November 8, 2012

2012 Leaders

Leaders revisited: Aecon finds balance with western expansion

With a main focus of expanding into Western Canada, Aecon Group Inc. has achieved balance across the nation since Leaders last featured the company three years ago.

“We are now truly a national company,” said John Beck, Aecon’s chairman and chief executive officer.

Previously, Aecon had primarily been an Ontario based company, but Beck saw the West as a huge opportunity.

“We believe there will be more growth in our business in the West than in the East in the years to come and we want to fully participate in the growth.”

Aecon now has a workforce of approximately 12,000 people balanced between the East and the West. It is equally balanced in its activities across the country and conducts about $3 billion in business a year, almost exactly evenly split between Canada’s coasts. Manitoba and Prince Edward Island are the only two provinces where Aecon is not very active.

Aecon recently established a western headquarters in Calgary with chief operating officer Teri McKibbon based out of the West. Senior management is now based in both Calgary and Toronto, an important factor in striking a balance, says Beck.

Today, Aecon is targeting projects in the mining, transportation and energy sectors and Beck says those sectors are more active in Western Canada.

In 2010, Aecon acquired Fort McMurray, Alta.-based Cow Harbour Construction Ltd. operating in the oilsands, which formed the core of a new business called Aecon Mining.

Aecon is currently involved setting up and operating mines in the oilsands, potash, nickel and uranium sectors.

“The mining business that we’re active in today is right across Canada,” he said. “That’s a business that we weren’t really that much in when we last talked.”

In the 2009 edition of Leaders, Beck indicated that “the future of the construction industry and infrastructure development in Canada has never looked brighter.” Today, Beck was happy to note that his prediction was correct.

“[There was] an even stronger effort because in addition to everything I said then, the mining industry has added that much more of a level of demand to activities.”

In the transportation sector, Aecon is involved in road, bridge, tunnel and airport project. It is becoming increasingly involved in transit projects as well.

In Toronto, Aecon has a $280 million contract for the Toronto-York Spadina Subway Extension to construct the Sheppard West and south tunnels for the Toronto Transit Commission.

Aecon is building hydroelectric projects like large dams, nuclear refurbishment cogeneration plants in both eastern
and western Canada and renewables, mostly in solar
and biomass.

The company was recently awarded a contract from Ontario Power Generation for the design and construction work for the Atikokan Generating Station biomass conversion project.

While the company is expanding in those three sectors, it is still involved in its traditional business projects. In 2009 Beck described utilities work, such as underground utilities, power distribution, fibre optics, gas pipelines and water as its “bread and butter.” Today, he said utilities are still Aecon’s staple and a growing part of the company’s business.

As Aecon expands into these sectors, the company has placed a greater emphasis on its various divisions working together through the One Aecon approach.

“We try to do internal joint ventures, where we just integrate various activities, so we get a one-stop shop for clients,” explained Beck.

He said their clients like it and Aecon has started to see more repeat business, which is how the company is measuring the success of the program.

“Clients prefer to work with us than go to a competitor. They prefer to negotiate with us to do work.”

Though, he noted, the company does not want to get to the point where each projects needs to be conducted through the One Aecon approach.

“Sometimes things need to be separated, but we want to continue to improve on that process.”

Financially, Aecon’s stock prices have almost doubled in the last year and the company increased its annual dividend by 40 per cent.

Beck said these positive increases signify “a better performance, better focus on execution and strict controls on our bidding processes and our performance on the sites.”

Going forward, Beck would like to see Aecon increase its margins to pre-recession levels.

“In the 2009 and 2010 recession our margins were badly compressed,” he explained. “If you look back to 2007, 2008, that’s our focus.”

This year, Aecon has again been named one of Canada’s top 50 best employers. Beck says the company’s sixth consecutive ranking is due to the huge amount of training and development the company provides for employees at all levels.

“We are working closely with unions in terms of training programs because one of the big challenges for our industry is risk of labour shortage…we invest a lot in ourselves.”

He added that Aecon has not felt a challenge in recruiting labour yet and he feels there has actually been a little bit of a slowdown.

“I think it won’t be as bad as we were worried it might be, but we’re still getting ready for it because we expect it might come back.”

In the last couple of years, Aecon has been busy acquiring companies to meet what it sees as growing Western demand. Beck said they are now expecting a future based on organic growth with no more acquisitions on the horizon.

“We’ll follow our clients wherever they take us,” he said.

“It’s just going to get better and we will continue to get stronger. We’ll have our normal organic growth, but the real growth will come from margin improvements and the bottom line.”

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