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Annual Report 2010 ANNUAL REPORT KNOW-HOW WE KNOW WHAT WORKS WHAT’S SUSTAINABLE AND HOW TO GET IT DONE ANYWHERE IN THE WORLD SNC-Lavalin brings unique know-how to developing sustainable solutions that support the widest range of stakeholders. An international leader in engineering and construction, and a major player in operations, maintenance and infrastructure concession investments, our success is founded on 2 Financial Highlights our experience and proven technical skills, 4 At a Glance our global diversity and attentiveness to our 6 President’s Message clients and the communities we serve. 8 Chairman’s Commentary 9 Members of the Office of the President 10 Report on Operations 33 WE CARE 34 Management Team 37 Main Offi ces 40 Management’s Responsibility for Financial Reporting 40 Independent Auditor’s Report on Summary Consolidated Financial Statements 41 Summary Consolidated Financial Statements 45 Board of Directors 46 Ten-Year Statistical Summary 48 Information for Shareholders 49 Glossary FINANCIAL HIGHLIGHTS Ongoing 100 years of 24,000 projects in excellence employees 100 countries 2010 REVENUES 2010 REVENUES INFRASTRUCTURE AND ENVIRONMENT CANADA CHEMICALS OTHER AFRICA OTHER 29% AND REGIONS 54% INDUSTRIES PETROLEUM 20% 5% 14% 1% 3% 7% 8% ASIA EUROPE INFRASTRUCTURE 12% CONCESSION POWER INVESTMENTS 3% 6% UNITED MIDDLE EAST 21% 11% STATES OPERATIONS MINING 6% AND AND LATIN AMERICA MAINTENANCE METALLURGY AND CARIBBEAN Diversity by Diversity by industry segment geographic area SNC-LAVALIN SNC-LAVALIN REPORT 2010 ANNUAL 2 06 07 08 09 10 NET INCOME 437.0 (in millions CA$) 359.4 312.5 29% 5-year net 157.8 151.4 income CAGR(1) ROASE(2) (in %) 29.1 27.3 27.4 24% 19.0 16.4 5-year average ROASE(2) BACKLOG (in billions CA$) 13.0 10.4 10.6 10.8 9.6 $13 billion backlog at December 31, 2010 DIVIDENDS (in CA$) 0.72 0.62 24% 0.51 0.39 5-year 0.30 dividend CAGR(1) SNC-LAVALIN SNC-LAVALIN REPORT 2010 ANNUAL (1) Compound Annual Growth Rate 3 (2) Return on average shareholders’ equity AT A GLANCE INFRASTRUCTURE We design and build various types of infrastructure including airports, bridges, buildings, healthcare facilities, seaports, marine and ferry terminals, flood control systems, mass transit systems, railways, roads and water treatment/distribution infrastruc- ture and facilities for the public and private sectors. ENVIRONMENT POWER Our expertise includes social and envi- Our areas of activity include hydro, ronmental impact assessments and thermal and nuclear power generation, studies; site assessment, remediation energy from waste, green energy solu- and reclamation; ecological and human tions, and transmission and distribution health risk assessment; waste manage- projects. We offer end-to-end project ment, water and wastewater; marine services including front end engineering and coastal management; air quality for project feasibility, detailed design, and acoustics; environmental man- construction, commissioning and the agement; climate change; institutional operation of power facilities. We also strengthening and rural development. offer unique expertise in the application of information technologies and in tele- CHEMICALS & PETROLEUM communications and network design. In this sector, we offer front end engi- neering, detailed design, procurement, MINING & METALLURGY construction, commissioning and ongo- We provide project management, ing sustaining capital services in the process and detailed engineering, pro- areas of gas processing; heavy and curement and construction services conventional oil production; onshore for all mineral and metal recovery and offshore oil and gas; LNG re- processes to our global and regional gasification terminals; coal to liquid clients, including mine development, gas; carbon capture, transportation and mineral processing, smelting, refi ning, sequestration; pipelines, terminals and mine closure and reclamation, and fer- pump stations; refining and upgrading; tilizer plants. We also have specialized bitumen production; biofuels; petro- expertise in training simulation soft- chemicals and chemicals. ware and equipment. SNC-LAVALIN SNC-LAVALIN REPORT 2010 ANNUAL 4 SNC-Lavalin operates across a broad range of industry sectors and brings expertise in multiple engineering and business disciplines to every project. PHARMACEUTICALS & BIOTECHNOLOGY We provide full service solutions for the pharmaceutical, biotechnology and life sciences sectors including engineering, construction, automation, commis- sioning and validation. We also have international expertise in biotechnology and pharmaceutical process engineer- ing and regulatory compliance. OPERATIONS & AGRIFOOD MAINTENANCE We provide solutions covering the full We provide operations, maintenance life cycle, from food processing, pack- and logistics solutions for buildings, aging and handling, to distribution and power plants, water supply and treat- storage, for companies of all sizes in ment systems, desalination plants, their domestic markets and interna- postal services, broadcasting facili- tionally. We have expertise in designing ties, highways, bridges, light rail transit and building agrifood facilities, quality systems, airports, ships, and camps systems and compliance, plant modi- for construction sites and the military. fi cations and retrofi t and automation. INFRASTRUCTURE INDUSTRIAL CONCESSION INVESTMENTS Our areas of activity include glass, SNC-Lavalin Capital invests in ICIs in lubricants, sugar, cement, automo- various industry sectors and can take bile and aircraft assembly, cosmetics, full or partial ownership of infrastruc- fi lling and packaging lines, sulphuric ture which SNC-Lavalin often also and phosphoric acid, fertilizers, green designs, builds, operates and main- chemistry and many others. Our exper- tains. SNC-Lavalin Capital also has the tise includes process development and breadth of expertise to arrange short- design, instrumentation and automation, term or long-term fi nancing, participate e-learning and simulation, construction, in economic aspects of feasibility project management, plant commis- studies, negotiate legal agreements, sioning and start up, and a full range of prepare financial models, perform due technical and advisory services. diligence and manage ICIs. SNC-LAVALIN SNC-LAVALIN REPORT 2010 ANNUAL 5 INTERVIEW WITH PIERRE DUHAIME WE OWE OUR SUCCESS TO THE INCREDIBLE TALENT AND DEDICATION OF OUR EMPLOYEES Looking at the larger picture, developing countries are taking the lead in the global economy. They will soon account for more than half the world’s economic output. This marks a fundamental, long- term structural change in the world marketplace that should open up many opportunities for us. Accelerated growth in countries like China and India is driving the demand for commodities and boosting the economies in resource-rich regions, many of which are strong HOW DID THE COMPANY PERFORM markets for us. In Latin America, in particular in 2010, we nearly FINANCIALLY IN 2010? doubled our local presence. We now have over 4,000 employees in the region. Our fi nancial results for 2010 were excellent. Our backlog stood at $13 billion and we increased our net income to $437 million, 22% higher than in 2009. About 19% of our net income came from WHAT ARE YOUR MAIN PRIORITIES? our infrastructure concession investments (ICI), which marks a Safety is our top priority. We’re happy to report that our health defi nite shift in our business. ICI is now a substantial contributor and safety (H&S) performance in 2010 was very positive for all to our net income. our indicators and signifi cantly improved. We’ll continue to build Our return on equity was 27%, our revenues remained strong at on our H&S procedures and best practices. Equally important, we $6.3 billion, and our balance sheet was solid with cash and cash actively encourage and empower every employee to take the lead equivalents of $1.3 billion. Of that amount, $900 million is freehold in spotting and correcting unsafe situations on the ground. cash we can use for strategic acquisitions and investments. Risk management is another key area we’ll be focussing on. Here too, we saw excellent results in 2010 with a 19% gross margin on WHAT WERE SOME KEY MARKET our Packages projects. This reflects not only sound risk manage- DEVELOPMENTS IN 2010? ment practices, but also superb project delivery on the part of our employees. We are doing well, but managing risk is an ever-evolving We saw signifi cant growth in our public-private partnership (PPP) process. Every new project brings its own challenges that help us business. With the addition of the McGill University Hospital Centre refine our best practices. and the Chinook Roads Partnership, we now have six PPPs in Canada, and we invested in our first PPP in India with a toll road Acquisitions are an important part of our long-term growth plan. concession in Andhra Pradesh. We’re selective about our choices in terms of price and expertise, but we’re always looking for opportunities. In 2010, we acquired nine companies, bringing a total of 1,230 new employees to our operations in Canada, Colombia, France and South Africa. SNC-LAVALIN SNC-LAVALIN REPORT 2010 ANNUAL 6 06 07 08 09 10 DILUTED EARNINGS PER SHARE 2.87 (in CA$) 2.36 2.05 1.03 0.99 Recruitment and talent management are equally essential to our WHY DO YOU THINK SNC-LAVALIN HAS BEEN long-term growth. We welcomed Darleen Caron to the team as SO SUCCESSFUL THESE LAST 100 YEARS? Executive Vice-President, Global Human Resources and member I think our resilience stems from a balance of experience and of the Office of the President. This is a new position we created to innovation. We have an incredibly talented and dedicated team, address the growing complexities of recruiting and managing talent and our clients and Board of Directors constantly motivate us to on a global scale. Darleen has international experience in talent and surpass their expectations. Over the last 100 years, SNC-Lavalin has leadership management, and we’re happy to have her on our team. risen to countless challenges. Each time, it has turned hard lessons Our WE CARE values are an ongoing priority. Look for our 2010 to its advantage and become stronger.
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