December 10, 2008 / 12:59 PM / in 10 years

CORRECTED - UPDATE 2-Canada's MDS cuts outlook again, shares sink

(Fixes first paragraph to clarify that it lowered outlook for third time this year and not second time in quarter)

* Lowers 2008 rev range to $1.21 bln-$1.22 bln

* Warns net loss to fall below 2008 outlook range

* Shares drop 14.3 percent (Adds details. In U.S. dollars unless noted)

TORONTO, Dec 10 (Reuters) - MDS Inc MDS.TO MDS.N lowered its 2008 outlook on Wednesday for the third time this year and said it expected to post a bigger loss than it had previously expected due to a number of write-downs.

Shares in MDS, which specializes in analytical instruments, molecular imaging and contract research, sank 14.3 percent to C$6.83 on the Toronto Stock Exchange.

The company now expects full-year revenue in the range of $1.21 billion to $1.22 billion, down from its September outlook of $1.23 billion to $1.25 billion.

The company also said it saw pre-interest, pre-tax operating earnings in the range of between $148 million and $154 million, down from its previous range of between $160 million and $170 million.

Analysts expect average earnings before interest and tax of $140.9 million and revenue of $1.23 billion, according to Reuters Estimates. It is set to report its results on Dec. 17.

MDS said the revised outlook is due primarily to foreign exchange fluctuations and soft demand in some segments of the its North American customer base.

The company also said it will take a non-cash after-tax charge of approximately $260 million to write off the net book value of its MAPLE nuclear-reactor project asset and a non-cash write-down of MDS Pharma Services goodwill in the range of $270 million and $370 million.

It warned that the charges will result in a net loss below its 2008 target range. It also said that because of these charges, previous debt obligations will restrict it from repurchasing shares “for the foreseeable future.”

Maher Yagi, an analyst at Desjardins Securities in Montreal was surprised by the write-down at the Pharma Services division.

“This stems mostly from the decline in overall contract research organization (CRO) stock market valuations, and from a delay in profit recovery at the division,” he wrote in a note.

“The latter implies that MDS foresees lower growth than previously expected at the division, which is understandable given the recent slowdown in growth trends seen at many North American CRO firms.”

In early June and in September, MDS cut its 2008 financial forecast amid softening demand for high-end medical instruments. ($1=$1.26 Canadian) (Reporting by Scott Anderson; Editing by Jeffrey Jones)

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