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Macdonald Dettwiler says revenue could turn flat

Macdonald Dettwiler and Associates (MDA-T), the Canadian satellite and data distribution company, reported a rise in quarterly profit on Friday and announced a share buy-back, but it warned of flat revenues next year.

MDA, famous for creating the robotic arm used on NASA space shuttles, lost a major source of business with the withdrawal of Canadian troops from Afghanistan this year, while a Ukrainian communications satellite project has hit hurdles.

Nevertheless, the company said its second-quarter operating profit jumped 28 percent. Revenue rose 21 percent to $194.9 million ($204 million US), but that missed the average analyst expectation of $200.3 million. It also said it aims to buy back up to $500 million of its shares. "It's a mixed takeaway," said Thanos Moschopoulos, an analyst at BMO Capital Markets. "On the one hand you had solid earnings in the quarter...and the return of capital through the buyback, but those positives are mitigated by the incrementally negative tone regarding the outlook." The Richmond, British Columbia-based company's chief executive, Daniel Friedmann, said project delays and government cutbacks may lead to flat revenue next year, compared with the 6 percent average growth expected by analysts. "We have a very healthy business but we're not seeing any step-ups from here on in the next six to 12 months," Friedmann said on a conference call with analysts. "Things are slipping, governments are going to the right ... Many governments are reevaluating, we have some big headwinds." MDA said continuing operating earnings were $28.8 million, or 70 cents a share, in the second quarter, compared with $22.5 million, or 55 cents, a year earlier.

The company had a net profit from continuing operations of $31.6 million, or 77 cents a share, compared with $14.9 million, or 36 cents a share.

MDA sold its property information business for $850 million late last year, saying at the time that it would look to use the cash to buy commercial assets in oil and gas, mining or agriculture. The company instead chose to use the cash to buy back up to $500 million of its own shares, but said it was still on the lookout. "We're looking at things in the tens and hundreds (of millions) going forward," Friedmann said. The company, which provides surveillance services to governments and militaries, said earlier this month it had extended to a third year a contract to supply unmanned aerial vehicles to Australian forces in Afghanistan. But the deal did not completely offset the loss of a larger contract with the Canadian forces due to their withdrawal from Afghanistan.

The company's order backlog declined to $833 million as it received contract payments for two Russian satellites and the Ukraine contract and it suffered from a reduction in Canada's space exploration budget. CTV Two CTV News CTV News Channel BNN - Business News Network CP24