March 12, 2009 / 11:40 AM / 9 years ago

UPDATE 3-MDS earnings fall as revenue drop

* Q1 adjusted EPS $0.06 vs $0.07 year earlier

* Revenue drops 15 pct to $275 million

* Shares jump 4.7 pct as free cash flow strengthens (In U.S. dollars. Adds analyst comments)

TORONTO, March 12 (Reuters) - MDS Inc MDS.TO, a Canadian health sciences company, reported a lower profit on Thursday asrevenue dropped, but cash flow was strong and its shares rose almost 5 percent.

The company, which specializes in analytical instruments, molecular imaging and contract research, said profit declined to $2 million, or 2 cents a share, in the first quarter ended Jan. 31 from $19 million, or 16 cents, a year earlier.

Adjusted to exclude restructuring charges and investment writedowns, earnings per share fell to 6 cents from 7 cents.

Revenue for the quarter was $275 million, down 15 percent from $322 million a year earlier.

Analysts were expecting earnings per share of 7 cents a share excluding items and revenue of $293.2 million, according to Reuters Estimates.

The company’s free cash flow was boosted by its restructuring initiatives. MDS added $31 million of free cash flow during the quarter, boosting its cash position to $149 million.

The shares which have dropped about 16 percent during the quarter, gained 4.7 percent to C$7.19.

The shares drifted lower for most of the quarter after the company posted disappointing fourth-quarter results in December on a hefty writedown at its Maple medical-isotope reactor.

“Most of the trends are negative and I think the next few quarters will be difficult for the company,” said Maher Yaghi, an analyst at Desjardins Securities in Montreal.

Revenue at its Pharma Services division dropped 15 percent to $124 million, while revenue at its Analytical Technologies division slipped 27 percent to $85 million.

The company blamed the 15 percent decline in revenue at its Pharma Services unit on soft late-stage orders as customers deferred research and development projects.

MDS said last year it would likely see some declines in those two divisions on an expected drop in U.S. sales of specialized instruments and slower growth in its research division.

Revenue at its Nordion division, which makes medical nuclear isotopes, rose 10 percent to $66 million helped in part by the shutdown of a competitor’s nuclear reactor in Europe during the quarter. ($1=$1.29 Canadian) (Reporting by Scott Anderson; Editing by Frank McGurty)

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