Com Dev CEO: Commercial Satellite Order Slump Will Not Last Long

[Satellite News 04-13-12] Canadian satellite component manufacturer Com Dev continued its streak of profit growth in its 2012 first-quarter, as earnings soared to $3.6 million despite a six percent drop in revenue to $47.2 million, according to its latest financial results issued April 13.

   Com Dev CEO Mike Pley said that while the Canadian federal government’s recent decision to trim the budget of the Canadian Space Agency by 10 percent was expected to impact its business, an increasing momentum in the commercial satellite telecommunications market would more than offset any losses.
   “We do relatively little business with the Canadian government, so we will not suffer that much,” Pley said on a conference call. “Less than $12 million of Com Dev’s backlog of $125 million is with the Canadian government. Com Dev is somewhat unique among the world’s space companies in that our success is, and has been, largely independent of our domestic government.”
   Com Dev did reduce its staff in 2011 in anticipation of a reduced Canadian space budget. The company’s domestic space industry competitors, such as MacDonald, Dettwiler and Associates (MDA), have already said they will have to lay off staff. Pley, however, said there was no indication that Com Dev would conduct any further layoffs at its space hardware and services facilities. Com Dev total workforce stood at 1,224 employers at the end of 2011, representing a decrease of about 5 percent from the end of 2010.
   The 2012 first quarter was not a busy period for commercial satellite orders. According to Com Dev, only eight telecommunications satellites – four commercial, two civil government and two military – were ordered during the period. The first period of 2011 generated 10 satellite orders worldwide.
   “Our strength is based on our ability to win business from satellite prime contractors in competitive procurements,” said Pley. “Our civil-government business is clearly profiting, as emerging-market nations now opt to launch their own telecommunications satellites. We have already received contracts for work on four of the eight satellites ordered in the quarter and we are competing for contracts on the other four.”
   Com Dev booked about $45 million in new orders during the 2012 first quarter – a decrease of 24 percent compared to the same period last year. Com Dev CFO Gary Calhoun said the company should be able to sustain higher margins now that it has almost completed five program orders under fixed-price contracts for the Canadian government. “Four of the five programs have been completed, and the fifth should be finished by this summer. The final program’s costs appear to have stabilized, but until that puppy is out the door, there’s always a chance of cost growth on it,” said Calhoun.
   Pley said he did not see a recent lull in the commercial telecommunications satellite business as a signal of a sustained market slump. “We are seeing signs in the coming months that should lead to a surge in new telecommunications satellite orders – if not this quarter then in the next quarter,” said Pley. “I don’t think I’ve ever seen our engineering and sales staff quite as busy in terms of the pipeline of work.”
   Com Dev’s strong 2012 first quarter follows a steady year of growth in 2011, when the company earned $5.1 million in profit and $49.9 million in revenue in its 2011 fourth-quarter, compared with a net loss of $1.9 million on $51.5 million in revenue during the same period last year.
   Com Dev ended 2011 with a profit of $13.6 million – a considerable increase from the $2.7 million in profits it reported at the end of 2010. “I am pleased with the progress we made during the year, but we still have work to do to reach the level of sustainable profitability this organization is capable of delivering,” Pley said in a statement issued with the 2011 full-year results. “A slowdown in orders in the civil space sector contributed to reduced revenues, but we have taken steps to properly size the business and focus our efforts on available opportunities.”

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