April 23, 2009 / 11:15 AM / 9 years ago

UPDATE 2-Hemisphere Q1 profit falls on slower farm spending

* Q1 EPS $0.03 vs. $0.11 last year

* Revenue drop 31 pct

* Sees full-year revenue of at least $60 mln

* Shares down 3 pct (Recasts, adds analyst comments)

By R. Manikandan

BANGALORE, April 23 (Reuters) - Canada’s Hemisphere GPS Inc HEM.TO, a maker of global positioning systems, posted a 72 percent drop in the first-quarter profit and expects an overall revenue decline for 2009 as the ongoing economic slowdown hurt demand for its GPS products.

“Despite good sector fundamentals and initiatives to stimulate demand, the current global economic climate has reduced discretionary spending and we now expect an overall revenue decline for 2009,” CEO Steven Koles said in a statement.

The company forecasts full-year revenue of at least $60 million and expects the second half of 2009, in particular, to compare much more favourably year-over-year. In 2008, Hemisphere generated revenue of $72.7 million that was a 35 percent increase from 2007.

Despite the good sector fundamentals and financial health of farmers, spending remained cautious in the early part of the North American selling season, the maker of GPS products for agriculture, marine and other markets, said in a statement.

The company, reported net income of $1.6 million, or 3 cents per share, down from $5.8 million, or 11 cents per share, in the prior year quarter.

Hemisphere, whose quarterly revenue fell 31 percent to $18 million, said that customer purchasing activity in the agriculture sector was at the low end of its expectations due to cautious recessionary spending.

“Results were lower than expectations. It seems pretty apparent that farmers were being more cautious with discretionary spending for equipment,” analyst Peter Prattas from Fraser Mackenzie Ltd told Reuters.

Hemisphere said its North American revenue declined 35 percent and international revenue fell 13 percent.

The company’s gross margin, however, rose to 52.4 percent from 50.5 percent as it benefited from cost reductions through outsourcing and a weak Canadian dollar.

Total operating expenses dropped 4 percent to $7.8 million, as the global market uncertainty has resulted in an increasingly more conservative cost management strategy.

As of March 31, Hemisphere, which has no debt, said it held cash of $12.5 million, or 23 cents a share and also has a $7 million credit line.

“I think they can remain profitable for the year and have a strong balance sheet to weather the storm,” Prattas added.

Shares of the Calgary, Alberta-based company were trading down 4 percent at 96 Canadian cents Thursday afternoon on the Toronto Stock Exchange. They have lost 49 percent of their value in the last six months. (Editing by Anil D‘Silva)

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