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UPDATE 1-SNC Lavalin posts C$1.6 bln loss, cuts dividend as Saudi prospects worsen

worsen@ (Adds background on Canadian-Saudi relations, CEO comment)

Feb 22 (Reuters) - SNC Lavalin reported a C$1.6 billion quarterly loss and cut its dividend on Friday, as Canadian engineering firm's oil and gas business faces intensifying trade challenges in Saudi Arabia.

SNC, which has engineering contracts with firms in Saudi Arabia, has been caught in the crosshairs of a strained relationship between Ottawa and Riyadh, resulting in a C$1.2 billion fourth-quarter charge at its oil and gas business.

Difficult inter-governmental relations between Canada and Saudi Arabia and unpredictable commodity prices have caused the near-term prospects of SNC's oil and gas business to worsen, Chief Executive Officer Neil Bruce said in a statement.

The company lowered its quarterly dividend by 18.7 Canadian cents per share to 10 Canadian cents, as it seeks to save C$131 million in cash annually.

The company, which had already lowered its 2018 profit outlook twice, said fourth-quarter revenue at its engineering and construction business slumped to C$2.49 billion from C$2.87 billion a year earlier.

For the three months ended Dec. 31, SNC's net loss attributable to shareholders was C$1.6 billion. It had reported a profit of C$52.4 million a year earlier.

($1 = 1.3209 Canadian dollars) (Reporting by John Benny in Bengaluru; Editing by Sai Sachin Ravikumar)