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Good day, and welcome to the SNC-Lavalin's conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Denis Jasmin. Please go ahead, sir.
Thank you. Good morning, everyone, and thank you for joining us today. With me today are Neil Bruce, President and CEO; and Sylvain Girard, Executive Vice President and CFO.Today's call relates specifically to the press release issued earlier today and is intended to give an opportunity for analysts to ask questions. We will have our usual quarterly earning conference call to discuss our fourth quarter results in more detail on February 22. The recording of today's call will be available on our website within 24 hours. [Operator Instructions]I would also like to remind you that comments made by speakers today could contain statements about expected future events and financial results that are forward-looking and, therefore, subject to risks and uncertainties. These forward-looking statements represent our expectation as of today, and accordingly, is subject to change. We disclaim any obligation to update any forward-looking statements except as required by law.A description of the risk factors that may affect future results is contained in the company's MD&A available on our website and in our filings with the Canadian securities administrators. During today's call, we could also discuss certain non-IFRS financial numbers. You can find reconciliation of these numbers with comparable IFRS measures in our latest financial documents and presentation.With that, I will turn the conference over to Neil Bruce. Neil?
Thank you, Denis. Good morning, everyone. I don't want to go back over the press release. I think it's self-explanatory. But today, I would like to take the opportunity to provide maybe a little bit more color on the 3 component parts.So within Oil & Gas, we have projects within the Middle East and Saudi Arabia, where we have been struggling over the last -- at the end of the quarter to get the required agreements documented in order to meet the requirements of IFRS 15 in a timely manner with a degree of certainty in order to be able to recognize that. We -- none of the contracts there, or items in there, are new. They're all things that we knew about. And effectively, they are things that we expected and we were managing within our contingencies.The second item was a part loss, not a complete loss, in an arbitration process with a client for a very profitable large Oil & Gas project in Australia that was completed. This was around -- interpretation around what was included in some unit rates and, therefore, what should be billed or not billed, or disallowed. This contract remains one of our most profitable contracts but clearly the decision, the preliminary decision on the arbitration, which was fairly arbitrary around splitting some stuff down the middle, was in excess of what we had provisioned for. So therefore, there is an impact with that, and that came, again, very late in Q4, in the back-end of the year.And then the third item is a serious problem on a mining project awarded in 2016. A number of issues that we encountered in terms of ground conditions, various subcontractors, competencies around that, and I think our enthusiasm for maintaining a schedule and completing this contract. We have made certain commitments with some of the supply chain prior to getting concurrence and agreement with the client. Therefore, again, in terms of revenue recognition in line with IFRS 15, we don't have sufficient documentation in order to back it up. But we will be pursuing our contractual rights all the way through to a court process, if necessary, in order to recover what we think we are entitled to. This isolated incident is clearly unacceptable, and I do intend to take appropriate action to mitigate the financial impacts for the company.There are 2 other pieces that I want to add and sort of join up in here is on January 22, we announced the appointment of Craig Muir as President of Oil & Gas. And today, I've also appointed Ian Edwards as Chief Operating Officer. And together, Ian and I will immediately [indiscernible] our operation and delivery capability to ensure the consistency in our approach to contract and risk management, and we will be giving further update on our plans in the Q4 earnings call.In terms of the oil and gas markets, generally, I think as everybody can see through the market, there was a fair bit of enthusiasm at the beginning of the year. Then we had the downturn with commodity prices, there was a fair degree of uncertainty around our main customer spending plans; that, combined with the worsening relationships between Canada and Saudi Arabia in particular, basically were all inputs into our computations and calculations that we do in terms of the Oil & Gas business, and we do on a continuous basis. And when we combined our fees, we concluded that we were in a position where we needed to take an impairment on that business.And I think that's where I want to stop and really open it up for questions and clarifications.
[Operator Instructions] Our first question today is coming from Mona Nazir of Laurentian Bank.
So firstly, I just wanted to touch on -- you just discussed in the press release there's a number of issues, which combined, leads to the over 50% reduction in 2018 E&C guidance. There's Mining & Metallurgy revenue, the margin. Similarly, on the Oil & Gas side, the revenue and margin. And also, you mentioned the arbitration related to the project in Australia. Is there any way that you could break out the impact of each item for each segment in Q4? So what kind of revenue decline can you expect in M&M, and what could be the related margin profile? Because there are just a number of variables that could lead to -- number of combinations that could lead to the same EPS reduction?
Yes. I mean, we really don't want to break out. I mean, we've got ongoing customer negotiations certainly on 2 of the items, and we don't really want to put numbers on them at this stage. But in -- when we get to the Q4 earnings release, we will be giving a bit more detail in there. I think in terms of -- we're recognizing these positions at the moment. In terms of sort of follow-on to -- through into next year, I mean, it may sound sort of fairly general, but we do believe that the effects of these events are basically going to slow our growth through into '19 by a sort of [indiscernible] a bit. That's probably where we're at with that.
Okay. And I understand that your 2019 guidance will be released next month. But in regard to the 2020 EPS figures, on the $5 consolidated, should we expect that to be down materially as well? And then on top of that, what kind of M&A contribution did that $5 target include?
Well, the $5 target, when we rolled it out and -- on a number of sessions we had within the -- it was in the range of $0.60 to $0.75. I mean, it wasn't a precise number, it's $0.60 to $0.75. And I think we have previously said when we had the disappointing news around the remediation agreement, that we would not be pursuing any from that perspective. So that's why in terms of Vision 2020, I think it's clear that we are a bit off of that $5 target.
And then just lastly for me before if I step back, I'm just wondering, looking specifically at the Saudi Arabia component, I'm just wondering, when did it really come to light that it would be a material impact to you? Was there any one time event? Because just looking at back at the November conference call, I think it was pretty explicit at that time, there was no effect there and everything was on track.
I think everything is on track in terms of the work that we had booked and the work we were executing. And again, I don't really -- so I don't really want to comment on the ins and outs, on the rights and wrongs about the relationship between the 2 countries. But I mean the relationship and, certainly, the KSA we do with regards to Canada has not been helped by the recent positioning with regards to the asylum seeker in Canada. I mean that, from a Saudi perspective, is not going down very well at all. So it is really around, when we look at it in terms of impairment, it's very much around forward-looking work, not necessarily what we're doing through December and today, where we'll continue to work on the contracts that we've already got.
Our next question comes from Yuri Lynk of Canaccord Genuity.
Neil, again, just for clarification on Q4, when I'm trying to model this. Is the Oil & Gas segment negative EBIT in Q4, or just much lower margin than you were anticipating?
Well, I think it will be a combination of both. And you'll see that when we fully disclose everything. You'll see that in 3-weeks' time or so, be a combination of both.
Okay. And then, I guess, more importantly, looking ahead for that business, given your -- the goodwill writedown. I mean, traditionally, we've talked about 6.5% to 7.5% margin as kind of being the target range that you thought you can achieve in that business. What would that look like today?
I don't think it's going to be a great deal of difference in that. It's really the -- it's all about in the meat. It's looking at the amount of work that we can -- and again, specifically, they're very much targeted in the Middle East and KSA. And I don't see a huge -- or actually, I don't see much of a difference in terms of the margins that we can achieve. We just need to be a bit more cautious about the work that we win or might not win in KSA and 1 or 2 other areas within the Middle East.
Okay. I mean, it sounds like a much more competitive environment given the CapEx that are going to be -- that's going to be spent in that region. I just thought that the margins might be a little bit lower going forward, but -- and then just overall, taking a step back, would you say the issue -- is the issue more -- particularly in mining, is it the projects getting away from you in terms of cost overruns? Or is the main issue mostly the more rigor around chargebacks under IFRS 15 and that kind of holding all E&Cs to a higher standard in terms of chargebacks to the client and when you can recognize that. Just trying to get a feel for is it execution, or is it more kind of getting used to these new -- these accounting standards?
I mean, I'd like to able to say it is the second one. It's actually the combination of both. If you look at -- and I really don't want to wager too much on the accounting standard because that will just sound too much like an excuse. But IFRS 15 revenue recognition on these contracts have been the -- having a high degree of probability and certainty under the contract. And on big projects where you have changes, having that documented to the required level on a quarterly basis is just really, really difficult. But -- and there is -- so there is an element for that, but ultimately, there's also an element in terms of our -- the commitments that we've made in the project in order to meet the overall scheduling requirements where we have unexpectedly, and it's not acceptable, where we've gone out on a limb and actually taken the -- taken on that responsibility without making sure that we've got explicit agreements with the client. I mean, there's a number of issues around site conditions, environmental issues, subcontractor, supply chain performance. And we're deeply disappointed that the mining team have made commitments in terms of our supply chain that have not, as yet, been reciprocated with the client.
Okay. Last one from me before I turn it over. Obviously, the stock is multiyear lows here. Any -- I know you're going to give the guidance in a couple of weeks. But I mean, any outlook for '19? I mean, does EPS for next year, is that restarting with a 2? Anything you can give us for the outlook as you see '19?
Yes. I mean, we need to be cautious around some of the numbers, I mean, at this stage until we get all the details. But the only piece I was trying to sort of give sort of ballpark is that we feel like we've, in terms of the progression of the company and the growth in EPS, we feel like we've sort of gone back a year and a bit.
Our next question comes from Benoit Poirier of Desjardins.
Yes. First question on Oil & Gas, I was wondering if there's an option here where you could sell the Oil & Gas business in Saudi Arabia? Or any opportunities here?
I mean, we've never explored that. But obviously, the -- from a company perspective, we're deeply disappointed about the position we are in. And we will be looking at -- part of the appointment of Ian as the Chief Operating Officer will involve looking at predictability of delivery. And maybe some of our businesses don't fit into the required category, so we will be having a look at that. And we will also be looking at clients and countries and regions that we're operating in as well to ensure that we have far more predictable item in the future.
Okay. And how the announcement this morning affects the process around the Highway 407? Is it something that could put a hold or maybe looking for a higher stake? Or any thoughts about how it's impacting the Highway 407 here?
Highway 407 is -- so in the last update, I think we were very clear that we got a valuation for that. We will certainly -- we're in the process where it's taking a bit longer. We will continue to pursue that. But ultimately, if we don't reach the right valuation through that process, then we will not proceed.
Okay. And last one for me. Given the impact on the EPS, could you talk a little bit about the -- how it impacts your free cash flow with respect to issues in Middle East? And maybe also talk whether the issues in oil and gas and mining, whether it impacts over all your reputation of the infrastructure side deal?
Maybe I can start the cash question. This is Sylvain. So clearly, these items are going to have an impact on our Q4 cash flow, because if we don't reach customer settlements, then we don't get paid. So that will have an impact. The mining issue also to some extent. But I would say that one carries into next year because the loss that's being booked this -- and when I say this year, I mean Q4 '18, will convert into -- or the portion of it will convert into cash out into next year as the project continues. So impacts on both '18 and '19.
Our next question comes from Devin Dodge of BMO Capital Markets.
So just to get back to the Oil & Gas segment in the Middle East. But I guess how are you approaching that market currently? I'm just trying to get a sense whether you're going after more work in the region. And just maybe further to that, has it been getting more challenging maybe in the last 6 months to reach a commercial agreement for work that's been completed?
Yes. I think we're looking at a higher standard in terms of contract types and the relationship with the customers and the cash flow associated with the projects. And it's -- we're doing a complete review of all of that, and I really do expect us to be even more selective in terms of the work that we will do within that sector or within that region.
Okay. Do you believe that SNC's been getting its fair share of work from oil and gas customers in the Middle East?
I think we were, up until -- round about October-November time.
Okay. So if we think about 2019, it sounds like maybe we're getting more cautious. Should we be expecting revenues in the Oil & Gas segment to be softer in 2019?
Yes. I think that's a fair assumption.
Next question from Michael Tupholme of TD Securities.
Neil, I know you're reluctant to break down the actual reduction in the guidance between the 3 various items you called out in terms of specific numbers. But can you just talk about whether or not certain ones of those factors that contributed to the declining guidance carried much more weight than any of the others?
Yes. I mean, you'll see the details later on. But I mean, the major, I think hopefully, you got from the tone of the press release, that the major item in all this and the biggest disappointment is within the mining sector. I'm not saying that we were happy with the other 2 portions either, but Mining's been the biggest impact.
Okay, fair enough. And on that point, I realized when these sorts of situations occur, notwithstanding best efforts to try to factor in all necessary provisions and whatnot, at this point in time, things can sometimes creep into future quarters. But how concerned should we be about that possibility versus you thinking that you've got this sort of everything is accounted for at this point in time?
I think we've done our best in a very short space of time to make sure that we account for everything. I mean, part of the -- Ian's appointment will be very much addressed at certain sectors. I will also be spending a fair amount of time with oil and gas and the Middle East in terms of that transition through in terms of the management changes. But ultimately, we've taken a number of actions immediately, and we'll be continuing to work through that in absolute detail so that we can give everybody a bit more flavor in a 3-weeks' time.
Okay. That's helpful. I guess, just to follow on that last point there, Neil. Is it fair to say though that we shouldn't really be expecting these kinds of, the sort of situation to bleed into 2019? I mean I realize there's other things going here that are going to affect the 2019 outlook. But as far as mining, this is not an area that we should be thinking about additional issues into 2019?
I mean, we've done a full analysis, and we don't expect it, but the project is not complete yet.
Okay, fair enough. And then just on Saudi Arabia, and apologies if I missed this. But at this point, if I go back to what you've been saying sort of over the last few quarters since the situation there first developed, the situation have been that the employee count, SNC's employee count in Saudi Arabia had remained fairly constant. Like is that still the case at this point? And as we look forward to 2019, are there any significant projects in Saudi Arabia that are wrapping up or completing in 2019?
I think the main thing here is that, yes. I mean, so we had over 9,000 people all working on existing work. We've seen in -- just in the last 6 weeks, we've seen a further tooling of the relationships between Saudi Arabia and Canada. We have feedback from our clients there that, yes, they want us to carry on and continue to work off the work that we are currently working on, but our ability to secure significant future work is very much under review. Hence, us being a lot more cautious about our future market, more so than necessarily the current situation. So we haven't had to reduce our headcount dramatically yet. But if the relationship stays where it is and we have difficulty winning the same levels of work, then clearly, the revenues will come down and the headcount will come down through '19.
Okay. And just a question regarding the impairment, maybe for Sylvain. Is the methodology for that impairment test consistent with what it's been the last few years? Or and, therefore, the impairment is purely a function of the revised outlook? Or is there any changes in the methodology side that also play into this?
No, there's no change in the methodology per se. And the main driver of our methodology is looking at future outlooks, especially on revenues and then that flows down. So having the big change has clearly been on the top line expectations, which driven by, as we said, the Saudi issues, as well as just the general volatility in that market and uncertainties over CapEx and so forth and so on. So we revised those and then, yes, you kind of have the results we showed here.
Sorry, Neil, back on the 407, the answer you had provided to Benoit's question, in terms of timing, is there any kind of a new update that we should be thinking about? I realize it was pushed out a little bit because of possibly some other parties getting involved, and there's some due diligence work obviously to be done. But any sort of goalpost around expected timing for The Street and the market?
No. Nothing significant at the moment. I mean, we're still in the process, we're still looking at that -- or engaged in that process at the moment. And hopefully, we will be in a position in 3 weeks' time to give people a bit of a progress update on that. But again, just the one thing I do want to emphasize is that prior to this announcement and post this announcement, we're very clear about valuation. And if we don't need that valuation, then we won't be concluding a transaction.
Our next question comes from Maxim Sytchev of National Bank Financial.
I had a question. So on the mining projects, I mean, assuming that there was a material negative impact in Q4, when are you expected to be fully completed on those?
It should be towards the back-end of the first quarter, early second quarter.
Of '19?
From '19, yes.
Okay. And then Neil, your commentary around the kind of 2019 expectations kind of scaling back 1 year, are you making a reference to the new guide of 2018? Or relative to the trajectory that 2017 EPS was $2.12, and then if you extrapolate to 2020, it was obviously, a high number. So I'm just trying to get the sequencing. Which base year are you referencing to, if you can talk about that?
Well, I'm not referencing the outcome [indiscernible] for this year, for '18.
So you're not referencing 2018?
No.
Okay, okay. And then do you mind maybe talking about sort of the risk mitigation strategies and some of the issues that have sort of come out recently right now in mining specifically? Because I think The Street has been under the impression that kind of post-'15, '16, some of those issues have been ironed out. So is this specific to a geography, that the risk mitigation strategies has been maybe not sort of fully fine-tuned? I'm just trying to understand where the issues are coming from exactly?
Well, again, further down the line, we'll give more details. But the initial review and the thing that's most disappointing about this is it's highly likely that this was not adhering to our well-documented risk processes. So -- and only in terms of the enthusiasm to satisfy the client and complete the project that, that in itself is unacceptable.
Right. And then not to sort of ask the same question on the 407, but can you maybe update us in terms of where you are exactly in the process? Have you gotten sort of indicated bid for the asset? Or are we still kind of in a due diligence process, and hence, in 3 weeks', you're going to see kind of the first bids? Just trying to gauge if the bottom line which gets changed in terms of your own expectations around what other people are ready to pay for this asset?
Yes. I mean, we're under a confidential process, so I really don't want to comment on that. But I mean, from our perspective, our views around valuation, and the trigger point at which we would proceed with divestment has not changed at all. So we will be maintaining that.
Okay. And then in terms of, I think you publicly have discussed in terms of how you would hypothetically use the proceeds from the 407. Has that thought process changed given the press release from this morning?
I think it's too -- I mean, genuinely, no, but I think it's too soon to be definitive about that. And again we're looking to -- we will be looking to give a lot more flavor and some details in 3-weeks' time. It was just hugely important, from a disclosure perspective, to get this information out to the market as soon as we possibly could.
Okay. And then the last question I have, just around risk mitigation strategies kind of across the platform, the desire to support construction risk on a prospective basis. Because when we look at some of the mining contracts, I believe they were EPC. So can you maybe talk about sort of the overall risk appetite on a prospective basis, if it's possible?
Yes. I mean, our appetite, going forward, I'm sure, will be reducing. We are already getting into additional requirements internally around looking at which sectors do what sort of work. And we will absolutely be scaling back on -- certainly on some of the resources side in terms of EPC work. And we are right in the middle of that review as we speak.
Our next question comes from Mark Neville of Scotiabank.
First, just on the size of the impairments or the write-down in the Oil & Gas. How -- on a percentage basis of the carrying value, is this like 50%, 60%? I'm just looking -- sort of looking for a ballpark number.
It's less than 50%.
Sorry, less than 50%?
Less than 50%, the impairment. You have to keep in mind that this is kind of a flow-through amount, meaning pretax equals post tax in this case.
Okay. And again, this is sort of all just revenue outlook for this business going forward?
This is all what, I'm sorry?
This is sort of driven by revenue outlook?
Yes. Well, that's the main driver. That clearly is the main driver of the [indiscernible].
Sorry, just on the projects in mining, when do they wrap up?
[indiscernible] what project, and it is due for completion by the end of Q1, early Q2.
Okay. And sort of the longer-term margin review of that segment too, is that, again, sort of when you're thinking about how you might sort of bid some of these contracts, is that significantly altered now as well? I think it was 8% to 10% previously?
Yes. And again it's probably too early to say. But I mean, if we are -- if we cut back and are even more selective within that sector, then ultimately, I think the revenues will come down, but the margin should increase a bit. In terms of -- if we concentrate on studies, front-end work, engineering, together with sustaining capital and OEM, then generally, the margins are higher, but the volumes are lower.
Okay. And again, just I guess back to your comment, Neil, on sort of pushing you back 1 year, 1.5 years EPS trajectory. I'm just not really sure what that means, I guess, in terms of how you think about it. Because I thought you made a comment that the $5 if you back out concessions, back out M&A, maybe that's pushed out a year and a bit. Is that really just the reference or the sort of how you're sort of thinking about this? But if that's, call it 3.25 by, for me, in [indiscernible] by 2022-ish, is that sort of how you're still thinking longer-term about this? I'm just, again, just not really understanding that comment, I guess.
Well, as you can imagine, I mean, with this information coming up and trying to get into the market immediately in terms of getting out really quickly in terms of disclosure, we don't want to be too specific around guidance. I mean, not something that we certainly will do in 3 weeks' time once we got to the bottom of everything and we can give a lot more clarity around it. But just in terms of, I think what we really want to say is that I wouldn't take the -- I certainly would not take the upturn that we have notified the markets of today as an indication of what '19 will be. Therefore, if you're just looking at it, we feel as if in terms of overall progression, EPS from E&C, I mean, capital remains unaffected. And EPS from E&C in terms of what everybody expected in '18 or '19, if you reverse that by a year and a bit, then that's the sort of level that we're talking about.
Okay. And I guess just on the Oil & Gas, again, it would look like there would have to be fairly significant loss in that segment in Q4 sort of just based on your commentary and where the guidance lands. I mean just sort of thinking about that for '19 in terms of the ability to just generate a profit in that business next year. Again, it's just -- I guess I'm just having a hard time to sort of, like everybody else, sort of just coming up with sort of any sort of ballpark numbers for next year, whether it's consolidated or for that business.
Yes. I mean, we'll give more details into 3 weeks' time. I mean, it's back to -- in terms of the shortfall with regards to our expectations or our budgets that -- we are still going to, we will continue to pursue the required documentation in order to recognize revenue that we think that we're entitled to. In terms of looking at that sector going forward, we believe that the margins generally are still achievable at the levels we've talked about before, but in terms of work prospects, especially in the Middle East, we really see that reducing, revolve into sort of where we were 6 months ago, 3 months ago.
Our next question comes from Frederic Bastien from Raymond James.
Given that your assets, your biggest asset base, say, for the Highway 407 goes home every night, what sort of message have you been communicating internally to rally the troops and keep your folks engaged?
Well, we had our ExCom call at 7:00 this morning. We had our top 100 in the organization shortly after that. We are clearly trying to make sure that everyone understands the issues, everyone understands the work that we need to do in order to recover and be able to book the revenues that we were unable to do in Q4, together with looking to pursue what we believe is our contractual requirement on the mining project. And we want to make sure that people are absolutely focused on dealing with the isolated small amount of incidents, and the vast majority of the rest of the business carries on delivering as normal because EDPM, infrastructure, nuclear are actually all performing -- are all performing really well. So we want to make sure that the actions we take and the things that we do are very specific to the areas that need the actions taken.
Okay. And then if we were to go back 6 months, I mean now you've had the legal hiccup and then some of those concerns around that. Would you say you're comfortable with the way that your employee workforces is reacting to these developments?
I mean, with regards to the legal piece, I mean, there is a steely determination within the organization to get to what they believe is the right answer, which is -- this is a long time ago. The innocent shouldn't be punished. It should be the people who actually caused the problem in the first place. And that is one item that absolutely galvanizes the organization in terms of being totally determined to get to the right answer in this.
Okay. And then lastly, I just went back to my e-mails, and the only contracts of size announced by the Mining segment in 2016, or at least the ones I've come across, were 2 EPC contracts from Codelco in Chile. Are these the ones that's been giving you troubles?
In terms of the relationship with the customer, I mean, we don't want to comment further on that.
We'll go next to Derek Spronck of RBC.
The call it $1.55 reduction in 2018 guidance, how much of that would you classify as recurring versus nonrecurring?
I mean, we don't particularly see it as recurring per se. I mean, as we've said, the mining contract is one isolated contract. And within the Oil & Gas arena, the arbitration piece should be finalized and should be a one-off. And the other items in terms of documentation for to satisfy the requirements of IFRS 15, we would expect to recover some of that going forward. So we don't see any of this as a recurring thing moving forward into '19. I mean, you still need to complete the project. We still need to sit down with the customer and agree in documentation around change orders. But we don't see it as a recurring thing sort of looking all the way through into '19.
Okay, that's helpful. Just on the balance sheet, in light of the anticipated cash flow in 2018 and in 2019, are you comfortable with how your balance sheet is, and when considering cash flow requirements over the next few years?
Well, we're not happy with our performance on operating cash flows, if that's what you're alluding to. So -- and clearly, like I said earlier, some of the items here on the press release have an impact on our cash flow results for '18. So cash flow remains a very important thing for us to improve on and get to more acceptable cash flow generation or EBIT conversion into cash. So we're not happy with it really.
But you're comfortable with your leverage levels at this point?
I'm sorry?
You're comfortable with the amount of leverage you have?
Well, not quite. Because we -- as we said in '18, we were looking to delever, and we definitely have -- our plan at the beginning of the year was to pay down some debt. We knew that we would, back in Q3, and I think we spoke about that on the call at the time, we knew that we would struggle to do that in the year, but that's still something we wanted to do. And with this lower performance in Q4 in cash, we will need to do -- aim to do more of that into '19 or try to figure a way to improve on that.
Okay. But it doesn't change your ability to operate under the existing conditions, right? You're not going to need to perhaps raise equity or what have you in order to...
No, not at the moment. No, no. But clearly, with news like this and we're engaging with our financing partners and the rating agencies and so forth, no. It's too early to discuss any kind of conclusions on that. But that's something we specifically do when we have in the past when we have had negative news like this, which is to make sure that we're all set and aligned.
Would it then change, just considering that part of the issue with Saudi Arabia is due to the Canadian-Saudi Arabia relationships. Would that -- do you think that asset would be better held in a non-Canadian entity?
Yes, it could be, could be. So we are -- I mean we are looking at a number of options. I mean, we had -- I mean, things sort of change pretty quickly, especially around a few unpredictable events. I mean, we actually thought the relationship piece, certainly from a Saudi perspective, was improving towards the back end of the year. So this can switch pretty quickly. But I mean, we're looking -- for a variety of reasons, we are looking at all options in terms of what stays in the portfolio or what doesn't.
The relationships between Saudi Arabia and Canada and Peru, would that change your value of the business and/or how you're looking at the Oil & Gas business?
Well, others may have a different view what that's actually worth going forward than we might do under the Canadian flag. But I mean, the world's a pretty unpredictable place at the moment. So I'm not sure that anybody would bet on their relationships between certain countries are going to remain stable and predictable going forward. I mean, you've seen a number of things around Saudi, U.S. and Canada, with China and a number of other areas, which continues to -- just continues to be pretty unpredictable. But in terms of looking at the portfolio, I mean, we clearly are looking at all of the items in the -- or all the businesses within the portfolio as well. And if we thought that there's more value with part of the business being with somebody else, then we'd look at pursuing that.
And we'll go next to Chris Murray of AltaCorp Capital.
I guess a couple of questions here. First of all, when you went through this processed review, these contracts in Mining and Oil & Gas, I'm just curious, I'm assuming you did similar things in both the nuclear business and in infrastructure and also the EPCM business. Any thoughts about any issues that you discovered there? Anything we should be thinking about as we move into '19?
I think we will conclude on our full review, and we'll share more information, hopefully, in 3-weeks' time. The mining contract is distinctly -- is isolated and is distinctly different to all the other items. I mean, in terms of Oil & Gas, I mean, the adjudication piece was sort of unexpected, and it came quicker than we actually thought, the process where the adjudicators took a fairly sort of simplistic approach to it all. So therefore, that's something that -- and it's a highly profitable contract. So that's slightly different. The Oil & Gas piece is really around progressing Vale's claims and Vale's changes, but it's about getting the right documentation in place and getting the customer sign-off in order to be able to book it. Mining is different in so much as it's got a degree of sort of differences around the risk profile and there is about the enthusiasm to complete the project before getting some of the necessary paperwork in place. So therefore, there's a mixture of IFRS 15 level of detail around some of the changes, but then some of the other changes that we believe that we're entitled to are even less progressed than that. So the mining project is distinctly different to the Oil & Gas piece.
Okay. But the rest of the pieces of the business are kind of are performing as you expect, is that a fair comment?
Yes. I mean, the other elements of the business are all pretty much on track in terms of where we expected them to be, some slightly above.
Okay. And then my next question is just thinking about the employment of Mr. Edwards as a COO. We've kind of seen a couple of different reorganizations in the management structure over the years. What's the key message or the key element, I think, of an appointment of a COO that all the sectors report to? Is this more about changing a bit of your approach on risk management? Is it bringing in additional oversight? Just what are your thought -- I'm trying to understand your thoughts on making the change this way again?
Well, it's about -- Ian is I think -- the market, we've seen that Ian's a very experienced, talented individual, more than 30 years experience in all of this. He dealt -- not in isolation, I mean, he was principally responsible for the turnaround within the infrastructure group, which I think if you go back and have a look at sort of where we were at in terms of the infrastructure group and loss-making into the infrastructure group we've got today, I think he's got a fantastic track record. And ultimately, we want to bring that focus to all of our sectors. And I guess, we also want to make sure that we just got additional oversight and drive there whilst we're dealing with some of the other issues as well. So we are continuing to -- continuing to work on our position with regards to the legal issues. And I still hope a remediation agreement and some form of settlement, but that's pretty time consuming too. So just having Ian there with his experience and experience of the organization, providing that oversight and drive around operational delivery, we believe, will be a good addition.
Do you think it's fair to think that some of the issues that you guys have been dealing with have created maybe a void in some of the oversight over the last couple of years?
I'm not sure it's created a void per se. But we do believe that whatever we do, and we think this is the right answer, to provide additional dedicated oversight to ensuring that we deliver operationally, and that it's delivered operationally, sustainably into the future, and we get predictability absolutely nailed.
Our final question comes from a follow-up from Benoit Poirier of Desjardins.
Sorry, Neil, but could you come back a little bit on the comment you made related to scaling back by a year? You said that it doesn't refer to 2018, but would it be fair to say that it referred to the EPS guidance for 2017? Just to be clear for everyone, sorry.
I guess, I'm being vague because I don't want to be that clear. We still got work to do, but we will -- absolutely, we will get back and we'll give you more details. But just what I'm really keen to do is make sure that people don't somehow read into this but we are sort of moving to -- from an E&C perspective, that we're working off a base of $1.15 to $1.30. That is absolutely not the case. So another way of just trying to give you a rough ballpark figure is to say if these things had not come to light, then scale the numbers back a year and a bit and being the sort of ballpark of what we are expecting. But we will give absolutely more information in 3 weeks' time.
Okay. And last one. Just given the issue that value with respect to the dam break, could you provide your SNC exposure in terms of revenue and maybe accounts receivable? Talk a little bit about your exposure?
Yes. We're absolutely not involved in that at all. I mean, it's a tragic, absolutely tragic event with loss of life, and our thoughts go to everybody involved in that. But SNC-Lavalin are not involved and engaged in that particular facility.
Okay. And was the S11D project completed, Neil, the one in the Rio de Janeiro and Brazil with Vale? It's a contract that you got awarded a while ago?
Yes. But it's -- the work that we're doing is very much around consulting and is not for the same facility.
And that concludes the question-and-answer session for today. I'd like to turn it back over for any additional or closing remarks.
Thank you very much for joining us today this morning. If you have any further questions, please don't hesitate to contact me directly.Thank you very much and have a good day, everyone.
Again, this does conclude today's conference, we appreciate everyone's participation today and you may now disconnect.