Thank you. Good afternoon, everyone, and welcome to SNC-Lavalin's 2016 first quarter earnings conference call.

Today's call is also being webcast, and a replay will be available on SNC-Lavalin's website within 24 hours. With us today are Neil Bruce, President and Chief Executive Officer; and our new Executive Vice President and Chief Financial Officer, Sylvain Girard.

Our earnings announcement was released this morning, and we have posted a slide presentation on our website, which we will refer to during our call. Before we begin, I would like to ask everyone to limit themselves to two or three questions to ensure that all analysts have an opportunity to participate.

You are welcome to return to the queue for any follow up questions. I would also like to remind you that as detailed on slide 3, certain statements made during today's call and slide presentation about expected future events and financial results may be forward-looking, and, therefore, subject to risks, uncertainties, and assumptions.

These are described in our financial documents and could cause actual results to differ materially from what may be inferred from the forward looking statements. Such forward looking statements represent management's expectations as of today and, accordingly, are subject to change.

We disclaim any intention or obligation to update any forward-looking statement, except as required by law. You will find more information about the risks and uncertainties associated with our business in our financial documents filed with the Canadian security commissions, which can also be found under the investor section of our website.

I would now like to turn the conference over to Neil Bruce.

Merci, Denis. Good afternoon, everyone, and thank you for joining us today.

I am pleased to have with us Sylvain Girard, who was appointed as our CFO at the beginning of April. Sylvain joined SNC-Lavalin in 2014 and brings over 20 years of global financial experience, including 14 years CFO in the financial services and healthcare sectors of GE in Europe.

His leadership, deep financial expertise, international experience, and strong understanding of our business make him the right person to take over this role. So welcome, Sylvain, to your first analyst conference call.

On today's call I will briefly review our Q1 results and discuss our segment performance and outlook. I will then ask Sylvain to talk about the Q1 results in more detail.

So let me start with slide 4, with a brief comment on our Q1 financial performance. Despite the turbulent markets and the softer economic environment that persists, we successfully delivered an adjusted net income from E&C of $57 million, or $0.38 per diluted share.

This quarter, we improved the balance of our earnings over last year's results, where all four segments were profitable together for the third quarter in a row. We also delivered a very strong quarter of business development conversion, increasing our diverse backlog to a record $13.4 billion, with particularly strong bookings in oil and gas and nuclear.

We can also see that our strategic plan is already yielding tangible results in efficiency of execution. Our STEP Change program resulted in a $39 million SG&A expense reduction in the quarter, a 19% decrease compared to Q1 2015.

We expect to deliver the anticipated benefits for this financial year, benefits of which are twice the $50 million implementation cost. As we have previously indicated, we have just launched our operational excellence program on plan, which is designed to further improve and sustain a culture of efficiency and execution.

We are committed to our strategy and actions to deliver consistently improving financial performance. This includes our target of an annualized adjusted E&C EBITDA margin of 7% in 2017.

As previously indicated, we will continue to take all additional measures throughout the year, if required, to ensure we meet this goal. Capital also had a good first quarter, with $91 million of net income, or $0.60 per share.

These results include a net gain on investment disposal of $51 million, which was mainly the disposal of the Malta interest. We also maintained a strong cash balance, which stood at $1.4 billion at the end of the quarter.

Now looking at our segments, beginning with slide 5. Our oil and gas sector continues to perform well, and we see many prospects and opportunities ahead, particularly in the Middle East region.

This sector generated $4 billion of revenue and a 7.2% EBIT margin over the last 12 months. We also replenished and closed the quarter with a $4.5 billion revenue backlog.

As you, the oil and gas industry continues to face very challenging global market conditions, including low oil pricing. This impacted particularly our production and processing solutions legacy Valerus.

However, our oil and gas business has tremendous engineering and construction expertise and capabilities across all phases of the project lifecycle. These make us less vulnerable than certain of our peers, and represent a key differentiator in the current challenging market.

Proof of our resilience is the recently awarded major contracts: one for the development of infrastructure and processing facilities for a gas field, and one for the EPC of an asphalt production facility, both in the Middle East. We expect this sector to continue to perform well in 2016, and be one of the main contributors to our net income.

The margin in this quarter is not indicative of the 2016 full year margin expectation. Now, turning to Slide 6, we continue to remain cautious about the mining and metallurgy market.

While this sector continues to be affected by a lower level of activity due to lower commodity prices, which impact capital investments, we are seeing some good opportunities, particularly outside Canada. The mining and metallurgy revenue backlog at the end of the quarter was $300 million.

We were awarded an engineering services contract to provide operations support service to Emirates Global Aluminum, two aluminum smelters in the UAE; as well as a prefeasibility study for the Soto Norte project in Colombia. This sector generated $676 million of revenues and a 9% EBITDA margin over the last 12 months.

Moving to Slide 7, the power sector continues to have good potential for new nuclear and gas-fired thermal power generation projects in Canada and internationally. The power revenue backlog at quarter end stood at $3.1 billion, which includes our share of the $2.7 billion contract for the execution phase of the Darlington nuclear refurbishment project in Ontario.

Together with a contract for the decommissioning of a nuclear research reactor in Alberta, this sector generated $1.7 billion of revenues, and a 6% EBITDA margin over the last 12 months. Now, turning to the infrastructure segment.

We continue to see many opportunities for our infrastructure sector, particularly in Canada and here in Quebec. Both provincial and federal governments have recognized the pressing need to invest in the infrastructure to sustain economic growth.

The infrastructure and construction sub segment had a good start for the year, we saw some yielding tangible results for our STEP Change program, which improved our efficiency, processes, and execution this quarter. Total backlog for the infrastructure segment was $5.5 billion at the end of the quarter.

Total revenues and EBIT margin was $2.7 billion and a 3% margin, respectively, for the last 12 months. Lastly, on Slide 9, the new structure that we are planning to put in place for a certain number of our mature North American concessions is progressing well, with great interest shown to date.

And we should, as indicated previously, make an announcement around the half year. We are also very pleased with the earlier than anticipated close of the sale of our indirect ownership interest in the Malta International Airport for a cash consideration of €63 million.

This demonstrates further our focus and active approach to managing our asset portfolio to optimize shareholder returns. Highway 407 continues to deliver very good results, with increases in Q1 2016 compared to Q1 2015, of 5% in revenues and 9% in EBITDA.

In summary, for the third quarter in a row, we are delivering good results whilst winning more contracts; and, therefore, we are maintaining our guidance with regards to E&C EPS and EBITDA margin outlook. Despite the turbulent markets and persisting softer economic environment, we successfully increased our backlog to a new record with quality contract awards.

We maintained a strong cash balance and achieved good results in all four sectors, particularly in infrastructure and construction. We also just launched our operational excellence program in order to further improve and sustain a culture of efficiency and execution, which will help us deliver increasingly better results.

With that, I'll pass the call over to Sylvain to go over our financial results in more detail. Sylvain.

Thank you, Neil. Good afternoon, everyone.

Let's now turn to slide 10. E&C revenues for Q1 2016 totaled $1.9 billion compared to $2.2 billion in Q1 2015.

The variation was mainly due to a decrease in revenues from infrastructure, mining and metallurgy, and power, partially offset by an increase in revenues from oil and gas, all of which was expected. For the third quarter in a row, EBIT margin was positive for all segments.

The segment EBIT from E&C was $108 million in the quarter compared to $117 million in Q1 2015. I will explain this variation in more details on the next slide.

The segment EBIT from capital was $109 million in the quarter compared to $43 million in Q1 2015, mainly due to the favorable impact of the disposal of our indirect interest in the Malta International Airport. The adjusted EBITDA amounts from E&C and capital in the quarter were in line with Q1 2015, but the adjusted EBITDA margin from E&C improved to 5.2% compared to 4.6% in Q1 2015.

Adjusted net income from E&C in Q1 2016 was $57 million, or $0.38 per diluted share, in line with Q1 2015, as the lower segment EBIT was offset by a decrease in income taxes. The lower effective tax rate in the quarter was primarily due to tax benefits arising from the use of previous losses on which no deferred tax asset was recognized, as well as the geographic mix of earnings.

While the effective income tax rate from E&C was exceptionally low this quarter, we expect that this rate for the year 2016 would be closer to, but lower than the Canadian statutory income tax rate, principally driven by our geographic mix of earnings. Note also that our total SG&A expenses in the first quarter of 2016 decreased to $168 million, or a ratio of 8.5% over total revenues, compared to $207 million or a ratio of 9.2% in Q1 2015.

This 19% decrease is mainly due to the successful implementation of the STEP Change program in 2015. Our balance sheet remains strong, with a cash balance of $1.4 billion at the end of March 2016, $290 million higher than at the end of March 2015.

Working capital, net of cash, was negative $1 billion, demonstrating our overall positive cash flow position on projects. Our recourse debt to capital ratio remained low, at 9%.

Now moving on to slide 11. The slide presents the main reasons for the variances in the segment EBIT for E&C.

Let me comment on two of those. First, the oil and gas segment.

The EBIT decreases in Q1 2016 to $42 million, which represents a 4.9% EBIT margin, compared with 7.1% in Q1 2015. This margin decrease was expected, and is mainly due to our legacy Valerus division.

However, we believe that as the work increases on our recently awarded major projects in the Middle East, the margin will improve through the year, in line with our expectation as set out in our plan. Secondly, the infrastructure and construction segment.

The EBIT increased in Q1 2016 to $17 million, which represents a 4.6% EBIT margin, compared with a negative 2.7% in Q1 2015. This improvement comes partly from lower G&A and higher gross margin from better project efficiency and execution.

We are pleased with the infrastructure results this quarter. Now, moving on to slide 12.

As Neil mentioned earlier, our revenue backlog at quarter end was $13.4 billion, representing a 15% growth over the same period last year. Our backlog was composed of 45% reimbursable contracts and 55% of fixed price contracts, similar to the end of 2015.

Bookings for the first quarter were $3.4 billion, which represents a 1.7 book to bill ratio. This included $1.8 billion of bookings in the oil and gas segment, and $1.1 billion in the power segment, mainly from nuclear.

Overall, our backlog remains well diversified and of high quality. And lastly on slide 13, we have maintained our 2016 outlook, which is an adjusted diluted EPS from E&C in the range of $1.50 to $1.70.

This concludes my presentation. We can now open the line for questions.

Thank you.

First question on the just want to touch on the infrastructure segment. Good EBITDA performance there.

Can you help me? Was there any close out margins contributing to that EBIT performance in the quarter?

And, secondly, just on the outlook for that segment, can you update us on the number of large P3 bids that you might be shortlisted on, at present?

Okay. Thanks for the question.

In terms of closeout, we are generally closing out contracts on a continual basis and in the quarter we didn't complete contracts, but we were certainly moving past some risks that we had on certain projects. And as we move past the risks, then clearly we release the contingency.

So, certainly within infrastructure, there was a release of contingency purely because we had mitigated and moved past risks. And in terms of the shortlisted, there's a number of infrastructure bids in Canada alone, as I think as everybody is aware, and to date we are shortlisted on the first two.

But there's another -- in excess of a dozen that are following on from that that we will be looking at over the next year.

Okay. Helpful.

And just so I understand on the -- switching to the SG&A, you are talking about expected benefits of $100 million on the SG&A line. Will we see that all in 2016?

And is that to be measured against 2015 levels? Just so I'm clear on how to model that.

Yes, we are definitely -- it is measured against 2015. It's a good question, but it is measured against 2015.

And we do expect, through 2016 to effectively end 2016, with achieving that target.

Okay. So, this kind of run rate we saw for the quarter is -- if volumes stay where they are, we would expect to maintain that level of SG&A throughout the rest of the year?

Or is there further to come here?

No. At this stage, I'm not sure I would just take the first quarter and multiply it up by four, but it is a good indication.

As we said, we're confident in delivering twice the $50 million investment, so we're confident to deliver the $100 million.

You briefly touched on the 407, and how results are tracking very well there. I don't know if you are in liberty to discuss this, but has there any thought been given to increasing the dividend there?

I think it's been static now for six consecutive quarters.

No, we don't give details on that.

All right. Then I'll move on to my next question.

Your STEP Change program, obviously delivering some good results. I know you already touched on that.

With respect to -- are you seeing any other efficiencies you can derive that are over and beyond the program that you've implemented?

Well, we're actually working on the operational excellence project, which should drive more efficient execution. But it's not to say that those would necessarily engage spend to get those efficiencies in place.

So we are continuously looking for better ways to improve obviously our margin rates, but also our SG&A efficiency through the operational excellence program.

Neil, in light of some pressure in several segments on the EBIT margin front, you made some comments -- and I'm not sure if it's related, but -- about the opportunity to go for further cost reductions efforts, if necessary, to get to the 7% target. Do you feel like you are going to need to tap into additional measures, and what could those be?

So, as we've said, we will look at every opportunity as it comes up in order to get to that. Whether it's about achieving the 7% or not, we will look at every single opportunity.

We had a recent example where, looking at the legacy Valerus organization, we had a review of the business and felt that we could rationalize some of the facilities and property. That was not part of the STEP Change program at the time.

But that's a really, really good example of where we've looked at something, it makes absolute business sense, so we're going to carry on and do it. But we'll do it whether it's to achieve 7% or not, we'll do it because it's right for the business.

Okay. Just to be clear, whether it's to achieve 7% or not, the goal is 7% this -- you will just continue to do this kind of stuff to improve the margin from there?

Is that [multiple speakers]?

No, we are doing it very -- I mean, we look at every single business case and say, does this make sense for the business going forward? And if it does, then we'll implement it.

In terms of the main program, which is very much around STEP Change getting the cost base in the right place, and then operational excellence around the operational efficiency, it is very much geared towards achieving the 7%. Things that we may do in the meantime are more geared towards -- is it the right thing to do for the efficiency of the business moving forward, regardless of the targets?

And we just want to make sure that people understand that, despite the -- or the fact that we're looking at that efficiency improvement, we'll make the right decisions for the business, regardless And likewise, I mean part of it is also getting the balance right around -- there's various ways of EBIT. And part of it could be about shrinking the business.

And that the message we are really trying to get over is we're not going to do that. So we just want to make sure that people understand that we are on track.

We've launched operational excellence to meet to help us deliver on the 7%. But in the meantime, if there are clear business things that come up in the meantime, we'll implement them.

Okay. And just a last one for me on revenue.

In light of the backlog, which has a length to it that goes beyond several years at this point, I'm just wondering how you're feeling about revenue for 2016. Any additional risks or opportunities from last quarter in terms of meeting the guidance that you've set out for the year?

Well, I think the revenue that we are looking at, and we've delivered in Q1 from a business perspective, is pretty much as expected. And we are pleased with that.

And, ultimately, the increasing and record backlog of the $13.4 billion just gives us increased confidence about our ability to deliver the revenues, and then ultimately the earnings through 2016 and 2017 and, in some cases, beyond that. I think the other piece is what is going into the backlog, particularly with contracts in the nuclear sector, for instance, is of significant higher quality than what's been there in previous years.

My first question is related to the strong quarter that you posted. I was just wondering whether there was some work, especially on the infrastructure side, that happened sooner than expected.

We saw some comments on the Champlain Bridge. And I was just wondering whether Q1 was stronger than initially expected, and what about the revenue mix going forward?

I think from an infrastructure perspective, we talked last quarter about looking at target, a return to profitability and then ultimately up to a circa 4% in infrastructure. And these guys are on that track, so they are delivering what we said we would.

So I really don't see anything unusual in the quarter. We're just pleased that, say they're delivering as per plan, moving past risks within the business that allow us to release contingency.

But that's not an unusual event. That is on every single project, so there's nothing that different here.

Really pleased with infrastructure and construction, and the progress we're making.

Okay. And given the strong result, especially for the last few quarters, is the track record of consistency strong enough to start looking at some M&A opportunities, Neil?

I think we've said before that we are going to deliver quarter on quarter. So we certainly believe that Q3, Q4, now Q1, we'll look to Q2.

And as I said before, we will be engaging with our shareholders and getting their view, not on the M&A, but getting their view on do they believe that we've done enough to instill confidence in the business? And if we get a general yes, then we'll move on to the bigger, wider plan.

But I have no hesitation in saying, no, we're going to do another couple of quarters before we get into that, if that's the feedback we get.

Can you talk about where the infrastructure and construction segment is at, in terms of projects ramping up and ramping down? I know you have a few or a couple very large ones that are just in the process of ramping up.

But there are some other ones that I think are nearing the end of completion. Is this going to be a seamless transition as we think about the revenues for that segment, or should we expect some lumpiness?

Well, I think within infrastructure, looking at it on a quarter by quarter basis, there might be a little bit of lumpiness. What we are looking for here is not so much the trend in revenues, but making sure that the efficiency within our earnings, quarter by quarter, is consistently profitable.

And that's the key measure that we're looking at, at the moment. But you're right, we've got a couple of really big projects are just beginning to ramp up now, in terms of the Champlain Bridge cross rail in Ontario.

So, there will be a little bit of fluctuation. But our eye is firmly on the profitability piece, and that continued progression in terms of increasing profitability within infrastructure quarter-by-quarter.

Right, okay. Thank you.

And then secondly, there was comments last quarter about your belief that you need to hold about $1 billion of cash for normal course operations. Is that still the right number to think about?

Yes, I think this is the right number to think about for the moment. When you look at the balance sheet, and I commented on that regarding our working capital position, and some of the commitments that we have upcoming -- I mean, this is what we see as the right number.

Okay, perfect. And then just lastly on the non-cash working capital, it was a fairly large investment in the first quarter.

So how do we think about that over the balance of the year?

You are thinking about the usage in operating cash flow, or --?

Sorry. Non-cash working capital over the balance of the year, whether -- it was a fairly large consumption of cash in the quarter.

Yes, exactly. So, yes, we did consume cash in Q1.

If you look at our financial statements, this was less, much less, consumption than the prior year. As we close the year, we feel confident that we ought to turn that around and get in a positive operating cash flow position for the year.

Just a quick question on oil and gas. Given the fact that right now obviously the visibility on revenue is much stronger, given the backlog, I was wondering if you can please comment on the competitive landscape, especially in the Middle East.

Do you feel like you have to give up margin right now to win work? Any color there would be much appreciated.

Okay. I think the -- generally, we are not giving up any additional margin to what we've talked about in Q3 and Q4.

So, part of the reason that we clarified the quarter's margin, a number of 4.9%, is basically to clarify that that came from a timing piece around Valerus versus a year before. And we are absolutely confident that the margin that we were expecting from oil and gas that we've talked about before will be delivered throughout the year.

One of the other additional benefits, which maybe is not completely apparent, is although we had a good tax benefit contribution towards the EPS, part of that tax benefit was the change in geographical mix. So the very fact that we are executing and delivering more from the Middle East, as opposed to the U.S.

which is a trend that we see continuing, actually benefits the business in terms of tax.

Okay. Actually, that's very helpful.

And on the tax rate then, what should we be using then for the core E&C? In [MD&A], obviously you telegraphed higher, but can you maybe quantify this?

At this stage, we think a range between 20% and 25% for E&C would be appropriate.

Okay. Okay, that's excellent.

And last question, Neil, if you don't mind. Thinking about the 407 and potential M&A, can you contemplate larger-scale transactions and keeping the 407 in the fold?

Just maybe -- I mean, are those things linked in your mind or not?

Again, I'd just refer back to the last quarter, as well. It was certainly within the Q&A where I confirmed that I really don't see an intrinsic link between the two.

I think it's possible to keep the 407 in the fold, and to do reasonably large M&A, once we have delivered a number of quarters of good, solid E&C results.

Just thinking about the process that you're running right now with the North American capital assets. Is there anything that we should be thinking about in terms of either regulatory risk or partners that could somehow interfere with some sort of decision by mid-year?

I don't think so. We've done extensive pre-work, both internally and with our advisors, and that certainly hasn't been flagged as any major risk at all.

Thank you all for having joined us today. If you have any further questions, please do not hesitate to contact me.

Have a good day, everyone. Bye now.