contracts and packages contracts. Packages contracts, which were 57% of 2007 revenues, have a higher risk associate with them, since SNC bears the risk of rising commodity costs, resulting in services contracts generally having a higher gross margin. SNC is increasingly moving towards services contract revenue. The revenue backlog of 2007 Services contracts was up 90% year-over-year versus the packages revenue backlog which was down 27% year-over-year.
SNC is one of the largest construction and engineering company in Canada, but faces domestic as well as international competition.
|SNC ||FLR ||AMEC  ||Bechtel |
|Revenue||C$6.7 bil||$16.7 bil||£2.3 bil||$27 bil|
|Net Income||C$153 mil||$533 mil||£83 mil ||N/A|