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AtkinsRealis notches record backlog on pricey public contracts, big U.S. spending

MONTREAL — AtkinsRéalis more than doubled its profit last quarter and raised its financial forecast for the year as the company shifts to growth and rounds out its transition to a pure-play engineering firm.
AtkinsRealis, the company formerly known as SNC-Lavalin Group Inc. reported its third-quarter profit more than doubled compared with a year ago and raised its outlook for revenue growth. SNC-Lavalin Group Inc. headquarters is seen in Montreal on Thursday, Aug.3, 2023. THE CANADIAN PRESS/Christinne Muschi

MONTREAL — AtkinsRéalis more than doubled its profit last quarter and raised its financial forecast for the year as the company shifts to growth and rounds out its transition to a pure-play engineering firm.

The company formerly known as SNC-Lavalin Group Inc. — whose massive, overbudget construction projects several years ago wound up draining coffers and pushing a round of cuts — notched a record backlog in its third quarter.

The figure hit $12.5 billion as of Sept. 30, driven higher by government contracts for energy and transportation projects in Canada, the United States and the United Kingdom.

"We continue to see exponential demand for our services in these markets, fuelled by the need to replace aging infrastructure and provide clean, affordable solutions for the built environment," CEO Ian Edwards told analysts on a conference call Friday.

The growing backlog includes recent wins such as a $141-million electric-vehicle battery plant contract in Bécancour, Que., transportation work in the U.S. and a fresh agreement with the U.K. defence ministry, Edwards said.

Hundreds of billions of dollars in public funding for infrastructure and green technologies in the U.S. via a pair bills in the last two years remain a key source of income targeted by AtkinsRéalis.

"The line of sight to further opportunities remains vast as the U.S. will continue to invest in lowering the carbon footprint on their aging infrastructure," said Edwards. He cited the Biden administration's US$1.2-trillion infrastructure bill as well as the Inflation Reduction Act, which zeros in on renewable energy.

The Montreal-based company is currently working or bidding in eight U.S. states, he said. AtkinsRéalis eventually aims to employ 10,000 staff south of the border, up from about 4,500 now.

"Our strategy is to get us to a top 10 player in the U.S. We're currently ... around 17," Edwards said.

To fulfil its global backlog, the company took on an additional 1,200 employees last quarter, bringing the total to roughly 37,000. The higher headcount comes despite the sale in August of its Scandinavian engineering business, Systra Group, to a French consulting firm for 80 million pounds — about $135 million.

AtkinsRéalis also grew its nuclear revenue and backlog 23 per cent year over year. Edwards pointed to the Ontario government plan to build a new nuclear station at Bruce Power on the shores of Lake Huron, on top of the ongoing refurbishment of the Toronto-area Darlington nuclear plant, where Atkins subsidiary Candu Energy secured a four-year, $20-million contract last year.

Earlier this week, the company announced that a Candu-led consortium snagged a $750-million engineering and procurement contract to extend the life of Romania's Cernavoda nuclear plant.

Under Edwards' stewardship since June 2019, AtkinsRéalis has shifted its focus to engineering and consulting services and away from lump-sum projects — fixed-price contracts under which companies must pay for any cost overruns themselves.

In recent quarters, the three fixed-price construction contracts bearing the bulk of the company's adjusted losses in its "lump-sum turnkey" segment were Toronto's Eglinton Crosstown light-rail transit system, Ottawa's Trillium Line and the greater Montreal area's REM light-rail network extension.

Last quarter the LSTK loss amounted to $13.2 million, the only segment to see red ink, and far less of it than the $43.9-million drain from a year earlier.

The costs are now lower because they relate to administrative tasks, permitting, testing and driver training, Edwards said.

AtkinsRéalis boosted its outlook for the year on Friday, saying it expects organic revenue for its services business to grow between 15 per cent and 17 per cent, up from earlier expectations of 12 per cent to 15 per cent.

The sunny forecast helped push its share price. The companies shares ended the trading day up by $3.31 or more than eight per cent to $43.75 in late afternoon trading, capping off a one-year increase of 82 per cent.

Net income from continuing operations amounted to $105 million or 60 cents per diluted share for the quarter ended Sept. 30, up 178 per cent from a profit of $44.7 million, or 25 cents per share, in the same period last year.

Revenue for the quarter grew 15 per cent to $2.20 billion from $1.89 billion a year earlier.

On an adjusted basis, the company's professional services and project management business earned 38 cents per diluted share for the quarter, up from an adjusted profit of 30 cents per share a year earlier.

The outcome beat analyst expectations of 36 cents per share, according to financial markets data firm Refinitiv.

This report by The Canadian Press was first published Nov. 10, 2023.

Companies in this story: (TSX:ATRL)

Christopher Reynolds, The Canadian Press