June 19, 2009

Outlook

Aecon poised to capitalize on economic recovery

Records set in 2008

PATRICIA WILLIAMS

staff writer

After record financial results in 2008, Toronto-based Aecon Group Inc. is well positioned to cope both with the current economic turmoil as well as recovery down the road, says chairman and chief executive officer John Beck.

“From our balance sheet to our bidding pipeline, from the diversity of our markets to the experience of our people, we believe Aecon is well-structured to deal with the fallout from the current downtown,” he told shareholders in Toronto Tuesday.

“More importantly, we believe we’re in an ideal position to take advantage of the economic recovery when it starts to take hold.”

Aecon, Canada’s largest publicly traded construction and infrastructure development company, last year reported record revenue of $1.9 billion and net income of $59 million for the 12 months that ended Dec. 31.

By the end of the year, its backlog was $1.25 billion, the largest in its history.

That backlog is expected to be sustained through the next six to nine months as various public sector stimulus initiatives and private-sector growth opportunities converge.

“As we all know, last year was not like any other,” said Beck, who has more than 40 years of experience in the construction industry in Canada and internationally.

“Expectations of continued economic expansion were reviewed, revised and quickly reversed. The lubricant of easy credit was removed from the market and the engine of growth stalled.

“Governments quickly developed new fiscal and tax policy initiatives in an effort to stimulate economic activity.”

In Canada, the infusion of fresh capital into refurbishment and expansion of aging infrastructure “after several decades of underfunding,” bodes well for Aecon. The company’s backlog in this sector stood at $660 million at the end of March.

“Big or small, we can’t think of a better time to be in the business of building Canada’s infrastructure,” said president and chief financial officer Scott Balfour.

Aecon, which provides services to private and public sectors clients in a diversified range of sectors and geographic regions, sees “an excellent bidding pipeline” of new project opportunities in the infrastructure realm coming on stream in 2009 and 2010.

“In particular, the appetite for big transit, big highway and big energy projects has never been stronger,” Balfour said.

“To give you an idea of the scale of the work that is being conceived, looking out through to 2010, we have visibility on between $3 and $4 billion worth of P3 transportation projects, just in the greater Toronto area.

“The same thing is happening in other part of the province and in other parts of the country, with hydro projects and tunnels being commissioned in British Columbia and toll roads under development in Alberta and Quebec.”

While the big project pipeline is filling up, Balfour said Aecon is approaching this work “with a vigilant eye to mitigating risk and keeping balance in its backlog.

“Our bread and butter projects are still smaller contracts,” he said.

In the industrial sector, Balfour said “there are very few who expect, or in fact want, Fort McMurray to return to the days of irrational exuberance.”

Last year, this sector was driven by the “almost breakneck pace” of development in the oilsands.

When the global demand for oil abated in the second half of 2008, new developments projects “literally came to a halt,” Balfour said. Some life is now coming back to the region with the recent announcement by Imperial Oil to green light its Kearl project.

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