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SNC-Lavalin Group Inc. is blasting Codelco’s decision to pull the plug on a $260 million contract that was at the root of two recent profit warnings.
The embattled Canadian construction giant confirmed late Monday night that it had received official notice of the termination, saying it was “appalled and surprised” by the Chilean state-owned miner’s decision.
“We believe that this termination is unwarranted and in breach of good faith agreements reached by the parties,” SNC said in a release.
Codelco’s decision was an abrupt twist after SNC said on Feb. 11 that the two companies had decided to pursue an arbitration process to settle their dispute. Indeed, in an interview with BNN Bloomberg on March 20, SNC CEO Neil Bruce said “the issues in Chile are behind us.”
While the political scandal surrounding alleged interference in SNC’s corruption case has been dominating headlines in Canada, the company’s operational challenges have been dominating investors’ attention. SNC shares plunged 27.8 per cent on Jan. 28 after the company’s first profit warning that was prompted by the mining contract in Chile. Shares fell another 7.4 per cent when SNC delivered its second profit warning on Feb. 11.
SNC said in its release Monday it had recently updated Codelco on the status of the project, including what it called delays “that were the responsibility of Codelco, and the poor and unjustified acts by the main construction subcontractors.”
SNC said it will assess the legal and financial impact of the contract cancellation and will provide more details during its next quarterly conference call with analysts.
(By Noah Zivitz)
