Nordion suspends dividend after arbitration loss
By Allison Martell
(Reuters) - Nordion Inc NDN.TO, a Canadian provider of medical isotopes, said on Monday it will suspend quarterly dividends after an arbitration panel rejected its claim for damages from its main supplier, sending its shares into a tailspin.
Nordion had hoped to compel state-owned Atomic Energy of Canada Ltd (AECL) to pay damages or to complete two new reactors that were set to replace the aging National Research Universal reactor in Chalk River, Ontario.
The new reactors, called Maple, were designed to supply Nordion with raw material for its isotopes, but they were mothballed before construction was finished. The panel rejected Nordion's claim, which was based on a 2006 supply agreement with AECL.
RBC Capital Markets analyst Douglas Miehm consequently cut his rating on Nordion shares to "underperform" from "outperform", calling the ruling "about as bad as it gets," and wrote in a note to clients that he had been expecting a decision in Nordion's favor.
"The arbitrators' decision was surprising, but the full terms of the 2006 agreement were never fully disclosed so it was always difficult to be completely confident in Nordion's case," he said.
Nordion said it would stop buying back shares after completing or cancelling its current stock repurchases.
"We are extremely disappointed with the outcome of the arbitration," said Tamra Benjamin, Nordion's vice president for public and government relations. "But regardless of that, we still have a strong business, we've got solid results, we've got good cash flow and margins."
Benjamin said Nordion would need some time to look at the ruling and consider its next steps. Continued...