After celebrating the Feb. 6 opening of Montreal-based SNC-Lavalin Inc.’s new Europe headquarters in London, CEO Neil Bruce was headed to Saudi Arabia, where his firm continues to feel the chill of last year’s diplomatic rupture between the oil-rich kingdom and Canada—as well as from other cascading developments.

In addition to global events now buffeting the firm's bottom line are escalating troubles at home—as new political and legal fallout reaching to Prime Minister Justin Trudeau complicates the contractor's push to keep the 50,000-person company competitive and moving beyond past ethics headlines.

Bruce said ongoing Saudi business is relatively unscathed after Canada’s support last year for an imprisoned woman in the kingdom. But the firm’s outcomes for new work there fell below its previous roughly one-in-three success rate, he added. Oil and gas made up 37% of its approximate $6.9 billion 2017 revenue, including $747 million in Saudi Arabia.

SNC-Lavalin on Feb. 11 announced lower projected fourth-quarter 2018 revenue and profit results, with the profit outlook cut by more than 40% and share price down by one-third, noting impacts of an unidentified mining project dispute that Bruce later confirmed is the Codelco copper mine in Chile. The firm termed the problem as “isolated” but also said it will halt EPC bidding in the mining sector and could change its sector management.

Bruce also elevated infrastructure group executive Ian Edwards to COO to review overseas clients and markets. He is a former Australia-based Leighton Group executive who has run SNC-Lavalin's major infrastructure business since 2014.

With the project issues and lowered earnings outlooks, ratings firm S&P downgraded the firm on Feb. 12 to BBB-, the lowest investment-grade rating, it said. Toronto-based ratings agency DBRS, owned by The Carlyle Group, said on Feb. 15 that its BBB rating "is under review," but the action does not apply to project ratings.

Brexit Uncertainties Ahead

Brexit impacts also loomed over the firm’s London expansion for 1,200 employees built around its 2017 buy of British design giant Atkins.

“The government is really leaving it to the last moment,” said Bruce. But “we feel pretty immune,” he added, noting 99.9% retention of former Atkins employees.

Operating as SNC-Lavalin’s engineering, design and project management division, Atkins employs 11,500 people in Europe. But most of its business and more than 10,000 staff are in the U.K. SNC-Lavalin also plans a 2,000-person base in Epsom, England, 25 kilometers away.

With the U.K. departure from the European Union set for March 29, Prime Minister Theresa May has yet to agree to a divorce treaty with its remaining 27 member nations. The House of Commons voted down her 585-page draft departure pact last month by an unprecedented majority.

The threat of leaving without a deal has caused near panic in business and industry. “There will be huge uncertainty at the ports with any business … relying on imports seriously affected,” warns Meg Hillier, chair of the chamber’s Public Accounts Committee.

For Philip Hoare, the Atkins unit’s U.K. and Europe CEO, the Brexit worry is future workload. With Brexit dominating the political agenda, government investment decisions have been shelved, he fears, although existing large public infrastructure programs now provide the firm a secure baseline.

Back In the Headlines

But new bombshells in Canada related to past bribery scandals in Montreal and Libya involving long-terminated executives continue to plague SNC-Lavalin, as does a new potential legal headache, with the resulting financial impacts and speculation on future changes in its corporate size and shape.

The firm is in early-stage trial proceedings on federal criminal charges filed against it in 2015 related to past executives' bribes on Libya work.

Former CEO Pierre Duhaime, forced to resign in 2012 because of alleged ties to a separate Montreal hospital contract bribe scheme, pleaded guilty Feb. 1 to helping a public servant commit breach of trust and was sentenced to 40 months of house arrest and community service; other charges were dropped, however.

Now attorneys for former vice president Stephane Roy, charged in 2014 but not yet tried on alleged bribes tied to the Libya contracts, argued in court on Feb. 13 to have those charges dropped due to the trial delay. He was acquitted last year on bribe charges on the Montreal hospital project.

Still developing with potential major new complications is a Feb. 7 report in Canada’s Globe and Mail newspaper that the office of Prime Minister Justin Trudeau may have pressured the country's former attorney general—who was since switched to another cabinet role and then resigned—to reverse federal prosecutors' rejection of the firm’s bid to negotiate settlement of the company bribe charges based on its revamp since 2012 of corporate management and toughened ethics rules and enforcement.

The controversy has become a Canadian media spectacle that also has attracted U.S. attention.

SNC-Lavalin CEO Bruce earlier told the Globe and Mail that the firm had “no visibility about pressure or anything else.”

A settlement of the charges, involving new penalties and other measures, would avoid criminal prosecution and retain the firm's ability to bid federal contracts.

Canadian authorities have yet to publicly disclose reasons for not granting the firm a so-called deferred prosecution agreement, a tool Canada enacted last June similar to those used in the U.S., U.K. and elsewhere.

Media reports speculate that its decision is related to the firm not reporting its internal corruption probe findings to authorities.

But in a Feb. 10 TV appearance, new Attorney General David Lametti said a settlement with the company is a "possibility."

Even so, now brewing, however, are possible provincial bribe charges outlined in December court documents against SNC-Lavalin related to alleged actions by departed employees to win a $127-million contract almost two decades ago to renovate Montreal’s Jacques Cartier Bridge. Authorities have not said when or if charges will be filed.

The firm has strong defenders in Quebec, who are concerned about a potential acquisition by a non-Canadian firm or a bankruptcy that could impact a core provincial employer.

Meanwhile, financial analysts who see stability in the firm's core businesses, are urging it to move on liquidating some investments to shore up its cash flow and quell investor anxiety—particularly completion of a sale of part of its valuable 17% stake in Toronto's 407 toll road that could generate more than $2 billion, says Bloomberg.

Says National Bank of Canada analyst Maxim Sytchev: "if the shares of SNC cannot get traction (excluding the legal issues) in this relatively decent macro environment, what will happen when the business cycle shoe drops?"

With new speculation among Canadian business observers on SNC-Lavalin's best or likely future strategy, as reported Feb. 15 by the Globe and Mail (subscription) there could be a big audience listening on Feb. 22 when CEO Bruce reports the firm's four-quarter results.