Helicopter services firm HNZ Group shares sink on dividend suspension

MONTREAL – HNZ Group shares hit a nearly six-year low Monday after the helicopter services firm announced it will suspend its monthly dividend starting next year as it deals with a slowdown in the resource sector, a key market segment.

Shares of the Montreal-based firm (TSX:HNZ.A) sank to $10 in early trading on the Toronto Stock Exchange, representing a 28 per cent decline from Friday’s close — the lowest level since February 2010. The stock later regained a bit of ground, closed at $12, down 14.4 per cent.

The company says it will continue to make its monthly payment to shareholders of 9.1875 cents per share until the end of this year, but then it will stop.

“While the corporation continues to be profitable and generates free cash flow, the headwinds caused by low resource activity do not now appear to be short term, as initially thought,” chief executive Don Wall said in a statement.

“Preserving cash and protecting the strong balance sheet to weather the current economic environment is our foremost priority.”

Suspending the dividend will save $14.4 million annually, money the company said it plans to use for future growth opportunities.

Derek Spronck of RBC Capital Markets said he anticipates HNZ Group’s challenges are “likely to get worse before it gets better.”

“The downturn in resource-based contracts and pricing pressures on new tenders is likely to remain a significant headwind over the next 12 months,” he wrote in a report.

Cameron Doerksen of National Bank Financial said other offshore helicopter players are also deferring aircraft deliveries and cutting costs in anticipation of market woes persisting through 2017.

HNZ reported a loss of $8 million or 61 cents per share in its latest quarter compared with a profit of $9.6 million or 73 cents per share in the same quarter last year.

The loss for the quarter included a $17.4-million non-cash trade name impairment charge. Excluding the one-time charge, the company earned $7.1 million or 54 cents per share.

Revenue for the quarter ended Sept. 30 totalled $59.6 million, up from $58.1 million.

HNZ provides helicopter transportation and related support services around the world.

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