SNC-Lavalin Group Inc SNC
Q4 2011 Earnings Call Transcript
Transcript Call Date 03/08/2012

Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the SNC-Lavalin's Q4 2011 Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session with instructions provided.

I would like to remind everyone that this conference call is being recorded today Monday, March 26, 2012 at 10.00 am Eastern Time.

I'll now turn the conference over to Denis Jasmin, Vice President of Investor Relations. Please go ahead, sir.

Denis Jasmin - VP of IR: Thank you. Good morning, everyone, and welcome to SNC-Lavalin's fourth quarter 2011 conference call.

With us today are Gwyn Morgan, Chairman of the Board of Directors; Ian A. Bourne, Vice Chairman and Interim Chief Executive Officer; Gilles Laramee, Executive Vice President and Chief Financial Officer; and Leslie Quinton Vice President, Global Corporate Communications. We will discuss today the two press releases that were issued this morning. Please note that we have posted a slide presentation on our website, which we will refer to during our call.

Before we begin I would like to remind listeners that as detailed on Slide 3 certain statements or comments made during today's call and slide presentation may be forward-looking. Such statements or comments represent management's best judgment and expectation as of today's date, are subject to certain risks, uncertainties and assumptions which I'll describe on Slide 3, and cannot be guaranteed.

I would now like to turn the conference over to our Chairman, Gwyn Morgan.

Gwyn Morgan - Chairman of the Board: Thank you, Denis, and good morning. Given the recent announcement and changes to the Company's leadership, I'll be leading the call today as Chair of the Board. Pierre Duhaime has stepped down from his position as Chief Executive Officer and as a Director and will retire from the Company. Pierre has made major contributions to growth and profitability of the Company during his 23 years of dedicated service. The Board has accepted his decision to step down and we wish him well in the future.

I will be immediately commencing a search for a new CEO with consideration of both internal and external candidates. At the request of other members of the Board, Ian Bourne has agreed to assume the function of Vice Chairman and interim Chief Executive Officer of the Company. Ian is a seasoned executive who has served as a senior officer of a number of Canadian public corporations and is well versed in the affairs of the Company having served as a Director and on the Audit and Health Safety and Environment Committee since 2009. The Board has struck a special transition committee composed of Ian as the interim CEO together with the Chairman of the Audit and the Human Resources Committees, David Goldman and Larry Stevenson and myself, to assist with transactional matters including as a resource to the management team.

As you know from our February 26 press release, the Board of Directors commissioned an independent review of the facts and circumstances surrounding the certain payments and contracts that were documented to projects to which they did not relate. We also said we were taking steps to implement changes and to take any other appropriate actions arising from the findings of that review. The audit committee directed and provided oversight for the independent review, which was carried out by our external independent counsel with the assistance of investigative advisors to provide business intelligence and related services. A summary of the audit committee's independent review can be found on our filings this morning.

So since it is with much speculated media reports, I want to note that based upon the review's findings, we do not believe these payments related to Libya. The independent review's findings include that payments were apparently intended for the retention of agents on projects within the construction division. However, no direct conclusive evidence has been found to determine with certainty the use of the payments or the nature of the services rendered under the arrangements. The Board has adopted the independent review recommendations, which are directed primarily at reinforcing standards of conduct, strengthening and improving internal controls and processes, and reviewing the compliance environment. We have great confidence in management's capacity to translate the lesson learnt into companywide improvements.

There is no question that these events that presented the Company and U.S. shareholders with many challenges, but the fundamentals of our business remained strong. Our yearend release shows the Company's considerable accomplishments in 2011 that positioned us well for 2012. Recent large project award announcements and a growing project backlog demonstrate the confidence of our clients.

Focused on the future of our Company, they believe in our highly capable management team is rallying in support of our interim CEO, while we move expeditiously with our search for a new CEO. Our 28,000 employees working on projects in more than 100 countries remain firmly committed to providing our thousands of clients around the world with the high-quality services that made SNC-Lavalin one of the most respected names in the global engineering and construction

I now turn the call over to our interim CEO and I take the opportunity to thank Ian on behalf of the Board for his willingness to step up at this important time for our Company.

Ian A. Bourne - VC and Interim CEO: Thank you, Gwyn. Good morning everyone. I am pleased to have this opportunity to speak to you in my role as interim CEO. As Gwyn said I have been closely involved with SNC-Lavalin for three years as a member of the Board of Directors. I am committed to leading the Company, as we implement the changes the Board has approved, to strengthen our internal processes and procedures. I'm equally committed to making sure that as a company, we are focused on our clients and delivering the very high quality work, they expect from us on every project.

Gilles will talk about the financial performance. However first, I would like to highlight some of the major developments in 2011 starting with Slide 4. Last September, we completed the acquisition of Macquarie Essential Assets partnerships, 23% ownership interest in Calgary-based AltaLink, for a total consideration of C$229 million in cash. As a result of this transaction, SNC-Lavalin now has full ownership of AltaLink.

Also in September, the Rainbow Hospital Partnership wholly-owned by SNC-Lavalin, was awarded a public-private partnership, contract by the government of New Brunswick for the design, construction, commissioning, financing and certain operations and maintenance functions at the new Restigouche Hospital Center for psychiatric care in Campbellton, New Brunswick. The partnership subcontracted the construction of the new hospital to an SNC-Lavalin-led joint venture with the operation and maintenance managed by SNC-Lavalin.

One of our French subsidiaries entered into an agreement with the French government to upgrade the infrastructure and build a new terminal building for the Mayotte Airport, which is located on an island, located in the Indian Ocean. This subsidiary has also the mandate to manage and maintain the airport for a 15-year period in addition to assuming the commercial development.

In a good start to 2012, the 407 East development group, 50% owned by SNC-Lavalin was selected as the preferred bidder to design, build, finance and maintain Phase 1 of the new Highway 407 East project. Not only is this a nice win for our infrastructure group but it will also bring more traffic onto the existing Highway 407 of which we are a 17% owner. There are still many concession opportunities worldwide and in Canada especially and SNC-Lavalin will continue to selectively invest in them.

Let's discuss our outlook on Slide 5. Over the past 100 years our company has continued to prosper and to grow an impressive global footprint. Our ability to remain a world leader is due in large part to our comprehensive portfolio of services and products. It is a key factor that has enabled us to sustain our profitability over the years. Canada remains the Company's largest revenue source representing 56% of our 2011 total revenues. Africa remained our second-largest market with 16%. We've increased our revenue by 44% in Latin America and 32% in Asia Pacific and Europe.

Speaking of Europe, I want to take a moment to thank Jean Claude Pingat for his many years of dedicated service to SNC-Lavalin. Jean Claude retired at the beginning of this year after a long and full career. We are pleased to welcome Christian Jacqui as a member of the Office of the President and the new Executive Vice President for Europe. Christian has more than 20 years of international experience in engineering, project management, and corporate leadership, particularly in Europe and Asia.

In another change to the Office of the President may recall that Charles Chebl was appointed Executive Vice President of the infrastructure and construction business unit and a member of the Office of the President. Some you have had the chance to meet him at our Investor Day last summer. Charles is an excellent leader with almost 30 years of experience in Canada and internationally. We are confident that under his leadership the infrastructure and construction group will continue to thrive and grow. We continue to complete our projects in North Africa and the Middle East. We are also focused on creating new opportunities with active business development in those targeted areas.

Now let's return to Canada. There are many good prospects for infrastructure. This segment of the economy is very active with bids on many large projects. For example, the Evergreen Line of British Columbia and the Ottawa light rail train. Moving to mining and metallurgy, this market remains strong and promising especially in Canada and South America. We have just been awarded a contract by Vale to provide project management, engineering, procurement and construction management services for their $2 billion Clean Atmospheric Emissions Reduction project in Sudbury, Ontario. Opportunities in iron, gold, nickel and diamonds continue to grow in Northern Quebec as the government's (plan ore) develops further. Potash is also thriving. We have approximately 400 employees working under our Hub contract with BHP Billiton, mainly on the Janson project in Saskatchewan.

The hydrocarbons and chemicals group formerly called chemicals and petroleum is also pursuing many opportunities. The group has recently signed a new contract with PDVSA for the project in Venezuela which we recently announced. Working closely with the client, our project management team will supervise the work of contractors who will provide engineering, procurement, construction, installation and commissioning services for the offshore and onshore facilities. Andy Mackintosh's team is looking at prospects around the world.

The power market remains strong. On the nuclear power front, in October 2011, Candu Energy, Inc., a wholly-owned subsidiary of the Company, acquired certain assets of Atomic Energy of Canada Limited's commercial reactor division, and recently SNC-Lavalin in a joint venture with its partner has been awarded a major contract by Ontario Power Generation to carry out the definition phase for the Darlington retube and feeder replacement project. The overall project consists of two phases. A definition phase from 2012 to 2016 and an execution phase from 2016 to 2023. Patrick Lamarre and his team also continued to look at new nuclear build opportunities domestically and internationally.

In hydro we are fully engaged in the Lower Churchill EPCM and are looking at opportunities in Africa and India. And lastly on the transmission and distribution side, we are currently exploring possibilities in Africa and Canada. We are particularly pleased that the government of Alberta is proceeding with the development of the Western Alberta transmission line project.

In operations and maintenance group Charlie Rate has an extensive portfolio of business and is actively pursuing new opportunities. Our remote camp operations and maintenance support capabilities extend to mining and petroleum projects, and as this latter sector recovers we can expect more bids in this field.

Finally our infrastructure concession investments group remains an important source of predictable earnings for the Company. The emphasis on P3’s will create new opportunities in Canada and around the world, and of course you Gilles Laramee has been a driving force in the success of this segment. We expect full-year 2012 net income to be in line with reported 2011 results. This is based on our backlog particularly in the power and mining and metallurgy segments, as well as infrastructure concession investment segment. The hydrocarbons and chemicals and infrastructure and environment segments, will continue to be challenged throughout 2012.

So what does all this mean in terms of the dividend, please look at Slide 6. The Board of Directors has increased the quarterly cash dividend by 5% to C$0.22 a share. This extends our recent track record of annual increases which reflects our sustained performance.

Before concluding, I want to note that both the Bangladesh investigation and the proposed class action suit are ongoing and are covered in the written materials distributed this morning.

In closing I want to say that I will continue to count on my colleagues and the Board of Directors for their counsel and support and on all our employees for their continuing hard work and dedication to the future success of the Company. I'm eager to start working together.

Now over to Gilles.

Gilles Laramee - EVP and CFO: Thank you, Ian. Good morning, everyone. I would now like to go through the fourth quarter and year-end financial results. Let's start at Slide number 8. Net income for the fourth quarter of 2011 was C$76 million compared to C$159 million for the fourth quarter 2010, or C$133 million excluding the 2010 net gain of C$26 million from the disposal of two infrastructure concession investments.

This variance excluding the 2010 net gain mainly reflects operating loss in infrastructure and environment and in hydrocarbons and chemical's segments, mainly due to unfavorable costs we forecast on certain projects. A C$22 million loss from the revised position of the Company's net financial position on its Libyan infrastructure projects and a period expenses of C$35 million, which will be addressed on the next slide. This is partially offset by higher operating income mainly from the mining and metallurgy and operations and maintenance segments.

Now turning to Slide 9, for 2011 net income attributable to SNC-Lavalin shareholders was C$279 million, compared to C$477 million. C$431 million excluding a net gain of C$46 million from the disposal of certain assets and investments recognized in 2010. The variance reflected a 23% decrease in net income excluding ICI, partially offset by a 21% increase from ICI. The decrease in net income excluding ICI mainly reflected a lower contribution from infrastructure and environment, partially offset by higher contributions from all other segments, while the increase in net income from ICI reflected higher dividends from Highway 407.

As announced in our February 28 press release, the Company recognized a net loss of C$35 million related to payments made in the fourth quarter of 2011 under what are presumed to be agency agreements. It should also be noted that the Company 2010 results were adjusted by reducing the net income by C$17.9 million to reflect the impact of payments of C$20 million in 2010 under what is presumed to be an agency agreement that were charged and documented to construction projects to which they did not relate. The Company decided to correct its prior period comparative financial information in its first issuance of annual audited consolidated financial statements prepared in accordance with IFRS.

Now let's turn to Slide Number 10. Year-to-date revenues increased by 20% in 2011 to C$7.2 billion compared to C$6 billion. Revenues increased in all company segments of activities and in all revenue categories with packages revenue growing by 34% and services revenue growing by 19%. Revenue in Canada increased by 30% in 2011, mainly due to higher level of packages activity. Revenue from outside Canada increased by 10% in 2011.

Now turning to Slide 11, you can see the list of remaining business acquisitions of 2011. We added, approximately, 2,900 people to our global workforce through the acquisition of certain assets of AECL commercial reactor division and six other acquisitions. At the end of the year, we had about 28,000 employees, which is 4,000 more than in December 2010.

Now turning to Slide number 12, as expected, the services gross margin (amount) increased in 2011, primarily reflecting higher level of activity, notably in mining and metallurgy, partially offset by a lower gross margin to revenue ratio, mainly in mining and metallurgy and hydrocarbons and chemicals. Also as expected, the gross margin amount or packages decreased in 2011. This was mainly due to a lower gross margin to revenue ratio mainly in infrastructure and environment and power, partially offset by higher level of activity, notably in power. It's noteworthy to mention that the 20% gross margin to revenue ratio for packages in 2010 was above the Company target range of 7% to 10%. The operations and maintenance gross margin amount increased in 2011 compared to previous year, mainly reflecting a higher gross margin to revenue ratio on certain ongoing contracts. The gross margin amount for ICI increased in 2011 compared to 2010 mainly due to increased gross margins from AltaLink and higher dividends from Highway 407, partially offset by the net gain before tax of C$30 million from disposal of Trencap and Valener in 2010 and by the absence of contribution in 2011 from these two investments which were sold in the fourth quarter of 2010.

Now turning to Slide 13, as expected SG&A expenses increased in 2011, mainly due to approximately C$45 million from business recently acquired, as well as a 5% increase in the overall SG&A expenses.

Turning to Slide 14, revenues from infrastructure and environment increased in 2011. It should be noted that the revenues in this segment for 2011 included C$86 million of revenues from Libya compared to C$418 million in 2010. The overall increase in revenues was lower, however lower than anticipated. The operating income from infrastructure and environment was below expectations.

As the increase in 2011 was greater than expected mainly due to a lower than anticipated gross margin to revenue ratio, this was primarily resulting from unfavorable costs reforecast on certain major packages project in 2011, as well as a fourth quarter loss related to the Company financial position regarding its Libyan infrastructure projects, combined with a lower than anticipated increase in the volume of activity.

The 2010 operating income was positively impacted by favorable cost reforecast on certain major packages projects. It should be noted that the 2010 operating income was unfavorably adjusted to reflect the correction of C$20 million under what is presumed to be an agency agreement as previously explained. The Company recorded C$39 million loss in 2011, related to Libyan projects that were in progress before the Company evacuated Libya. C$22 million of this amount was recognized in the fourth quarter for our net financial position excluding C$23 million of cash payout in a Libyan bank to be nil. This final position was determined with the projects being considered on an aggregated basis.

As a result, the deferred revenue and advances from these projects are economically offset by trade receivables and contracts in progress on these same projects. Hydrocarbons and chemicals revenues increased in 2011, the operating income also increased in 2011, but it was below the Company's expectations, mainly due to unfavorable cost before tax on certain packages project, as well as C$35 million of period expenses in the fourth quarter of 2011 as previously explained. In 2010, the low-level of operating income was mainly due to unfavorable cost before tax on certain packages projects.

As expected, mining and metallurgy revenue increased in 2011. Also as expected the operating income increased, reflecting higher level of activity. The increase was partially offset by a lower gross margin to revenue ratio in services, mainly due to lower gross margins on certain major projects, combined with additional costs on the one project in the first quarter of 2011.

As expected power revenues increased in 2011, mainly reflecting a higher level of packages activity. While we expected the operating income from power to increase, it remained in line as the higher level of packages activity was offset mainly by a lower gross margin to revenue ratio.

2010 results were favorably impacted by a gain before taxes of C$23 million from the disposal of certain technology solution assets as well as favorable costs we forecast in 2010. Other industries operating income increased mainly due to higher level of activity, partially offset by a lower gross margin to revenue ratio. Operation and maintenance operating income increased in 2011, mainly reflecting a higher gross margin to revenue ratio. The Company expected the operating income from the ICI segment to remain in line when excluding the 2010 C$26 million net gain on disposal of Trencap and Valener.

This increased, excluding the net gain, mainly due to higher dividends from Highway 407 as well as higher contribution from AltaLink partially offset by the absence of contributions in 2011 from the Company's investments in these two disposed investments, which were sold in the fourth quarter of 2010.

Now turning to the financial position on Slide Number 15. As you can see, the Company's financial position remains solid with cash totaling C$1.2 billion at year-end and our shareholders' equity stands at C$1.9 billion. Slide Number 16 presents our cash and cash equivalents for the past five years as well as a return on average shareholders' equity. The Company's return on average shareholders' equity. The Company's return on average shareholders' equity is 19% for 2011.

Now turning to Slide 17; as we can see on this slide, the cash totaled C$1.2 billion at the end of 2011, about the same level of 2010, notwithstanding the C$864 million of investing activities. This cash used for investing activities is mainly due to C$546 million of acquisition of property and equipment related to AltaLink, acquisition of businesses, and cash invested in ICI. These investing activities were more than offset by C$920 million in cash generated from operating activities.

Now turning to Slide Number 18. This slide shows the net book value and the estimated fair value of ICI. Taking into account the transaction price of the 23% minority interest of AltaLink acquired by SNC-Lavalin, following our exercise of a right of first refusal and a offer by a third party, plus the cash injected by SNC-Lavalin since the transaction, the estimated market value of our investment in AltaLink is C$1 billion. The estimated market value of our 407 investment amounts to C$1.5 billion based on the 10% interest acquired by CPPIB in October of 2010. Our other infrastructure concession investments have a net book value of $763 million. When we add the estimated market value of our investment in Highway 407 and AltaLink to the net book value of our other ICI, we arrive to a value of approximately C$3.3 billion or C$22 per share.

Now turning to Slide 19. Revenue backlog at year end went up, reflecting an increase in services partial offset by a decrease in O&M and packages. Services backlog went up by 58% in 2011, reflecting an increase in all company’s industry segments with the highest increase in mining and metallurgy. Packages backlog decreased in 2011, resulting primarily from a decrease in infrastructure and environment, partially offset by an increase in mining metallurgy and power. The 2011 operation and maintenance backlog decreased reflecting the normal fluctuation in the timing of the long-term contracts finally in Canada.

Now turning to Slide 20, this slide is meant to show that we continue to provide a solid return on equity compared to our peers and as per PE multiples for our activities other than ICI now stands at 7.5 times based on a trailing 12-month result.

Before I conclude my presentation let me just take a moment to talk about the material weaknesses disclosure. The Company has identified material weaknesses in its internal control over financial reporting as at December 31, 2011, relating to management overrides and noncompliance with and ineffective controls over compliance with the Company’s policy on commercial agents and its code of ethics. As a result the Company has concluded that the disclosure controls and procedures and its internal control over financial reporting were not effective as of December 31, 2011. These material weaknesses and proposed remedial measures are fully described in the Company annual management discussion and analysis. This concludes the presentation. We now open the lines for the question period. Thank you.

Transcript Call Date 03/08/2012

Operator: Sara O'Brien, RBC Capital Markets.

Sara O'Brien - RBC Capital Markets: Do you expect the investigation will go forward by the regulatory authorities and possibly a criminal investigation will follow as well?

Gwyn Morgan - Chairman of the Board: It’s Gwyn Morgan here. We have no knowledge of that. I think there's several issues here that the – the matter of Libya we believe is a completely separate issue with regard – than the payments as we've said already. There is as you know – we're actually learning more from what the media says than what we can find internally, because we don't have the people with us anymore, that were involved. But I think the big thing is that if there – well the big thing for us is to just turnover whatever we have and whatever we've learned to the authorities which is what we're doing and now they will – we really have no idea where they are going to take that, but we will cooperate in every possible way. The other matters, I really can't speculate the report of the – the independent report to the audit committee speaks for itself.

Sara O'Brien - RBC Capital Markets: Maybe can you comment, if it's not related to Libya, where were these construction projects that these consultants were purportedly related to located and are you convinced now that there is no more such agency agreements in SNC's history or current practice?

Gwyn Morgan - Chairman of the Board: First part of the question, for commercial reasons and because of client confidentiality, neither SNC-Lavalin nor any other engineering company to our knowledge makes available the – identifies agents or projects associated with those agents. So that is a practice that that we can't violate for those reasons. On the basis of the – these two contracts were unique in a number of different ways. As already been set out in different ways, they were identified, they were charged to contracts that didn’t exist. The procedures weren't followed, and so on. The review focused on these particular situations, but on the basis of the review in full and our internal and external audits, which were extremely thorough obviously given the circumstances, no other agency agreement came to light in the context of the independent review and as being (improperly) documented in respect of the project, which they did not effectively relate and the Board believes that we have identified all the material matters associated with these matters.

Sara O'Brien - RBC Capital Markets: And maybe just Gilles on the guidance for 2012 I am assuming it's about C$2.49. Just wondering can you break down between ICIC and engineering and construction and can you tell us why the guidance is so low given the backlog growth year-over-year? Is it that you're already seeing book losses in Q1 for (project reforecast) and maybe bit a commentary around that?

Gilles Laramee - EVP and CFO: On the guidance on the basis that we wanted to provide a total guidance without the split of excluding ICI and ICI and certainly to your comment about being low as you can see with major events we've been undergoing and also changes at the Office of the President, we certainly put a guidance that we felt good with. So I think I cannot say more, but certainly our backlog position on services is very good, and we are pleased with that, and the first quarter up to now, as mentioned by Ian, there were some good signing of projects, but that being said, I think the guidance, and you will notice that in our MD&A, we used to provide quite a bit of guidance. This time around, we restricted to a press release providing overall guidance and really focusing on, for example, the three segments that we believe will be the basis for our results with solid backlog in 2012.

Operator: Anthony Zicha, Scotiabank.

Anthony Zicha - Scotia Capital: With reference to cost overruns and reforecast for infrastructure and environment, chemical and petroleum, when are those projects to be completed, and could you give us some idea of what their size is?

Gilles Laramee - EVP and CFO: They are major projects. They are project, for example, that are midway. Some, for example, in hydrocarbons and chemicals that have started and with certainly being difficult from the start, and there is a mixed bag of those projects, some that are closer to be completed. So as any other quarters, as you well know there is positive impact and certainly we have more tendency to focus on the unfavorable projects as still on the overall margin for the full year when you are looking at packages, gross margin to revenue ratio is set at 10%, which is certainly within the range of our 7% to 10% gross margin ratio on revenue for packages. But for sure there being someone that’s on infrastructure and environment and hydrocarbons and chemicals in the last quarter that got us to take certain additional loss.

Anthony Zicha - Scotia Capital: Could there be some spillover in Q1 from those projects?

Gilles Laramee - EVP and CFO: Again there cannot be any guarantee Anthony. Certainly we weren’t totally looking at other contracts, but for sure there cannot be guarantee about that and we’ve been trying in the past to look and review carefully and the project manager also taking the necessary contingency and risk. However, that being said, it’s part of our business. There will be positive and negative on execution of contract and that is the nature of our business, but as you have seen over the last years' track record has been pretty good.

Anthony Zicha - Scotia Capital: One more question. Relating to the packages, which international region experienced the most challenging environment and what has caused the weakness in the margins in this packages.

Gilles Laramee - EVP and CFO: I would not pinpoint one particular region if I could say. I think it’s, it’s not necessarily a region. One thing to be said, however, certainly the packages business in the PPP market as it is very competitive, provides a basis whereby, the gross margin to revenue are lower than typically project of that very competitive market base as you all know, but there is no one to be pointing out specifically it’s because of a region or another region. I know there's nothing that comes to that.

Anthony Zicha - Scotia Capital: So, just maybe you can just add to the answer of that question. You’ve already made the point that package margin for 2011 were lower than 2010, partly because 2010 was exceptionally high. What sort of – what has been the sort of normalized expectation for margins and packages?

Gilles Laramee - EVP and CFO: Our stated normalized margin and certainly in line with the basis on which we're bidding those project is in the 7% to 10% margin, certainly in 2010 with 20%, we've seen many projects that we’re winding down provides very favorable positive in flow, positive income in 2010.

Operator: Paul Lechem, CIBC.

Paul Lechem - CIBC World Markets: Just maybe following on some of those questions on the cost overruns. You made the comments that the P3 market has been very competitive and you've recently been selected as the preferred (bidder) for 407 extension. So how should we think about the profit potential from that contract? The recent contracts that you've been announcing, are these being signed up at lower going margins in historical or are you comfortable that the margins can trend to your target ranges?

Gilles Laramee - EVP and CFO: It's a good question Paul, but as you – we've always refrained from quoting any margin or any profitability on any given contract, and you could understand you're even more sensitive as we are with our partner. But that being said, in general context, as very – you're putting a lot of money in bidding those jobs and the competition is harsh, it's internationally – from international basis in many instances. And margin, you need to be very competitive. So certainly there is a downward pressure to our lower margin than is typical.

Paul Lechem - CIBC World Markets: So with these projects that have these cost overruns, will they continue to impact your margins until they are complete? How are you recognizing margins on those problem contracts through completion?

Gilles Laramee - EVP and CFO: There's different type of projects. There is project whereby there is only a cost reforecasts and the project is still making a profit, but lower than was anticipated before. And there is other that were just losing money upright and we needed to record all the loss at the time we know it's known. And in that sense this influence for sure the margin in the future as we're not recording anymore margin on those. There were some losses recorded from the beginning. So there is no trend I could mention on that to say in the coming years, because of we're announcing certain cost reforecasts on certain projects that will be (a trend) in 2012. However, that being said, our packages I'll repeat (indiscernible) and for sure the fourth quarter we had some costs reforecasts, but still on a 12-month basis we are 10% on the packages side on the margins.

Paul Lechem - CIBC World Markets: In 2011, you recorded revenues from Africa of over C$1 billion. How much in backlog is still related to North Africa and what do you expect your revenues to be in North Africa over 2012?

Gilles Laramee - EVP and CFO: I don't have that piece of information, Paul. It's not something that we have necessarily – we disclose I would say. We have that in terms of our files, but I don't have it right now with me.

Paul Lechem - CIBC World Markets: Is that a region you are looking to exit over time or at least to deemphasize over time? Notionally should we think that your African business will be ramping down as you complete those contracts?

Gilles Laramee - EVP and CFO: No. We have no interest of winding down this region and certainly as we mentioned in our MD&A, we are looking at Libya in term of looking at new opportunities and potentially restarting certain of the projects, and we are working in many countries in Africa, and we have no interest of changing that, and I don't know Ian if you would like to…

Ian A. Bourne - VC and Interim CEO: Yeah. Paul, I would reinforce that I mean we are driving forward with the business as we've known it and continue to drive for new opportunities, and we are not backing away from parts of the world in which we have been successful before.

Paul Lechem - CIBC World Markets: Couple last quick questions if I may. Number one, is there any ability for you to the recoup any of these unauthorized payments that were made over the last couple of years?

Gwyn Morgan - Chairman of the Board: It's Gwyn here. Well, as we launched the investigation under the direction of the Audit Committee and with the independent counsel and also international advisors that can do things like trace money and so on. We haven’t been able to get to the bottom of this as to where the money went, as reported in the independent report that you have seen released today. Obviously if we can determine ways of recouping money on behalf of the shareholders, we will do that.

Paul Lechem - CIBC World Markets: Okay and last question, has any of this of these issues has it started to influence your ability to win new business. Are any customers backing away because of the uncertainty around the Company at this point?

Ian A. Bourne - VC and Interim CEO: No, and point of fact if you look at the month of March, it was one of the strongest months we've had and that of course is all post the release that we made at the end of February.

Paul Lechem - CIBC World Markets: Fair enough, but on business you are getting on now. I mean, those were contracts, which were already well underway and it will be probably difficult for customers to get out of contracts at that point. But I mean, and new stuff that you are bidding on that’s getting into the pipeline has that changed your ability for you to get on, you know people raising this as an issue?

Ian A. Bourne - VC and Interim CEO: No, we got high quality people, we got a strong balance sheet to support our activities and there's no indication that that’s going to be anything other than caring on as we've done before.

Operator: Pierre Lacroix, Desjardins Securities.

Pierre Lacroix - Desjardins Securities: Just wanted to have some more perspective on the agency business, are you doing business with international agent, or is it more attractive that is done internationally or you have that in Canada as well. I would just like to get an overall perspective on how that business is working?

Gwyn Morgan - Chairman of the Board: I will just give you a few – it’s Gwyn here. I will just give you a few, little bit background on the general nature of the industry as the agent issue as it relates to our industry. On the global engineering and construction industry, retention and representatives or as or agents as we come to know them are common practice really around the world by virtually almost all of our competitors. SNC-Lavalin and agency agreements do stipulate that the agent adheres to all applicable laws and that the agent is not committing the act, which might cause SNC-Lavalin to be in violation of those laws. Of course under these two circumstances, these very special unusual circumstances that we've been investigating and we were trying to determine whether that was or wasn't the case and as the report said, we haven't been able to determine either way. The Company is a founding member of the partnering against corruption in its initiative constituted by member companies to the world economic forum in partnership with the Transparency International and the Basel Institute of Governance, which provides guiding principles for retaining representatives. The role of representatives may include relationship building or promoting the companies qualifications to clients, providing advice on bid preparations, negotiations and can continue right through the entire project if we do win a project. For example in assisting and getting the necessary construction permits, and carrying out the execution of the – successful execution of the project, helping with the import/export issues around materials and labor to come into the country and even assisting us sometimes in obtaining local labor, and finally assisting in the settlement of potential contract disputes and helping to expedite the timely payments. I might say that it's not the agency agreements, the idea of a gaining agencies in and of itself, that is so much of the problem. It’s having following those procedures and those values that I stipulated and in two cases obviously that broke down and that's why we've done all of this thorough investigation to follow that up.

Pierre Lacroix - Desjardins Securities: Thank for this perspective. But if I follow up on this, do you consider your network of agents to be a competitive advantage or do you think what is happening right now is impairing a little bit your ability to do business with some agents, so some perspective on that as well?

Ian A. Bourne - VC and Interim CEO: No. I think the fact is that – again these are very specific issues and company has a 100-year-old history and we've never really been in this situation before, and we hope we'll never be again and we're taking measures to prevent it ever happening again.

Pierre Lacroix - Desjardins Securities: One final for Ian and Gilles maybe, in terms of the relationship and the contact with your key customers I guess. In the last month or so it's been relatively on hold and talking to your clients. Do you have a plan to get back talking to them very shortly and/or you want to wait to have a new CEO in place before doing that?

Ian A. Bourne - VC and Interim CEO: You have to remember that we have people leading each of these business segments and divisions who are dealing with customers and client all the time, and that network is in place and has continued to be in place.

Pierre Lacroix - Desjardins Securities: Yeah, but my question was more at the top management level do you intend to have a campaign of going out and have an open discussion with clients about what's happening?

Ian A. Bourne - VC and Interim CEO: We're always transparent and we will continue to be that way.

Gwyn Morgan - Chairman of the Board: I just might add to what Ian is saying here. These division leaders and Executive Vice Presidents and people of the Office of the President are very senior people, and they all – each one of them run the different periods, different divisions, and they all have their own relationships with the clients that are top level relationships, and only this morning I was speaking to some of them and they were already planning this afternoon to start that process with the support of the CEO. Obviously, he's got a few other things to do as well right now, but it is the key thing for the Company to maintain the confidence of our clients. Ian has already mentioned that the strength of the Company financially – Ian and Gilles, and the important thing I think for clients is to know that we've got 28,000 people who are at their service and we've had a very few people involved in the problems that have occurred recently.

Operator: Bert Powell, BMO Capital Markets.

Bert Powell - BMO Capital Markets: Gwyn, in the press release you talk about reporting matters to appropriate authorities or intend to. Have you done that, and can you talk to which authorities you contemplate having dialogue with?

Gwyn Morgan - Chairman of the Board: Well, what we have done, in fact, I guess, are doing as we speak almost I believe more or less, but anyway, we are in the process of doing that virtually now, and we are actually reporting them to the authorities which have jurisdiction, and in this case we'll deal through our Canadian authorities, because that's where we are based, and they will take whatever action they may not take with regard to international matters.

Bert Powell - BMO Capital Markets: So, you are not engaging in any geographies beyond Canada at this point?

Ian A. Bourne - VC and Interim CEO: Really I think that it’s our own Canadian authorities that have the decisions to make in that regard.

Bert Powell - BMO Capital Markets: Are these regulatory authorities or these in the likes of the RCMP?

Ian A. Bourne - VC and Interim CEO: Well, as it relates to things like as I mentioned the Libya matter we’re talking to I think it has been the RCMP and other authorities that would basically be police authorities that we’re turning material over to.

Bert Powell - BMO Capital Markets: The catalyst for the investigation or the independent investigation was the C$35 million in contracts, correct?

Ian A. Bourne - VC and Interim CEO: The catalyst for the investigation around the payments was that, yes. That’s correct.

Bert Powell - BMO Capital Markets: You have made the statement in your remarks that you believe this is somewhat ring fenced to these two contracts, but what do you think if you can give us a sense as to how broad a scope investigation took to see if this wasn't just, that this wasn’t an isolated incident and in fact systemically there are other areas in the Company that needed to be examined?

Ian A. Bourne - VC and Interim CEO: I know you probably haven’t had a chance to read the independent report, but I think it covers a lot of that actually. But just in short form this has been a very thorough investigation of our, both our internal matters by internal auditors, by external auditors, the investigation itself. I believe that there has never been such a thorough review. I know there has been never a review of this nature in-depth and thoroughness in the history of this company and I would imagine almost every other one. So we have a lot of confidence in to saying that these were isolated incidents.

Operator: Hamzah Mazari, Credit Suisse.

Hamzah Mazari - Credit Suisse: Most of my questions have been answered. I just have two quick ones. Maybe if you could add a little more color as to the CEO search process. Are you looking both external and internal? Are you looking for someone from outside the industry or inside? What's your timing? How should investors think about that?

Gwyn Morgan - Chairman of the Board: Well, this is an international search. It will include our executives, people, or candidates I should say from inside the Company as well. We will be working to of course choose the best possible executive. Clearly, when we're looking for executives or when you're looking to replace a CEO in this complicated business and competitive business, you would like to have people that experience, very directly related experience and that's what all I can say. In terms of the timing of it, I would say that we're moving. As I said in my early remarks we're going to move forward expeditiously and there's no reason why this has to drag on and it's my top priority as Chairman and the committee, the committee that we talked about earlier, the transition committee will be helping me in being part of that process.

Hamzah Mazari - Credit Suisse: Then just a question on your appetite and ability to do further acquisitions. You had a big acquisition here, last year. Does the internal control weakness for you guys limit or delay further acquisitions? Do you need to fix your internal issues before you start getting aggressive on the acquisition front again?

Ian A. Bourne - VC and Interim CEO: I'll take that one. I mean to the extent that, as Gwyn has said, these are isolated events and we've done comprehensive due diligence on all our acquisitions and to the extent we continue to grow the Company, there's no reason that the focus on acquisitions would be any different from what it's been.

Operator: Frederic Bastien, Raymond James.

Frederic Bastien - Raymond James: These undocumented payments point to projects that were under the influence of the EVP of Construction who has departed. Over which jurisdiction does this person have direct oversight?

Gwyn Morgan - Chairman of the Board: Well the Construction division of the Company is a very larger division because of course it gets involved in virtually all of our construction projects, so they can be virtually across the world. So we may do – for example, we do engineering work and many times what we build is what we have designed, the engineers have designed, but the construction group will step in and help any one of the divisions, for example, mining and metallurgy or hydrocarbon and chemicals or infrastructure so on, will really be a part of the SNC team in many, many areas that we're actually doing the construction in. So it's a pretty broad – they operate broadly across the Company and around the world.

Frederic Bastien - Raymond James: But based on your earlier comments Gwyn, is it correct to conclude given who you are hiring is to do some – well, I don’t know if you are hiring him but the investigations are being currently conducted. Is it correct to conclude that the projects being investigated are not in Canada?

Gwyn Morgan - Chairman of the Board: Well, again, we just aren't going to comment on where the projects are, and we won't do that at any time. But it's fair to say that the only thing we have said is that they were carried out within the construction division under the jurisdiction of a person that's no longer here.

Operator: Gareth Tingling, Macquarie.

Gareth Tingling - Macquarie: I have a couple questions for Gilles and then Gwyn, if you don't mind, a couple for you. Gilles, I was just wondering, first, if you could talk about the revenue mix between packages, services and O&M for 2012 compared to 2011? Do you expect the mix to be the same or similar?

Gilles Laramee - EVP and CFO: Again, you are asking me a tough question. As we provided very limited amount of guidance and we concluded on that, but certainly, you could draw certain conclusion based on our year-end backlog on services and on packages, and it's quite easy to draw when you compare a backlog of services as at year-end 2010 of C$1.4 billion compared to year-end December 2011 at C$2.2 billion, and while packages are about the same if I could say, so then I would lead you to your own conclusion on that, if you permit me.

Gareth Tingling - Macquarie: Thank you for that direction. Let me redirect a little bit then and ask you this as a follow-up. Contract duration across your three lines of generic buckets for how you look at your business, are the durations changing? Are they lengthening or are they about the same?

Gilles Laramee - EVP and CFO: For sure on the services side we've been obtaining some of the large project that are a bit I would say longer duration, but overall as all I would say not really and I would say the same thing for packages. I don't think the lengthening would be – for sure the fact that I think Ian addressed that for example in the business of nuclear, whereby there will be some various stages, however what we booked is the first phase of the Darlington project. It could be continuation of project and likewise on the service side in potash business, again it could be and we were going in a prudent fashion in booking those backlogs. But in general I would not say that the nature of the duration or the duration of services packages O&M has recently changed.

Gareth Tingling - Macquarie: Okay, my next question is, there is very little discussion about anticipated charges or provisions for the independent investigation severance to the CEO, possible fines, penalties or even the costs associated with the creation of a new global reporting and monitoring system. I was wondering when you anticipate when you anticipate that we’ll be able to get some sort of an indication as to management assessments of potential (interest)?

Ian A. Bourne - VC and Interim CEO: I would say on, we certainly took into account an estimation for the cost on the investigation side and then extra (word) that was carried with regards to any liability that could arose to the Company following those projects for example and likewise, for example, in Bangladesh. At this stage, there's no way we can assess that and so there's no amount being taking into account into that.

Gareth Tingling - Macquarie: Well if you wouldn't mind then, I haven't come across the estimation for the changes that you just referred to. Forget about Bangladesh, but your former statement with respect to the cost of the investigation. What's the total amount that you're looking out for that?

Gilles Laramee - EVP and CFO: At this present moment I would not want to disclose that. I'm sorry, but the…

Gareth Tingling - Macquarie: That's okay, I wasn’t certain if it had been disclosed within the MD&A but I was unaware of it.

Gilles Laramee - EVP and CFO: No, unfortunately it was not, sorry.

Gareth Tingling - Macquarie: Will these disclosure – when these amounts become known, they will be made separate from the operations of the companies, or are we going to be looking at charges against these divisions where work was perceived to be needed or where more work is required? Are we going to see this as a completely separate charges or are they going to be rolled into existing costs in some cases?

Gilles Laramee - EVP and CFO: We as our – I would say our practice is to be transparent and as you can see the practice we've been using and publishing a full report of the independent review and as we have many of our MD&A disclosure, we will certainly disclose the cost of those investigation in our reporting in the upcoming quarters.

Ian A. Bourne - VC and Interim CEO: The only thing I would add to Gilles answer is that – I don't think the cost of examining our own internal procedures and so on and making them even better than they have been and trying to make sure. As I said earlier that this sort of thing never happens again are not going to be material in terms of the actual cost to shareholders. This is an internal process that Gilles will be leading along with our interim CEO and rest off the team. But the cost of the investigation and all of that are a separate matter and as Gilles said, they will be reported, and they are already currently included in our results.

Gareth Tingling - Macquarie: Okay and the guidance that you're providing for 2012 is exclusive of any – of these kind of charges or other kinds of costs, is that correct?

Gilles Laramee - EVP and CFO: As I mentioned the investigation or the independent review that was done and the additional work from an audit standpoint these were taken into account in terms of the estimate of the guidance we've been providing.

Gwyn Morgan - Chairman of the Board: Yeah, I should have said our guidance rather results because obviously these are 2012 expenses.

Gareth Tingling - Macquarie: And Gwyn my question is first of all when is the AGM for the Company?

Gwyn Morgan - Chairman of the Board: I think it's May 3 in Toronto by the way.

Gareth Tingling - Macquarie: I was wondering are there any anticipated changes to the composition of the Board for this year's AGM that were previously known, i.e. people planning to step down or any kinds of changes that were anticipated?

Gwyn Morgan - Chairman of the Board: There was one anticipated before and only one. It came up before any of this came up. Our Senator Hugh Segal has been appointed by the Prime Minister to be his – I don’t know exactly what it's called, but in effect he's de facto ambassador to the whole Commonwealth, which is what 50 countries or something. And under the circumstances he had approached me some time ago and said under this process I just can't be – I'm not going to be able to attend the meetings and I shouldn't really be on the Board. So other than that we expect the full slate to be only on the circular for the reelection.

Gareth Tingling - Macquarie: Okay, and my last questions is, are there any coincidental departures that were in the press release with this news that's come out today?

Gwyn Morgan - Chairman of the Board: No.

Operator: Michael Tupholme, TD Securities.

Michael Tupholme - TD Securities: I wanted to clarify on the guidance. When you say flat year-over-year (indiscernible), not taking into account any adjustments for 2011, are you?

Gilles Laramee - EVP and CFO: We are not. We are taking the amount of net income attributable to SNC-Lavalin shareholders of C$279 million.

Michael Tupholme - TD Securities: Then the second question, can you talk a little but about the timeline and the process for implementing the improvements in the internal control the Board has recommended?

Gwyn Morgan - Chairman of the Board: I'll take that. We have already embarked on some work, of course, and it will be done again expeditiously. We are in the process of making sure that the practices and procedures that we adopt are the best, and so while we want to get it done quickly, we don't want to redo it three or four times. So we are trying to strike that balance and we will make it a big priority within the organization to do it, as I say, as expeditiously as we can and as thoroughly as you would expect.

Michael Tupholme - TD Securities: Should we expect (indiscernible) investment developments as that progresses or will this simply be a situation where it'll happen over time and that will be all?

Ian A. Bourne - VC and Interim CEO: I am not sure how much of our internal processes are something that need a lot of publicity. I mean, to the extent that as a management team we will be reporting to the Audit Committee and the Board, to the extent those things are germane in a disclosure sense of internal controls and so forth, they would come out in the normal course, otherwise we will put in the practices and procedures that we feel are appropriate and unless there was something particularly noteworthy I don't think we would talk about it separately.

Gwyn Morgan - Chairman of the Board: The only thing I’d add to what's Ian just said is the audit committee, which Ian is a member of or at least he was till today I guess, has already at the direction of the Board undertaking a major review of our agent review process, as an agent retention process. So that has already been implemented. We don’t think there is any time to lose in that regard.

Michael Tupholme - TD Securities: I have just one other follow-up on the same point. When you look at your peers in the industry, are there any major differences right now in terms of the way your controls were structured relative to your peer group or not?

Ian A. Bourne - VC and Interim CEO: I would say we – I think we pride ourselves to have had order pass in term of reporting practice or I would say controls on our operation where it's all reviewed. That being said certainly as we have pointed out in our MD&A, the material weaknesses refers to in particular the agent policy and code of ethics. So this is something that we are committed and we don't want to reflect in the future again that we have a material weakness that deals with those two considerations. So, I would say that compared to competitors it’s difficult to assess with regard to our dealing with agents policy, but like any other, our competitor for sure the code of ethics is a very important point them as it is to us and as we are talking it in a very serious fashion right now.

Operator: Mr. Jasmin, we have no further questions at this time. Please continue.

Denis Jasmin - VP of IR: Thank you to all analysts and investors who have joined us today. Gilles and myself will now leave the room and I will now turn the conference call over to Leslie Quinton, Vice President, Global Corporation, Corporate Communication. We will continue with the question period with the journalists.

Leslie Quinton - VP, Global Corporate Communications: Thank you, Denis. Our Chairman, Gwyn Morgan and our Interim CEO Ian Bourne have agreed to accept a few questions from journalists. You may ask your questions in English or French. If in French, I can translate and summarize them in order to be answered. You may go ahead.

Operator: Dave Seglins, CBC.

Dave Seglins - CBC: I have two questions and it relates to – you've mentioned that virtually you have contacted authorities. Can you confirm, yet have you notified the RCMP about the findings of this internal probe?

Ian A. Bourne - VC and Interim CEO: Well, what we're seeing is that the situations are different of course depending on the particular jurisdiction and so we are – I believe that the current status is that the authorities have been contacted, the authorities having jurisdiction have been contacted and in due course our legal representatives will be meeting with them and passing on whatever we have?

Dave Seglins - CBC: Okay, could you be specific which agencies?

Gwyn Morgan - Chairman of the Board: No, we'll be dealing with the agencies having particular jurisdiction depending on situation.

Dave Seglins - CBC: Okay. On Thursday last the RCMP arrived in Mexico and they were there to interrogate a consultant Ms. Cindy Vanier and they were asking her – they told her that she was only a witness but asking her about dealings with SNC-Lavalin, Stephane Roy, Riadh Ben Aissa. Now she was a consultant. She is there in a Mexican prison, but she was drawn into work in Libya hired by SNC-Lavalin, Mr. Riadh Ben Aissa. Her work, as she describes it, was to travel to Libya. She was doing some fact-finding for your company. By her owned signed contract she was going to advise on the reintegration of employees after the war. What obligation do you have to her and what has SNC-Lavalin done to investigate its role in her (plight) as she sits there in a prison accused in this bizarre plot to try to smuggle Gaddafis to Mexico?

Gwyn Morgan - Chairman of the Board: Well, we have no obligation to Madam Vanier. In fact she was hired apparently even without the knowledge of anyone else in the Company, except for the persons that have left the Company from the construction division, and we are unable to get any more information from them because they weren't willing to provide if and they're no longer with the Company. So we only now as it – matters related to Madam Vanier and that whole affair have – really are following what is reported, as I said, earlier in the media. We did have – we did prior to the departure of Stephane Roy and Ben Aissa have our counsel do – the Company's counsel review everything we could find out, and that is what is being turned over to the authorities.

Dave Seglins - CBC: That particular information will be turned over now?

Gwyn Morgan - Chairman of the Board: Yes.

Dave Seglins - CBC: Or it has not been to date.

Gwyn Morgan - Chairman of the Board: No. There has been no contact. They never made any contact with us. The authorities never contacted us all regarding this, but we believe that given that we don't have any conclusive information either way about this, we felt that we should at least give them what we have and offered to provide anything we have and that's all we can do.

Dave Seglins - CBC: Mr. Roy reported to you and Ms. Vanier also contends that she had arranged a meeting to discuss water projects in Mexico, and I guess the question I'd ask in your review did you find evidence to support the fact that there was legitimate business being done, meetings being set up between SNC-Lavalin through Ms. Vanier with authorities in Mexico to discuss water projects.

Gwyn Morgan - Chairman of the Board: We really don't have any further details that we can pass on about this, because as I said, these issues were – these things were done by people that aren't here and so we can't determine exactly what happened and what was said.

Operator: Paul Waldie, Globe and Mail.

Paul Waldie - Globe and Mail: The report mentions – I've got a couple questions, but the report mentions that back in 2010 and in 2011, I presume it's Mr. Laramee, because he says the CFO was told about some of these payments. He didn’t like them, but somehow they seem to have been carried on. I am just wondering if you can tell me how far back this went. He talks about 2009 him having some knowledge in 2010 and 2011. Can you fill in some those blanks?

Ian A. Bourne - VC and Interim CEO: What really occurred here was that the actual – just to put this sort of straight as I can, for the 2010 matter, the matter was paid in 2010, again it was done within the construction division and there wasn't any knowledge on the part of the CFO or pretty much anyone else of top management at that time when those were entered into and paid. When we gave evidence to the CFO that they were paid. Of course we only knew the money had gone out, because it was accounted for, it was accounted for under the wrong, under a contract that was misallocated. So the CFO became aware of that and told the CEO and that was his role in doing so.

Paul Waldie - Globe and Mail: But that would have been in 2010 at least right.

Ian A. Bourne - VC and Interim CEO: Yes.

Paul Waldie - Globe and Mail: Can you also tell me how all of this came to light? You mentioned that in December 2011 the Company received information was this whistleblower internal. Can you give us some detail on how this all came to light?

Ian A. Bourne - VC and Interim CEO: There were a number of things here. Actually going to ask Gilles to answer this, because there was a process, an internal process, our internal auditors were involved in this and so just to have Gilles answer this, because this doesn't breakdown in terms of the of the – well perhaps I guess maybe what I should say is that you know we have this thorough investigation and the report is very extensive that we issued today. All of those things are articulated. So I guess, maybe I just referring to that, because otherwise I might start, we might start getting to something that's really has already been said and thoroughly analyzed and well thought out as to how it's been articulated.

Paul Waldie - Globe and Mail: One last question, why isn't the CFO leaving, if he knew about this in 2010?

Ian A. Bourne - VC and Interim CEO: Well, the CFO did his job. He passed it on to the CEO and at the time, when those – when the statements were issued for 2010, the fact that we don't report by – we don't actually report by project, we report by division, this misallocation issue was not material to the financial results. However, he did pass on the fact that it'd be misallocated to the CEO and he did his job and we have complete, absolutely confidence in our CFO.

Operator: Philippe Saulnie, Radio-Canada.

Philippe-Antoine Saulnie - Radio-Canada: (Foreign Language).

Leslie Quinton - VP, Global Corporate Communications: So, Philippe would like to know what are the recommendations following this investigation?

Ian A. Bourne - VC and Interim CEO: Well, in the MD&A, these are set out. They include adoption of clear corporate policies regarding procedures to be followed in the cases of management departures and management requests or directs others to disregard the Company's policies and procedures, clear duties to report violations or proposed violations to the policies and procedures, including the code of ethics, and we recommended that the Board of Directors has approved the following, creation of an Agent Review Committee to review and approve and entering into any of the agency agreements, annual review of the agent's policy by the Governance Committee of the Board, annual confirmation of compliance with the agent's policy by the Executive VP, enhanced due diligence procedures in connection with these agency agreements and formal training in the Company's commercial agents on the code of ethics of the Company. So these are all changes that we believe are going to further strengthen and help prevent what has occurred ever happening again.

Philippe-Antoine Saulnie - Radio-Canada: How does the Company find itself in such a situation? Is this not a little odd? How would you explain it?

Gwyn Morgan - Chairman of the Board: As been said earlier, this is a very unique set of circumstances and this division is a very large – construction division is very large division doing billions of dollars of business around the world, and so unfortunately as Chief Financial Officer said earlier, we had a breakdown in our controls in this matter in the sense that it was possible for these kinds of monies to be – these contracts to be (entered to) and the money to be paid without proper corporate approval and that is how we got into this situation and the things we're changing to make sure it doesn't happen again.

Philippe-Antoine Saulnie - Radio-Canada: Do you feel this has tarnished the image of the Company and that we have lost perhaps contracts based upon this news?

Gwyn Morgan - Chairman of the Board: There's no evidence that we've lost contracts based on this news. As I said in the investor portion of the call, we continue to and we saw in the month of March very strong receipt of orders and we continue to pursue business in our various divisions with the quality engineering and construction people that we've got. So, we feel this is going to be something that we'll move forward quickly and well.

Philippe-Antoine Saulnie - Radio-Canada: What kind of impact would this have on the Company? How would you summarize this?

Gwyn Morgan - Chairman of the Board: Well, first of all, I'd put it this way. This is a Company which has, as the CFO pointed out earlier, some C$1.2 billion of cash. We do hundreds and millions and billions of dollars of business around the world, and we've had problems with $50 million of unauthorized and improperly paid payments. So, we are going to put this behind us. We are going to prevent it from ever happening again, but in terms of the overall stability and structure of the Company, I might say that we have 28,000 people around the world who are ethical, dedicated, and capable and less than a handful involved in creating what has occurred.

Operator: Jeremy Lemer, Financial Times.

Jeremy Lemer - Financial Times: Two points I was hoping to get your response to. The first is you sort of sounded very confident in the internal investigation you have conducted and yet you haven’t been able to speak some of the key people involved and third parties involved, but also in your review you mentioned have been reluctant to get back to you. So I am wondering about the confidence you have in this review. To my mind it seems preliminary at best. The second point is it seems a (indiscernible) that none of your customers have responded to you or offer reassurances or being concerned by this whole process. So I was hoping you could comment on that. What have your customers been saying to you, what type of questions have they been asking you?

Ian A. Bourne - VC and Interim CEO: Well first of all the investigation with anything about cursory the review was very, very thorough and it as I mentioned earlier could not possibly have been more thorough in every aspect. What happens with these types of things is you find out what you, what you find out and there are things that you can’t find out and that is the conclusion and it’s clearly there. The whole when we – the Board asked that the audit committee commissioned these investigations was to do everything possible to get to the bottom of things and as the investigative report that has been issued today certainly is very clear and all the things that were done and how thorough it was.

Gwyn Morgan - Chairman of the Board: I would reiterate as I did in my comments earlier. We have received a number of orders recently including the 407 transaction, last week the Darlington transaction, a couple of weeks before that the transaction down in or the project down in Venezuela and we’re certainly not going to elaborate on communications we have had with customers, but suffice it to say that the orders continue to flow and the relationships with the customers continue to be strong.

Operator: (Indiscernible)

Unidentified Analyst: (Foreign Language)

Leslie Quinton - VP, Global Corporate Communications: How was Pierre Duhaime able to authorize these payments despite the opinion against it by the CFO?

Ian A. Bourne - VC and Interim CEO: Sorry the Board is not aware of the payments of course and – but obviously…

Gwyn Morgan - Chairman of the Board: Ian I think there has been a little bit of a misunderstanding. The reference in the report to the Chairman was the Chairman of SLI International, not the Chairman of the (corporate).

Ian A. Bourne - VC and Interim CEO: Thank you for clarifying that.

Unidentified Analyst: So, how could Mr. Duhaime authorize those while the CFO would not authorize that?

Ian A. Bourne - VC and Interim CEO: Well, in a corporate hierarchy, the CEO is the number one authority in the Company. So I guess if the CEO authorizes something, it means that it gets done. However, having said that, in fact the proper procedure that the CEO should have followed was to take it to the Board.

Unidentified Analyst: (Foreign Language).

Leslie Quinton - VP, Global Corporate Communications: Is it true that SNC-Lavalin makes these kind of payments to commercial agents?

Unidentified Analyst: Is it often that you do that kind of payments?

Gwyn Morgan - Chairman of the Board: As I said earlier in the meeting, these commercial agents are used by virtually all our engineering companies and almost all around the world, certainly almost every one of our competitors. It's not a question of whether commercial agents are right or wrong thing to do because they are a reality in many cases in terms of what is needed to execute projects, but the issue here is with these two particular ones. There was many things about these projects. First of all I might say was their size. These were very large payments compared to the average of what we pay. I think I was looking at some numbers recently and if we look at our average sort of three-year average payments to agents, we (more likely to be) in the $700,000 range. And so the scale of these is also very large and so there are so many things different about them, the authorization process that wasn't followed, the investigation of the details about the qualifications of the agents and all of the various things and the approval process internally and their size that made them distinguished. These are two very special things, and in the history of the Company we haven't seen this before.

Unidentified Analyst: I guess sometimes the line between payments to agents like that and bribes is a little bit thin, is it?

Gwyn Morgan - Chairman of the Board: Well, as I said earlier, we've got our code of ethics and our membership in the international organization that tries to prevent bribery is things we count on and certainly strive to prevent.

Unidentified Analyst: And I have a question about Libya. I know it might not be directly related to the inquiry, but how come SNC-Lavalin insisted so much on staying in Libya when it's the opposition now that's in power and you were very close to the former regime. So I don't understand why the Company wants so much to stay in Libya when the opposition now that's in power.

Gwyn Morgan - Chairman of the Board: Well, the fact, just remember that in Libya, for what is it, three decades or more, the Gaddafi regime was in place, there were hundreds of companies operating there and we had Prime Ministers and Presidents around the world going to visit Gaddafi in the later years and so on before all this happened. So, this is a country that many people were operating in, and we were one of those companies. We did some excellent work in there. One of the biggest projects is that we have to evacuate people from was the Great Man Made River project to take water to what is a large portion of the very parched part of the country and would have dramatically changed the way of life in that country. Unfortunately, that project has been suspended and what was referred to earlier by our CFO is that we obviously would, under the right circumstances and the right assurances for shareholders and security, recommence the project. The Prime Minister has been to the country and has said that Canada would help rebuild to the extent possible. So we are going to be looking at restarting at some point, but it's going to have to be under the kind of assurances that the projects can be secure, that the money will be paid, and then everything will be done in the proper manner.

Unidentified Analyst: You don't think that government now – the new government wouldn't want to do it with another company that's not had links with the former regime?

Gwyn Morgan - Chairman of the Board: Well, every other company that's operated in the country including all other engineering companies had links with the regime or they couldn't have done any business.

Operator: Nik Van Praet, Financial Post.

Nicolas Van Praet - Financial Post: Can you just tell me why there seems to be quite a spectacular failure of Mr. Duhaime to act in his proper role as CEO here. Why are you not taking any action against him?

Gwyn Morgan - Chairman of the Board: We have already said what has happened here. I also said that we thank our CEO for his 23 years of service. He did some tremendous things over his period. He made some errors in the recent days and recent times. We have no reason to believe that he overtly wanted to breach the code of ethics or doing anything else that was wrong. But in fact as CEO reports on what happened. I have been a CEO and I knew all along that things that happened under my watch would ultimately be my accountability and that's no different than in the case with Pierre.

Nicolas Van Praet - Financial Post: There is one person that should know what your agent policy is and the ins and outs of that, it should be your CEO. How do you explain just the fact that there is such a big breach of failure here in terms of acting properly?

Gwyn Morgan - Chairman of the Board: Again I have just not the independent report stand for itself. I would only add that once again remind that all of the actual contracts that we’re talking about these two major problem contracts – problem payments were conducted within a division that obviously had hidden the nature of those payments and the allocation of them to the wrong contract. That was not something that our CEO is directly involved in, but his oversight obviously was insufficient and some of those action taken subsequent to that was not proper. So that's been clearly put forward in the report and it stands for itself.

Nicolas Van Praet - Financial Post: But there's no legal action being taken against Mr. Duhaime by the Company?

Ian A. Bourne - VC and Interim CEO: No, certainly not.

Nicolas Van Praet - Financial Post: What is – if you could just describe the relationship you have right now with Mr. Ben Aissa and Mr. Roy, do you have any contact with them and…?

Ian A. Bourne - VC and Interim CEO: Well, as far as we know Mr. Ben Aissa is not in the country. He's home – I think he lives in Tunisia. I wouldn't know where he is. But obviously at the time when he left the Company, we've had no further contact.

Nicolas Van Praet - Financial Post: Are you seeking in any way to – I mean is there any legal action between SNC and those two individuals at this point?

Ian A. Bourne - VC and Interim CEO: Well, again I refer to the independent investigation and we did our best to find out everything that could about the course of – the ultimate course of those payments and I've been able to do so. So, at this point there's no further action we can take.

Nicolas Van Praet - Financial Post: Mr. Ben Aissa indicated at one point that he was going to potentially sue the Company for breach of reputation or something. Has he done that?

Ian A. Bourne - VC and Interim CEO: We have not seen any sign of that.

Operator: Unidentified Analyst.

Unidentified Analyst: I have a question, if you don't know where the payments went, how can you be so sure it has nothing to do with Serbia?

Gwyn Morgan - Chairman of the Board: Well again, I'll refer to the independent report and all of the information we've been able to gather, the investigation was able to gather is their investigation was able to gather points to the understanding and the confidence the Board has that it's highly unlikely that they found their way to Libya.

Unidentified Analyst: Okay. But how can we be so convinced that there is nothing in this report to that effect and Mr. Aissa was your Libyan point man?

Gwyn Morgan - Chairman of the Board: Well all I can say is that the Board after looking at everything has concluded that we have no reason to believe whatever that is that the money went to Libya.

Unidentified Analyst: And concerning one of the first questions that was asked to you in this conference was regarding the authorities, but I pretty sure understood that in the analyst call you said that you specified that there was information given to the RCMP in regards to Libya. Can you clarify what has been given to the RCMP and to what issue specifically?

Gwyn Morgan - Chairman of the Board: No, what I was talking about was the again separating the payments which we believe are completely separate matter than Libya, but with regard to the whole what people call Vanier affair. We had two people (working in) the Company that are no longer here who were involved in that and no one else knew about it really, at least the management didn’t and neither did the Board. So to the extent that we did have Board counsel – or I should say company counsel look into everything we could find out and fact is that there wasn't very much that we could gather because we didn’t have the – we weren't able to determine very much the people who were now no longer with the Company. So the point is…

Unidentified Analyst: Okay. So concerning these payments (indiscernible) RCMP, nothing was given to the RCMP regarding these payments?

Gwyn Morgan - Chairman of the Board: Well, the payments are a different matter. So you are asking about Libya and I was answering about Libya, so…

Unidentified Analyst: But my question is has any of the documents pertaining to these, I guess, misallocated payments been forward to the RCMP?

Gwyn Morgan - Chairman of the Board: Well, as I said earlier, the Company is in the process of contacting and we'll be passing on any information we have with regard to the payments, and basically the inconclusive results of our investigation to the relevant authorities, and we'll be in the process of doing that very soon.

Unidentified Analyst: Is this the RCMP in this case?

Gwyn Morgan - Chairman of the Board: As I said earlier, all I can say is it would be to the authorities (indiscernible) situation.

Unidentified Analyst: I have just a follow-up. If these agency contracts were so different than what you normally pay and they stood out so much, wasn't there something that Mr. Duhaime would have known, especially since he override his – the Head of the SNC International to authorize these payments?

Gwyn Morgan - Chairman of the Board: Well, as I said earlier, all that is clearly set out in the report as to when he knew what and what his actions were, and we are not going to comment on it further. You can certainly have access to the release that was made today.

Unidentified Analyst: No, I have read it, but I'm just wondering what in your view, how do you explain that as your seasoned CEO, he's been on Board of many companies. I mean this was something that's highly irregular, is it not?

Gwyn Morgan - Chairman of the Board: Well, I think both the report and the actions that we've taken speak for themselves.

Unidentified Analyst: So, did you ask Mr. Duhaime to resign?

Gwyn Morgan - Chairman of the Board: Mr. Duhaime retired from the Company and stepped down as CEO, Chief Executive and so those are – that's the fact and that's what we're – we look to – that’s happening.

Operator: Ian Austen, New York Times.

Ian Austen - New York Times: You mentioned that you have 28,000 honest employees and try to portray that there is a few bad apples, but you we're looking serious misjudgment by the Chief Executive Officer. The head of your largest operating unit and a senior financial person within it. Does this not raise serious questions about the whole management structure of the Company as well as the directors oversight of the Company?

Ian A. Bourne - VC and Interim CEO: Well, obviously there's a lot of questions that could be raised and that's why the Board authorized this independent investigation. There are serious matters, we are taking them seriously and we acted as soon as the Board acted, as soon as it was aware of them. That really was very close to the February 28 press release. At that point we couldn't say more, because we didn't know much more and now we’re having a report out there. Clearly, our Board of Directors can't govern something that they don't know about, or prevent something they are not aware of, but what we can do and that is what we are doing, is to examine all of our procedures so that the Board can be confident, that these kinds of events will not happen again.

Ian Austen - New York Times: In terms of future business, as you know, the Company's ties with the Gaddafi family had become a political issue. Is that going to affect your participation in the Abraham Lincoln National Airport project in Illinois?

Ian A. Bourne - VC and Interim CEO: Well there are many kinds of moving parts in that situation. One of the key parts of that is that there was already strong opposition from some local groups opposing a foreign contractor. We're up here in north of the border. So they were actively opposing our participation and selection, well before all of this came out. Of course now that it has – it will be quite expected, they would be using that as some further part in the argument, but this is a much, this is a local battle and it has a lot to do with their own form of protection if I could put it that way.

Operator: Ross Marowits, The Canadian Press.

Ross Marowits - The Canadian Press: I'm wondering, first of all do you use agents in Canada?

Ian A. Bourne - VC and Interim CEO: Well, again here are the agent, the matter of agents, where we use and when we use them is a matter of confidentiality and we don't comment on that. We really operate in a global business where our competitors are global and that is the nature of our business.

Ross Marowits - The Canadian Press: So these payments could've been for contracts within Canada?

Ian A. Bourne - VC and Interim CEO: We're just not commenting on any matter of where contracts are, where particular agent contracts are and what they are for.

Ross Marowits - The Canadian Press: Why would that be? There's all kinds of investigations about corruption in Quebec, why wouldn't you just clearly state that it is or is not in Canada?

Ian A. Bourne - VC and Interim CEO: Well again, it's something that – whenever we do, if we start, as I said earlier, if we start commenting on locations of contracts, anytime we violate our fundamental rule and we're not going do that in this case either.

Ross Marowits - The Canadian Press: Do you know what the payments were used for?

Gwyn Morgan - Chairman of the Board: The report makes clear that we weren't able to fully determine that. I just commented in my opening remarks the same thing.

Ross Marowits - The Canadian Press: So then how could you not – how could you be sure that they weren't used for bribes or other uses?

Gwyn Morgan - Chairman of the Board: Well, again the investigated report was unable to conclude either way and that's what we've made clear. When the Board authorized these investigations, what we really wanted to do on behalf of shareholders and for all kinds of other reasons, reputation of the Company and so on was to see if we could get to the bottom of where this – how this money was used. We've done everything possible to do that. The report concludes that we weren't able to really determine the use of those payments.

Ross Marowits - The Canadian Press: How much did Mr. Duhaime cooperate in this investigation?

Gwyn Morgan - Chairman of the Board: Completely.

Ross Marowits - The Canadian Press: So was he not aware of what the payments were used for?

Gwyn Morgan - Chairman of the Board: In terms of the course of what actually ended up happening to the money?

Ross Marowits - The Canadian Press: Yes.

Gwyn Morgan - Chairman of the Board: He wasn't, otherwise we wouldn't have been have to do all this investigation. The people who ultimately know I guess are people who left the Company and they are not giving us that information.

Ross Marowits - The Canadian Press: So he basically signed several millions of dollars without knowing what the money was used for?

Gwyn Morgan - Chairman of the Board: Well, again, I'm just going to refer you to the report. You know answering one question in isolation from what the background is, is sort of a misleading thing to do. There was more to it than that and I'll just refer you to the report.

Ross Marowits - The Canadian Press: Finally, are you concerned at all that the public will perceive that this is how the industry operates and it will put a black eye on the entire construction industry?

Gwyn Morgan - Chairman of the Board: Well, obviously it's not good news in terms of that sense, but what we keep on saying and what the facts are is that we've operated in this case a hundred years and we haven't have this kind of a problem. We've repaid lots of agents and done thousands and thousands of projects around the world. So, I think that we all have to put this into perspective.

Operator: (Francois Puliot), (indiscernible).

Francois Puliot: The last question was very interesting. Mr. Duhaime, he knew there was a problem with the C$33 million contract, and it's hard to believe that he decided to sign to authorize the payment without asking many question about this contract. I would like to know more about that?

Gwyn Morgan - Chairman of the Board: Well, I keep referring – I keep having to refer the report because with such a thorough investigation it talks about specifically what the President knew and what he did through this whole process and very complicated matter, and…

Francois Puliot: In the press release, because I read press release and there were no reference about what he knew and what he didn't know.

Gwyn Morgan - Chairman of the Board: Which press release did you read?

Francois Puliot: The press release you released this morning.

Gwyn Morgan - Chairman of the Board: We issued two press releases. The one was issued relating to the independent investigation and this is the one that has…

Francois Puliot: Yeah, I read this one, but there is no reference about what Mr. Duhaime knew.

Gwyn Morgan - Chairman of the Board: Well, there's a lot in there…

Francois Puliot: The press release mentions that he signed and he approved the payment, but we don’t know the question he asked and why he approved it?

Gwyn Morgan - Chairman of the Board: What was facing our CEO and this is not any defense of his actions, but what he was facing was a contract that was entered into by an agent from people previously who were in senior officer position in the Company. And for various reasons he felt he was obligated to pay the bill. In hindsight, we all regret that.

Francois Puliot: Who was this senior?

Gwyn Morgan - Chairman of the Board: Well, we're just talking about that, the Head of our Construction Division who is no longer with the Company.

Francois Puliot: Yeah, but he knew that the CFO has refused to approve it?

Gwyn Morgan - Chairman of the Board: Yes, all of that is contained in the report. I just don't want to further comment on it.

Francois Puliot: Just one last question. It's true that you will leave with a severance package?

Gwyn Morgan - Chairman of the Board: Again we don't talk about the terms of departures of any executive or any other person in the Company. Those are confidential and in fact specifically prohibited by the shareholders.

Francois Puliot: But you will have to report it to the shareholders.

Gwyn Morgan - Chairman of the Board: As I say, we will do whatever we have to do in terms of regulatory filings and, of course, we'll follow all of the proper procedures.

Leslie Quinton - VP, Global Corporate Communications: Thank you very much. That's the end of our question period.

Operator: Ladies and gentlemen, that does conclude our conference call for today. Thank you for your participation. You may now disconnect your lines.