Higher shipment volumes increased revenue at Ottawa-based Nordion (TSX:NDN) in the first quarter of 2014, helping the company to stay in the black.
By Jacob Serebrin
“Nordion’s first quarter of 2014 was characterized by increased revenue and earnings and the conversion of business opportunities into contractual relationships,” said Steve West, Nordion’s CEO, speaking to investors on a conference call on Friday morning.
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The medical isotope and sterilization technology supplier reported GAAP net income of US$35.3 million during the three-month period that ended Jan. 31.
That compares favourably with the net loss of $269,000 Nordion reported during the same period last year but is a decline from the $56.3-million profit the company reported during the final quarter of the previous fiscal year.
The first quarter profits were driven in part by the $70.8 million the company reported in revenue, a 32-per cent increase from the $53.7 million in revenue the company reported during the same period a year ago.
It’s also up from the $51.3 million the company reported during the previous quarter.
“Our first quarter results were in line with management expectations,” said Mr. West.
He said the increase in revenue was driven largely by higher shipment volumes of two isotopes.
Also contributing to the profitable quarter was a $20.9-million gain on foreign exchange rates. Nordion realized the non-cash paper gain by revaluing the $300 million it holds in U.S. dollars to its functional currency, Canadian dollars.
However, the foreign exchange rate “had a negative effect on revenue” from operations, said Peter Dans, Nordion’s chief financial officer.
“From an operational perspective, the revenue that’s impacted is primarily in sterilization technologies” which are mostly priced in Canadian dollars, he said.
Mr. West said the company is proceeding with the strategic review that led to the sale of a business unit which closed in July.
That sale, which brought in $200 million, is the main reason the company has so much cash on its books – and some investors are starting to wonder when the company is going spend it.
While Mr. West said the review would determine what will be done with the cash, he provided no details.
“I can’t give you any specific insight into the strategic review other than the fact that we continue to move forward,” he said.
Part of the reason the review is taking so long is due to the unique nature of the company, said Mr. West.
“Nordion as an organization, in terms of its business, is quite complex,” he said. “We’re a highly regulated company.”
The company saw growth in both of its business lines, with sterilization technologies growing from $16.5 million during the first quarter of 2013 to $19.2 million a year later.
Mr. West said the company signed a new three-year contract to supply isotopes during February.
“This contract helps up firm up our expected growth in sterilization technologies,” he said.
According to Mr. West, the company expects this business segment to grow between 10 and 15 per cent over the fiscal year.
The company’s medical isotope division saw even bigger growth, with revenue rising to $51.7 million from $25.2 million.
Mr. West said this increase was “a result of disruptions with other suppliers.” While he said these disruptions have been resolved, it has led to higher sales.
He said Nordion’s management now expects medical isotope sales to increase by 40 per cent over the fiscal year.
Mr. West said the company is still looking for a new supplier of molybdenum-99, an important isotope for its business. Nordion currently has a contract to buy the isotope from Atomic Energy of Canada Ltd. until 2016 but will have to find a new supplier after that.
“Nordion continues to participate in constructive conversations with credible potential partners to secure long-term, sustainable and economically feasible supply” of the isotope after 2016, said Mr. West.
However he refused to elaborate further.
Nordion’s stock price was up $0.13 to $11.16 on Friday afternoon, slightly below its 52-week high of $12.18.