AtkinsRéalis Group Inc. continued to tout its nuclear business as one of the keys to its growth strategy amid a record-high backlog last quarter.
The engineering services firm says its services backlog stood at $16.84 billion as of Sept. 30, representing a 34.7 per cent increase from $12.50 billion a year earlier.
The nuclear segment’s order book reached a record level of $3.2 billion as revenue for the division rose 36.4 per cent year-over-year to $368.9 million.
The company’s shares closed at $74.24 on Thursday, up $10.06, or around 15.7 per cent.
During the quarter, Atkins subsidiary Candu Energy signed a life extension contract for two reactors at the Qinshan Nuclear Generating Station in China. Atkins also continues contract negotiations regarding new builds at the Cernavoda nuclear power plant in Romania, said chief executive Ian Edwards.
He said this exemplifies “the demand and potential of our nuclear prowess across the globe.”
“We are one of the few public companies with the expertise and capabilities to service the entire life cycle of a nuclear asset,” said Edwards during the company’s third-quarter earnings call on Thursday.
“Through this, we can build a backlog that will grow over time and provide recurring revenue for decades to come.”
He added the company is “in discussions with public entities” about building new reactors to help support net-zero emissions goals.
“These potential contracts represent a massive opportunity for our business and could deliver significant growth over the next 10 years and beyond.”
Asked if there is a risk the nuclear industry could face capacity constraints down the road as it works to meet growing demand for new builds, Edwards said the issue is top of mind for Atkins.
He said the company has onboarded more than 1,000 employees in the past year for its nuclear business. It also launched its Canadians for Candu campaign earlier this year to promote its nuclear technology.
“Ultimately, there may be a need to develop … stronger relationships globally, and we have ties with very strong global companies that can help, but our focus in the short term is definitely Canada and building the Canadian strands,” he said.
Atkins announced on Wednesday it was awarded a 10-year contract for US$2.3 billion, along with partners Westinghouse Government Services and Jacobs Technology Inc., to operate facilities and assume site landlord responsibilities at the U.S. Department of Energy’s Paducah and Portsmouth Gaseous Diffusion Plants.
On Thursday, the company reported its third-quarter profit edged lower compared with a year ago when it benefited from a gain of the sale of its Scandinavian engineering services business Systra Group to a French consulting firm.
It earned net income attributable to shareholders of $103.7 million or 59 cents per diluted share for the quarter ended Sept. 30. The result was down from $105.0 million or 60 cents per diluted share in same quarter last year.
On an adjusted basis, AtkinsRéalis said its professional services and project management business earned 63 cents per diluted share, up from an adjusted profit of 38 cents per diluted share a year ago.
Revenue for the quarter totalled $2.45 billion, up from $2.20 billion in the same quarter last year.
RBC analyst Sabahat Khan called it a “positive” quarter for the company, as results were ahead of forecasts.
But the company’s lump-sum turnkey (LSTK) project backlog, which refers to fixed-price contracts under which companies must pay for any cost overruns themselves, was $190.1 million, down from $305.2 million a year ago.
Edwards said that primarily reflects the greater Montreal area’s REM light-rail network extension project.
It’s one of three LSTK construction contracts that have plagued Atkins’ business, along with Toronto’s Eglinton Crosstown light-rail transit system and Ottawa’s Trillium Line.
But Edwards said the commissioning and testing on its two Ontario projects are running as planned, noting a recent successful trial of the Trillium Line for which the company expects “substantial completion of this project imminently.”
Before interest and taxes, losses in the LSTK segment amounted to $17.7 million, worse than the $13.2-million loss from the same period the year before.
Atkins stopped bidding on lump-sum contacts in 2019 when it was still known as SNC-Lavalin. It continues to fight a court battle over payments it has not received.
“As we finalize the LSTK projects for our clients, we continue to pursue claim recoveries that we believe are owed and these discussions remain ongoing with our clients,” Edwards said.
This report by The Canadian Press was first published Nov. 14, 2024.
Companies in this story: (TSX:ATRL)
