WSP Global dropping projects in Russia as it unveils growth plan

WSP Global drops Russia

WSP Global Inc. is quitting its projects in Russia and will stop seeking out work in that country or Belarus following the invasion of Ukraine and subsequent economic sanctions, the engineering firm said Thursday.

"While we have a limited number of ongoing assignments and involving projects in Russia, we have decided to exit such assignments, for which we have a non-material exposure," CEO Alexandre L’Heureux told analysts, saying the company is "deeply troubled by the conflict."

"Furthermore, we will no longer be pursuing any further assignments in Russia."

WSP has no employees or offices in Russia, Belarus or Ukraine, he said. Its economic exposure there is expected to be under $1 million.

The Montreal-based firm joins a growing list of Canadian companies exiting Russia or suspending plans, sales or operations there, including auto-parts maker Magna International Inc., Kinross Gold Corp., McCain Foods Ltd. and Canada Goose.

The decision came as WSP reported a year-over-year profit bump of 84 per cent in its fourth quarter and unveiled a three-year strategic plan. The blueprint, which folds into longer-term vision to double in size, aims to boost net revenues by more than 30 per cent and adjusted earnings by 40 per cent by 2024.

Once a boutique firm called Genivar, the 63-year-old company has swelled to 55,000 employees from 31,700 at the end of 2014. It has eclipsed SNC-Lavalin Group Inc.'s workforce of roughly 31,000 — down from 50,000 employees less than three years ago as SNC streamlined into a pure-play engineering firm.

WSP's market value stood at $19.7 billion as of Thursday afternoon compared to its competitor's $5.6-billion valuation.

L'Heureux said he hopes to leverage the talent and scale gained via recent acquisitions — 14 since 2019, including the 7,000-employee environmental consulting firm Golder last year — to drive higher prices and efficiency.

"Our margin profile for the improvement is not about cost cutting," he said. "We are in a position to charge more for our services."

Over the next three years, WSP aims to grow its presence in several of its top segments, including environment. It also hopes to boost its activities in the power, energy, water and industry sectors while slightly reducing transportation exposure.

The company further plans to ratchet up "front end" consulting and strategic advisory work, which typically offers higher margins, and notch down engineering and design services to about 50 per cent exposure from the current 55 per cent.

Eventually it hopes to expand its "clean revenues" to more than half of its business as it looks to nab lower-emissions projects.

WSP scooped up several big contracts last quarter, helping to build its backlog organically by 10 per cent year over year to $10.4 billion.

One, called Clean Path New York, relates to a 288-kilometre transmission line planed for that state that will provide emissions-free energy to New York City and stretch from a substation on the East River to the Catskill Mountains.

The other, dubbed Firmina, is a project to complete the permitting for a 14,000-kilometre fibre-optic cable to be built by Google that will run under the sea from the east coast of the United States to Argentina.

"WSP Global showed again yesterday why it deserves a premium valuation. The engineering consultancy comfortably surpassed consensus expectations for 4Q21, offered a positive outlook for 2022 and set bold long-term ambitions to double in size and realize adjusted (earnings) margins above 20 per cent," analyst Frederic Bastien of Raymond James wrote in an investor note.

The company reported profits attributable to shareholders of $136.7 million or $1.08 per share for the quarter ended Dec. 31 compared with a profit of $68.9 million or 61 cents per share a year earlier.

Revenue in the firm's fourth quarter totalled $2.89 billion, up 29 per cent from $2.25 billion in the last three months of 2020.

On an adjusted basis, WSP said it earned $1.46 per share, up from an adjusted profit of 82 cents per share a year earlier and beating analysts' expectations of $1.31 per share by 12 per cent, according to market data firm Refinitiv.

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