The sale of a business unit and the settlement of a lawsuit returned Ottawa-based Nordion (TSX:NDN) to profitability during its 2013 fiscal year, despite lower operations revenue.
But the company, which supplies medical isotopes and isotope-based sterilization technologies, still needs to find a new source of radioactive materials before its current provider shuts down in 2016.
“Our fiscal 2013 results were ahead of our expectations,” said Steve West, Nordion’s CEO, speaking to investors on a conference call Thursday morning.
The company reported revenue of US$232.8 million during its fiscal year, which ended Oct. 31. That’s down five per cent from $244.8 million the year before.
According to Mr. West, that drop was due to the sale of the company’s targeted therapies business. The sale, which closed in mid-July, raised $182 million for the company and was a major reason for the return to profitably.
“Excluding the impact of the sale, revenue was consistent with the prior fiscal year,” Mr. West said.
Revenue from the company’s sterilization business was up one per cent, to $96.1 million, when compared with the year before. Revenue from the company’s medical isotope business was flat at $100.3 million.
Mr. West said he had expected medical isotope revenue to decline. However “a disruption at a reactor in Europe led to increased demand.”
The company recorded GAAP net income of $237.2 million during the year, up from a net loss of $28.9 million the year before.
The settlement of a legal dispute with Atomic Energy of Canada Ltd. also contributed to the company’s return to profitability, thanks to the agreement lowering Nordion’s legal expenses and leading to AECL paying Nordion $15 million in cash.
The settlement saw AECL commit to supplying isotopes to Nordion until 2016 but after that the company will have to find a new supplier – something Mr. West said is a high priority.
“Constructive conversations are ongoing with credible potential partners that we believe will contribute to this objective,” he said.
But finding a suitable supplier could be challenging.
“We don’t want to be doing science experiments with people,” he said.
Mr. West said it was possible that the company would engage multiple suppliers.
The company is also continuing the second phase of a strategic review. The first stage of that process led to the sale of the targeted therapies business. One of the decisions that will be made as part of the process is what to do with the $323.1 million the company has in the bank.
While Mr. West said that all options remain on the table, including splitting up the company further, he said that using the company’s cash-on-hand for an acquisition was unlikely.
For the three-month period ending Oct. 31, revenue was $51.3 million, down 31 per cent from $74.7 million during the same period the year before.
That revenue led to fourth quarter profits of $56.3 million, compared to a loss of $43.5 million during the same period the year before.
Going forward, Mr. West said he expects the company’s sterilization technology business – which accounts for a little less than half of its revenue – to grow between 10 to 15 per cent over the coming year.
“We do anticipate higher than normal growth,” said Mr. West.
He said he expects that growth will be driven by a customer that’s looking to diversify it sourcing of cobalt isotopes, an expected increase in prices and a shipping delay that means some sales won’t be recorded until next quarter.
Mr. West said he expects revenue from the medical isotope business to increase between 30 and 40 per cent over the coming year because reactors and processing facilities in Europe and South Africa are having problems.