PARIS — Satellite builder Space Systems/Loral reported sharply higher revenue and gross profit for the nine months ending Sept. 30 and said it expects to add at least one new satellite order to the five it has already won this year.
But Michael B. Targoff, chief executive of parent company Loral Space and Communications of New York, warned investors Nov. 10 not to expect the satellite maker’s financial performance to continue at current levels.
In a conference call, Targoff said Space Systems/Loral boosted revenue and EBITDA — earnings before interest, taxes, depreciation and amortization — because of “scope increases” in certain ongoing satellite contracts that he did not name. These increases, he said, would not continue.
Space Systems/Loral of Palo Alto, Calif., has won five satellite orders so far in 2009. Targoff said the company expects at least one more before January.
Asia Broadcast Satellite (ABS) of Hong Kong has announced Loral as the builder for its large ABS-2 satellite, pending completion of financial arrangements that may include loan guarantees from the U.S. and French export-credit agencies.
Satellite fleet operator Telesat of Ottawa, which is 64 percent owned by Loral Space and Communications, expects to select a builder for a Nimiq 6 direct-broadcast television satellite in the coming weeks. Competing satellite manufacturers in the United States and Europe in the past have questioned whether making a costly bid for a Telesat satellite is worthwhile given the Loral-Telesat relationship. Telesat and Loral officials insist Telesat is free to select contractors other than Space Systems/Loral.
Loral won seven satellite contracts in 2008 and needs at least four or five orders per year to maintain financial equilibrium at the Palo Alto plant, which is in the midst of an expansion to permit it to handle at least nine satellites per year, depending on spacecraft size and complexity. Targoff said the company would spend $5 million to $10 million between now and the end of 2010 to complete the installation of satellite test equipment at the plant.
One satellite under contract is the ViaSat-1 Ka-band broadband spacecraft owned by ViaSat Inc. of Carlsbad, Calif. Loral is investing $60 million in ViaSat-1 and in return owns rights to the satellite’s Canadian coverage area.
Telesat let pass an Oct. 31 Loral-imposed deadline to purchase Loral’s ViaSat-1 capacity for $13 million, a decision Targoff said he understood given Telesat’s other financial needs and the limited investment flexibility permitted by its credit agreements.
Targoff said the ViaSat-1 capacity purchase remains a good deal for Loral, which is negotiating with a Canadian satellite broadband service provider interested in using the capacity. To conclude this arrangement, he said, Loral would invest around $15 million in ground infrastructure as its part in providing the commercial service in Canada.
Loral said its satellite manufacturing business reported $745.8 million in revenue for the first nine months of 2009, up 15.4 percent from the same period a year ago. Adjusted EBITDA was $54.2 million, more than double the figure for 2008. Space Systems/Loral’s backlog at Sept. 30 was $1.6 billion.
Also good news for Loral is the fact that Intelsat, a regular buyer of Loral satellites, won the auction for the Loral-built ProtoStar-1 telecommunications satellite. In a Nov. 9 filing with the U.S. Securities and Exchange Commission, Loral said it has withdrawn its claim in ProtoStarLtd.’s Chapter 11 bankruptcy case given its relationship with Intelsat.
Loral is also owed money by DSBD of Reston, Va., the former ICO North America, which is in Chapter 11 proceedings of its own. Loral said DSBD owes it some $26 million in future payments related to the Loral-built ICO-G1 satellite, which was launched in April 2008.
