Shaping the Future - Neil Bruce's speech at the Empire Club of Canada

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  Turning around a company in a fast consolidating industry that has faced ethical concerns raises the stakes and presents multiple challenges. Decisions and direction taken today shape a company’s future. So what are the components that not only meet long term objectives, but also ensure sustainable growth for the long term? Neil Bruce will outline his thoughts on how engineering shapes our world for the better, and what it takes today to succeed as an international E&C firm.
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  • 1. Shaping the Future Neil Bruce’s speech* Empire Club of Canada March 23, 2016 *Check Against Delivery
  • 2. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 2 TOPIC SNC-Lavalin: Shaping the Future SYNOPSIS Turning around a company in a fast consolidating industry that has faced ethical concerns raises the stakes and presents multiple challenges. Decisions and direction taken today shape a company’s future. So what are the components that not only meet long term objectives, but also ensure sustainable growth for the long term? Neil Bruce will outline his thoughts on how engineering shapes our world for the better, and what it takes today to succeed as an international E&C firm.
  • 3. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 3 Hello everyone, I am thrilled to have the opportunity to address you today. I felt it was important that I make my first address of 2016 here. Over the past decades, we have worked and delivered numerous major projects in Ontario that we are very proud of. Close to 4,000 of our dedicated men and women continue to shape its future as designers, investors, constructors and operators of many of the iconic projects that contribute to this province's growth. This makes my presence today all the more fitting as I wish to share with you my view on the role that our business plays in Canada's growth and prosperity. Considering this is my first address in Ontario since my appointment as SNC-Lavalin's CEO, I thought a brief introduction was in order. A PROFOUND PROFESSIONAL EXPERIENCE I’d like to start by telling you a personal story. Two weeks after starting my very first job in the oil and gas industry, I was asked to go to the Brent-Charlie offshore oil platform. About a 3-hour journey by helicopter from land in the northern North Sea. This is my first time on a helicopter and my first time on an offshore oil platform. I want you to imagine a platform that holds 64 storage tanks, each with a capacity of 4 Olympic-size pools. It sits on a concrete substructure 150 meters above the ocean surface, in a water depth of 140 meters, and is designed to withstand storms with the ultimate 100 foot waves. The weather is just about as harsh as a memorable Canadian winter!
  • 4. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 4 I remember putting on protective equipment with layers of clothing underneath, and I am thinking “how can people do this all the time”. One of the guys comes over to me and asks if he could help me with my equipment. Let’s just say that I look like I need help. He puts me at ease. I’m sitting in the helicopter and clearly I’m the only one concerned about what's about to come next; I am the only one not reading a paper, or sleeping soundly. The closer we get to the platform, the bigger it gets. And a sense of nervousness sets in. We land and I feel relieved. But when I get off the helicopter, I realize how massive the oil platform really is. There are over 600 people on this platform. AND there’s an offshore floating hotel moored alongside. I find it difficult to orientate myself. I finally find my room that I will share with three other colleagues. At that point, I realize the importance of my role as a single person among many. Each one of us doing our job. Doing so to deliver this important project to our client, Shell, and also to our country, the UK. This is the platform that gave the Brent International Oil price its name. At the time, it supplied 13% of the UK’s oil and 10% of its gas needs. At one point, I meet with my supervisor who asks if I could help with “structural punchlisting”. So I pretend to know what that is, as any young engineer would… At least until I asked someone, who explained that the topside of the platform is put together from 40-50 component parts – totaling over 30,000 metric tonnes. That’s equivalent in weight to about 180 Boeing triple sevens.
  • 5. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 5 Structural Punchlisting means going to each of these parts – that was built on land and sent to the offshore platform – to see what “has not” been done. I had to document everything and miss nothing. This was crucial to make sure that when the right trades showed up to complete the work, they knew what had to be done, what tools were needed and what materials were required. To omit or incorrectly document a single vital piece of information could delay the completion of a task and have repercussions on the overall schedule. What I learned from this experience was how each person counts on the next one. How vital it is to work as a team. To help one another, and look out for one another’s health and safety. To be efficient and effective, because people count on you to do your job right and on time. This is what it takes to achieve fantastic goals, such as installing and bringing into production a massive oil platform in the middle of the ocean, built to withstand 100 foot waves. This experience marked me. It is a vivid memory I carry with me every day as a reminder of the importance of the work our engineers do, and the importance of collective success. This is essentially what SNC-Lavalin is all about. We deliver important iconic projects to our clients and communities here in Ontario, and around the world.
  • 6. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 6 THE FOOTPRINT OF AN INTERNATIONAL ENGINEERING FIRM I'm an engineer by trade and I am very passionate about our profession. Engineers have been shaping our world and advancing societies since the dawn of time. Over time, our profession has grown, diversified its specializations and delivered great accomplishments. When we consider what we’ve accomplished, how can we not marvel at the potential of Human ingenuity? We can generate energy from wind, water or the atom, that can be used to propel safe and reliable rail and transit systems, to ferry people to an airport, where they will embark on a plane to fly halfway across the world, thanks to the petroleum produced by an oil platform, built to withstand storms with the 100 foot waves. At home or abroad, our employees tackle every project with fierce dedication. We aim to consistently deliver sustainable, cost-effective engineering solutions that will have a lasting, positive impact for our clients, the environment and communities. At SNC-Lavalin, this includes: Mines and smelters to access metals to construct buildings and operate our cell phones. Take for example, the Ambatovy mine in Madagascar that we designed and built. One of the largest in the world. It produces 60,000 tonnes of nickel and 5,600 tonnes of cobalt a year. During the construction phase, we integrated the local community through our Local Resource Development Initiative. Our program raised the employability of more than 6,100 Malagasies by training them in skills such as bricklaying, formwork, painting and welding.
  • 7. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 7 Since 1997, more than 16,700 local workers gained - through our training and mentoring program - real-world experience working on some of the largest capital projects in the world. Another area where we build what matters is in oil and gas, which fuels our homes, transportation and a whole range of things that are important to our daily lives. For example, we are helping to build Gorgon in Australia, the world’s largest natural gas project. It will produce over 15 million tonnes of liquid natural gas a year and has generated 10,000 jobs in Australia. A few days ago, the project celebrated a historic milestone when the first liquefied natural gas cargo safely departed Barrow Island. A third area includes infrastructure – buildings, hospitals, bridges and transit systems – that connects and meet citizens' needs. An example you are certainly all familiar with is the Highway 407 that plays a key role in residential and commercial growth in the region. It runs some 108 kilometers, and includes 197 on- and off-ramps, 156 bridges and 41 interchanges, all without toll booths. We are also the experts in light rail transit across Canada. From Vancouver to Calgary and Edmonton, we’ve built 180 kilometers of transit with 130 stations, with a weekly ridership of 3 million people. We are also building with our partners the Ottawa Confederation Line and the Eglinton Crosstown LRT Project, here in Toronto. Both projects will greatly contribute to these cities growth. The Confederation Line is Ottawa's biggest transportation infrastructure project since the building of the Rideau Canal, which opened in 1832. Eglinton will be the largest transit expansion in the history of the City of Toronto, which has the potential of transporting 5,400 passengers per hour.
  • 8. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 8 It's worth noting that both of these projects are being delivered through the guidance of Infrastructure Ontario's Alternative Financing and Procurement model. This approach has rightfully garnered international recognition for effectively protecting the public interest and successfully delivering iconic projects. Recently, we were shortlisted with our partners for the Finch West LRT project. It is an 11-kilometre light rail transit that will provide rapid transit to two of Toronto’s neighborhoods. A fourth area where our experts improve people’s lives is in power stations and grids that light our lives and heat our homes. Two months ago, we were awarded, as part of a joint venture with Aecon, the contract for the execution phase of the Darlington nuclear refurbishment project. Our portion of the project is expected to create approximately 800 jobs here in Ontario. When the reactors are fully refurbished, the Darlington station, which produces 20% of Ontario’s electricity, will be able to provide safe, reliable, affordable and CO2-free energy to the citizens of Ontario for another 30 years. We are presently pursuing opportunities around the world in countries such as China, Romania and Argentina. Considering that our nuclear business has a strong foothold in Ontario, securing any one of those opportunities would have a positive impact on the province's economy. Canada’s nuclear supply chain is supported by more than 180 companies – many of which are small to medium sized enterprises – who are forerunners in science- based research and development. We were also contracted by the Greater Toronto Airports Authority to design and build a power plant to meet the needs of Pearson International Airport. Today, we operate and
  • 9. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 9 maintain it, ensuring the airport continues to operate independently of the local power grid. In 2012, we were awarded a $2 billion contract to retrofit and modernize the Vale nickel smelter complex in Sudbury with the goal of reducing atmospheric emissions. Once completed, we hope to have slashed sulphur dioxide emissions by 85%, and dust and metal emissions by up to 40%. It’s the largest single environmental investment in Sudbury’s history – and one of the largest in Canada. As Canada’s largest engineering and construction firm, the benefits of our projects are felt beyond our own activities. These are measured both at a macro or national scale, and in local communities. This would also be true for future projects in Canada such as the Energy East pipeline, which could contribute to the creation of national wealth. To do so, it needs to be designed and executed to respect the strictest environmental standards, as well as in social acceptability and engagement with First Nation communities. Today, our in-depth environmental expertise embedded in all of our sectors ensures projects are developed with the best environmental practices. We look forward to future sustainable projects that will contribute to the collective wealth of Canadian communities. TAKING CHARGE AND MOVING FORWARD So where is SNC-Lavalin today? We are a company that has seen significant change and broad improvement over the past three years.
  • 10. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 10 We took charge and tackled head-on the challenges of the past, and remain fully committed to the ethics and compliance culture we have built. It is an integral part of the way we work every day, here in Canada and globally. Just like you do not choose between your children’s safety, health, education and future success, we do not make choices between ethics & compliance, health & safety, client satisfaction and profitable operations. We choose to do them all at the same time, always, and deliver in a world class manner. Our commitment and concrete actions in ethics and compliance allowed us to enter an Administrative Agreement under the Government of Canada’s tougher Integrity Regime. I would like to recognize our employees’ efforts and dedication to continuous improvement in ethics and compliance. They deserve the credit for meeting the difficult criteria of the new Integrity Regime. When I took over as President and CEO in late 2015, I had a clear mandate to improve our company's performance and results. Recently, we’ve taken meaningful steps in the new chapter of our 5-year strategic plan. We made smart, strategic organizational changes to reinforce our position among the world’s global Tier-1 engineering and construction firms. The strategic plan we developed and are implementing has already yielded concrete results. We stabilized our organization, improved our internal cost base and aligned our businesses with market conditions. We’ve set clear priorities to guide us as we move forward: Our first area of focus is creating a streamlined structure. We took meaningful steps to improve our operational efficiency and execution across all of our businesses.
  • 11. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 11 The STEP Change program we successfully completed in 2015 has identified a significant number of cost reduction initiatives, and increased our competitiveness and agility. Our second area of focus is on delivery. Our focus is now on better execution and delivering sustainable results. We persist to reinforce our culture of continuous improvement, efficiency and execution, to deliver flawlessly on all projects, regardless of their size, scope and complexity. The Shriners Hospital for Children in Montréal, the ongoing massive Gorgon natural gas project I mentioned earlier, as well as the EMAL mega-smelter in Abu Dhabi are but a few examples. I cannot stress enough how proud I am of our employees who, day-after-day, deliver projects that enhance people’s lives and frequently exceed client expectations. Our third area of focus is growth in our four strategic sectors. Our diversified backlog speaks to our strength in our Infrastructure, Mining & Metallurgy, Oil & Gas and Power sectors. Despite the current economic downturn in some markets, our diversification and end-to- end capabilities are enabling us to continue to win projects around the world. Last summer, we were awarded Keys Energy Project in Maryland, solidifying our position as a leader in the US power market. One of our consortia was selected to deliver Montreal’s Champlain Bridge Corridor, one of the largest infrastructure projects in North America. And we expect continued growth in the Infrastructure sector. Different levels of government have recognized the pressing need to invest in infrastructure to sustain economic growth, and meet the needs of Canadians from coast to coast.
  • 12. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 12 In Africa, our experts in Mining & Metallurgy are presently designing Ethiopia’s first greenfield potash mining and processing facility. We’ve also secured five Oil & Gas contracts with our longstanding client Sasol in South Africa. With close to 25 percent of our global workforce based in the Middle East, this region continues to generate great opportunities. We won four contracts in as many months, including an important $800 million Oil & Gas project. Our growth is further reinforced by our Capital team. They continue to build our reputation as a partner of choice for large, complex projects, and are extending our investment capabilities across our four sectors. Our last area of focus is building a performance-driven culture. We continue moving forward in our goal to improve performance across the board. We’ve launched a company-wide program to further improve our agility, our project delivery and make us even more client focus. In turn, we’re starting to see enhanced client trust and satisfaction as well as increased repeat business, new and long-term projects, and a steady, healthy backlog. We expect that our strategic priorities will enable us to achieve clear targets, including delivering an annualized adjusted E&C EBITDA margin of 7% in 2017. Recently, I had the pleasure of delivering our year-end results, which highlighted our good financial performance in 2015. We delivered on our commitments and met our 2015 guidance. We maintained a strong balance sheet with cash and cash equivalents rising to $1.6 billion. And we maintained a stable and diversified revenue backlog of $12 billion throughout 2015 and secured an additional $2 billion in the first 60 days of 2016.
  • 13. SNC-Lavalin Neil Bruce’s speech – Empire Club of Canada 13 CLOSING Today, the diversity in our market segments, the broad offering within each of our sector, the dedication and the depth of our employees’ expertise, as well as our restructuring efforts, will lead us to continued growth and the realization of the full potential of our company. Regardless of the headwinds we face – we continue to tackle any challenge with the same energy and dedication that we invest in all of our clients’ projects. Because at the end of the day, we are a people business. Our assets are our people who live our values and deliver our clients outstanding projects. We have an important role in delivering sustainable, cost-effective engineering solutions that will have a lasting, positive impact for our clients, the environment and the communities we operate in. Everything that we have done and the daily efforts of our employees will ensure that we continue to build what matters in Canada and overseas for the next 100 years. Thank you.
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