BUSINESS

Canadian Helicopters CEO says new Afghanistan contracts unlikely in future

08/15/2012 05:22 EDT | Updated 10/15/2012 05:12 EDT
MONTREAL - Canadian Helicopters Group expects its mission in Afghanistan providing air support to the U.S. military will come to an end in a few years as NATO looks to wind down its operations in the war-torn country.

The Montreal-based company has secured considerable revenue in its four years of operations in Afghanistan, but CEO Don Wall said Wednesday he is less optimistic about seeing any new contracts.

"We believe that we'll continue to be there, but in terms of new work I don't think so today," he said in a conference call to discuss second-quarter results released after markets closed Tuesday.

NATO plans to withdraw most of its troops from Afghanistan by the end of 2014.

For Canadian Helicopters, the Afghanistan assignment is expected to continue at least to the end of 2013 if the company wins one-year extensions this fall on two contracts.

Wall said Canadian Helicopters would continue operating in Afghanistan until June 2016 if all other renewal options are exercised.

Analyst Cameron Doerksen of National Bank Financial said the U.S. will likely need helicopter support from civilian operators because of its desire to maintain a military presence in the country beyond 2014.

However, he lowered his target for Canadian Helicopter shares to $35 from $40 over concerns about revenue and margin growth in future quarters.

"While we are still positive on Canadian Helicopters' long-term prospects, we are nevertheless taking a more conservative view," he wrote in a report.

Canadian Helicopters (TSX:CHL.A) earned $12.4 million or 93 cents per share for the period ended June 30. That compared with $15.1 million or $1.15 a year earlier.

The decrease was attributed to the impact of the expiry of contracts in Afghanistan and Ontario's emergency services Ornge, partially offset by the contribution of its HNZ subsidiary in New Zealand.

Revenues fell slightly to $62.9 million, from $63.3 million in the prior year, with HNZ contributing $11 million.

Analysts expected that Canadian Helicopter would earned $1.05 per share on $66 million of revenues in the second quarter.

In Canada, revenues and flying hours were hurt by a softness in the mining industry.

"There's a little bit of softness all around. We haven't seen it stop but there's a little hesitation in terms of some of our customer and I'm talking about the bigger guys as well," Wall told analysts.

Wall said he expects the Canadian business won't be "awful" this year but won't be better than last year. Its total mining operations, including those in Canada account for about 12 per cent of total revenues.

Total revenue flying hours decreased 14 per cent 17,060 hours, with 1,523 hours flown at HNZ.

Canadian Helicopters Group (TSX:CHL.A) provides helicopter transportation and related support services in Canada, Australia, New Zealand and regions of Southeast Asia as well as Afghanistan and Antarctica.

It operates about 140 helicopters and employs approximately 800 people.

On the Toronto Stock Exchange, its shares closed at $29, down 81 cents or 2.7 per cent, in Wednesday trading.