PARIS - The
commercial telecommunications satellite market shows no signs of slowing down
with the global recession and may even be more robust this year than in 2008,
satellite-component manufacturer Com Dev Ltd. said.
The
Cambridge, Ontario-based company, which says it has booked or expects to book
work on 25 of the 27 commercial satellites ordered in 2008, does not share the
market caution of satellite prime contractor Orbital
Sciences Corp. of Dulles, Va. Orbital told investors in February that it
expected global demand for commercial spacecraft in 2009 to fall to between 17
and 20 satellites, from 25 in 2008.
Industry
contractors and analysts differ on what constitutes a commercial satellite, so
year-end tallies differ.
In a March
9 conference call with investors, Com Dev officials said they are scanning the
global marketplace for signs of a pullback and see no signs of any.
"We've seen
very little to indicate that industry prospects are dimming," Com Dev Chief
Operating Officer Mike Pley said. "We maintain forecasts of expected
transponder orders, and we see that figure as being at least as high this year
as it was last year, if not higher."
Pley said
Orbital's less-optimistic assessment may be due to the fact that Orbital, a
prime contractor that sells smaller
telecommunications spacecraft, does not deal with the entire market, as
does Com Dev as a component provider. Large commercial satellite-fleet
operators, and governments interested in sponsoring their domestic operator,
continue to spend on new spacecraft, he said.
Two Com
Dev-specific developments also are contributing to the company's bullish
outlook.
The first
is the ramp-up of business from Com Dev USA in El Segundo, Calif., which is
intended to give the Canadian company improved access to U.S. government
satellite programs.
Com Dev
reported that military
satellite orders were nearly 33 million Canadian dollars ($25.6 million) in
the three months ending Jan. 31, with "a significant portion" of that coming
from the U.S. operation, Pley said.
Com Dev
Chief Financial Officer Gary Calhoun said the new U.S. operation, which is on
track to report revenue of more than 30 million Canadian dollars in 2009, "is
as close as 'damn' is to swearing" to being at financial break-even. The plant
is sized to be able to handle around 50 million Canadian dollars per year in
business.
Calhoun
cautioned investors not to conclude that government satellite work, civil or
military, is necessarily more profitable for Com Dev than commercial work. Com
Dev's current revenue for the quarter was 59 percent commercial, 24 percent
civil government and 17 percent military.
"There are
some limits on military [profit] margins," Calhoun said. "They have got
government rates on them, and are subject to audit. That puts a dampening
factor on them so you're not going to see exorbitant margins being made. Over
time, we expect about the same range as our other businesses."
The second
market-growth opportunity that Com Dev is chasing is a satellite-based
Automatic Identification System (AIS) for maritime traffic. The company
believes a technology it proved on the 6.5-kilogram CanX-6 demonstration
satellite launched
in April 2008 give it an edge over current and prospective competitors in
the United States, Europe and Asia.
Com Dev is
building a second AIS-equipped spacecraft, called the Maritime Monitoring and
Messaging Microsatellite, for the Canadian Space Agency and Defence Research
and Development Canada. It is scheduled for launch in 2010. Com Dev has said it
is building a third AIS-devoted satellite, but it has not announced a customer.
Com Dev
raised 20 million Canadian dollars in an equity offering earlier this year,
with most of it going to develop the AIS product.
Peter Mabson, Com Dev vice president
for development, said the company is "investing in some of the space and ground
assets required to be able to launch an initial commercial service related to
this activity. That initial service will be starting in 2010."
Com Dev officials have said they
expect to attract strategic partners to co-invest in the AIS system, which is
designed as a small constellation of payloads to give coastal authorities
information on the identity, speed and direction of ships nearing territorial
waters. "We'd be looking to secure the financial arrangements [with co-investors]
during the current fiscal year," Mabson said.
Com Dev
reported that revenue for the three months ending Jan. 31 was 56.5 million
Canadian dollars, up 26 percent over the same period a year earlier. Gross
profit margin was 26 percent, shy of Com Dev's goal in part because of an
unnamed contract that has proved more expensive than expected to complete,
Calhoun said.
The company
booked 88 million Canadian dollars in new orders during the quarter, up from 33
million Canadian dollars a year earlier and 60 million Canadian dollars in the
three months ending Oct. 31. Backlog at Jan. 31 totaled 189 million Canadian
dollars, up 19.6 percent from the previous quarter.
