Aecon poised to gain from SNC-Lavalin’s retreat from world of builders

The head of Aecon Group Inc. has voiced his faith in fixed-price contracts after rival SNC-Lavalin Group Inc. signalled an abrupt retreat from the business this week in a move analysts say will work in Aecon’s favour.

Aecon’s share price jumped nearly 10 per cent to close at $21.59 Friday following another high-earning quarter, while SNC-Lavalin’s stock nudged up four cents from its 14-year low of $21 the day before.

“At Aecon, we are builders…it’s our job,” chief executive Jean-Louis Servranckx told investors on a conference call Friday.

“We are not dependent on a subcontracting industry that may overheat during some periods. We have our superintendents, we have our people, we have our workforce,” he said.

Aecon mainly deploys in-house managers and tradespeople on its projects in a ”self-performing” model that allows more control, in contrast to the general contracting approach taken by engineering and construction giants such as SNC-Lavalin.

About 42 per cent of Aecon’s 2018 revenue derived from fixed-price contracts, under which companies have to eat any cost overruns. That share is set to expand, as nearly two-thirds of its backlog revenues are set to come from the so-called lump-sum, turnkey contracts.

Analyst Chris Murray credited the Toronto-based company’s “very disciplined” bidding process and “somewhat unique” self-performance model — as well as a shift away from “social infrastructure” such as hospitals and universities for its success.

“They made a conscious choice to move away from that type of work, understanding that perhaps they weren’t as effective as being able to manage it,” Murray said in a phone interview. “Things like buildings and hospitals, they’re a bit more bid-intensive.”

SNC-Lavalin announced Monday it would quit the field of fixed-price construction contracts and scale back from oil and mining amid a strategic shift to its engineering roots, slashing its profit forecast for the third time this year.

The Montreal-based company, on top of a heavier reliance on subcontracting, has expanded its reach in resource industries over the last few years, but the segment has been plagued with high costs and contract problems.

Just Posted

Red Deer would be the site of potential TV show

A potential TV show aims to bring Red Deer kids across the… Continue reading

Oilsands firms considering diluent recovery units to boost crude-by-rail volumes

CALGARY — Ongoing pipeline project delays and growth in crude-by-rail capacity from… Continue reading

Ex-Eskimos CEO gets new job among flurry of Alberta government appointments

Ex-Eskimos CEO gets job among flurry of appointments EDMONTON — Len Rhodes,… Continue reading

State of mind to be key issue in Alek Minassian trial, judge says

TORONTO — The trial of a man accused of killing ten people… Continue reading

WATCH: ‘Lots to see and do’ at Pioneer Days in Red Deer

Sunnybrook Farm Museum is celebrating its 24th annual Pioneer Days this weekend.… Continue reading

Your community calendar

Thursday The Red Deer and District Garden Club hosts its annual Flower… Continue reading

Two men seriously injured after small plane crashes in Alberta field

BLACK DIAMOND, Alta. — Two people were injured in a plane crash… Continue reading

Two young girls dead after collision in Manitoba, RCMP say

DAUPHIN, Man. — RCMP say two young girls are dead after a… Continue reading

Chrystia Freeland condemns violence in Hong Kong, backs right to peaceful assembly

OTTAWA — Foreign Affairs Minister Chrystia Freeland is condemning violence in Hong… Continue reading

Canadians killed in Afghanistan honoured during emotional dedication ceremony

OTTAWA — Emotions ran free in Ottawa Saturday as the more than… Continue reading

Liberals unveil $3B sole-source deal for armoured vehicles ahead of election

OTTAWA — The federal Liberal government has unveiled plans to award a… Continue reading

85-year-old, lifting since 1950, on track to cinch weightlifting championship

MONTREAL — Olympic-style weightlifting isn’t just about strength or power. It’s about… Continue reading

Ottawa Mayor Jim Watson comes out as gay after 40 years

OTTAWA — After 40 years, Ottawa Mayor Jim Watson has come out… Continue reading

Most Read