Com Dev says stronger U.S. dollar reduced its Q1 profit but helped revenue
CAMBRIDGE, Ont. - Com Dev International Ltd. (TSX:CDV) says the stronger U.S. dollar had a negative effect on its first-quarter profit but it helped the satellite technology company's revenue and margins during a weak period.
Com Dev's first-quarter revenue was down just one per cent from a year earlier at $51.8 million even though its net income was cut by more than half to $1.8 million as it recognized a foreign exchange loss.
About $900,000 of the $1.5-million foreign exchange loss in the three months ended Jan. 31 was tied to the reduced market value of its currency hedging program.
Com Dev's senior executives told analysts Monday that the negative effect from its currency hedging should fade away if the loonie stays at current levels while the positive impact on margins will remain.
They also said another drain on profit â€” changes at Com Dev USA to reflect reduced U.S. military spending â€” is nearing completion as the company shifts more commercial and civil work to the subsidiary.
Demand for its commercial and civil products, such as transponders, and its newer ExactEarth satellite service have remained strong and are likely ramp up later this year, they said.
ExactEarth currently has five satellites in orbit, 630 kilometres above the planet, used to monitor global shipping activity in real time.
"The first quarter, at $1.4 million, was a slow booking quarter (for ExactEarth) as always. But the second quarter will be a record quarter, as ExactEarth has already booked almost $6 million of orders since the start of Q2," said Com Dev chief executive Michael Pley.
Pley said ExactEarth's sixth satellite is scheduled to launch in May or June from Kazakhstan but the division's revenue will grow this year even without its contribution.
He attributed the higher orders at ExactEarth to a growing list of customers, which has grown to 102 from 62 a year earlier. There are also 71 trial customers.
Pley also said Com Dev expects about $105 million of revenue in fiscal 2014 from an overall backlog of $149 million in orders. New orders are expected to be strong in the second half fiscal 2014.
"However, the U.S. situation will continue to be a challenge for us in the near term," Pley said.
"The brunt of the financial impact has been borne in the last two quarters, so we expect to see some improvement in Q2 as we ramp up revenue there based on transferred commercial programs and then return to a stable, profitable picture â€” albeit at a reduced level for the U.S. â€” in Q3 and Q4."
Com Dev's head office is in Cambridge, Ont., and Com Dev USA is based in El Segundo, Calif., south of the Los Angeles International Airport.
Its overall first quarter net income dropped from $4.1 million in the first quarter of fiscal 2013, while revenue was down about $500,000 from a year ago at $51.8 million.
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