AtkinsRealis ATRL-T chief executive Ian Edwards announced the engineering firm is looking to sell its money-losing joint venture with Hitachi Energy after beating earnings expectations and notching a record services backlog last quarter.
The CEO said the company formerly known as SNC-Lavalin plans to explore the sale of its stake in Linxon, which focuses on electrical substations, to a third party.
“Linxon’s business model for fixed-priced installation projects no longer fits with the strategy of the go-forward business of AtkinsRealis, and therefore we have agreed with our partner Hitachi Energy that we will look to exit our shareholding,” Mr. Edwards told analysts on a conference call Friday to discuss the company’s latest results.
He said it was too early to comment on how long the process will take.
The Linxon segment recorded an adjusted loss of $2.1-million in AtkinsRealis’s fourth quarter.
In July, the company announced a deal to sell its Scandinavian engineering business, Systra Group, to a French consulting firm for £80-million – about $137-million. The deal marked the first big move under a strategic revamp as the firm looks to sharpen its game as a pure-play engineering firm in green energy and infrastructure.
AtkinsRealis earned a $90-million profit in the quarter ended Dec. 31 versus a loss of more than $54-million in the same period a year earlier. It also boosted the backlog of its services business by more than $1-billion from the third quarter to a new high of $13.7-billion.
The fresh contracts behind that sum include an AtkinsRealis-led consortium deal worth $750-million to extend the life of a Romanian nuclear reactor, services to enhance runway safety at the Miami airport and an agreement to modernize Montreal’s Saint-Jerome hospital.
Under Mr. Edwards’ stewardship since June, 2019, AtkinsRealis has shifted its focus to engineering and consulting services and away from lump-sum projects – fixed-price contracts under which the company must foot the bill for cost overruns.
However, three so-called lump-sum turnkey construction contracts continue to plague its business: Toronto’s Eglinton Crosstown light-rail transit system, Ottawa’s Trillium Line and the greater Montreal area’s REM light-rail network extension.
Last quarter, losses in the lump-sum turnkey segment amounted to $23.6-million, smaller than the $150.2-million loss from the same period the year before.
The loss was lower because it relates to administrative tasks, permitting, testing and driver training, executives said.
In its fourth quarter, AtkinsRealis reported that revenue rose 20 per cent to $2.28-billion from $1.90-billion a year earlier.
The result included professional services and project management revenue of $2.22-billion, up from $1.85-billion a year earlier, while revenue from the company’s capital investments totalled $64.1-million, up from $49.4-million a year ago.
On an adjusted basis, the company’s professional services and project management business earned 45 cents a diluted share in its latest quarter compared with a loss of 19 cents a share a year earlier.
The result beat analysts’ expectations of 40 cents a share, according to financial markets data firm Refinitiv.