Noranda slashes dividend, posts loss

Facing $4.1 billion in net debt, Noranda (NRD-T) is slashing its traditionally juicy divided by 40%.

The surprise move, which drops the quarterly payment to 12 from 20, is part of a larger restructuring plan aimed at taming the company’s debt-laden balance.

Also under the plan, Noranda will issue $500 million worth of new shares (about 40 million of them at the current share price) and take on US$300 million in new term-debt to fund pending debt maturities. Brascan (BNNa-T), which owns a 40% stake in Noranda, has agreed to buy up to $300 million worth of the new shares; the balance will be offered to the public. A portion of the proceeds from the offering will be used to redeem $150 million in preferred shares recently issued to Brascan; the rest will go to reduce debt.

The dividend cut and preferred shares redemption are expected to cut the company’s annual dividend payments by $70 million. In the end, Noranda figures the recapitalization plan will cut its net-debt-to-capitalization ratio to 38% from 51%, and generate about $1 billion in capital.

The dividend news was accompanied by a second-quarter net loss of $15 million (or 11 per share). The results include $12 million in restructuring provisions, which were partially offset by a one-time tax recovery of $7 million. A year earlier, Noranda earned $47 million (18 a share), including a net after-tax gain of $66 million on the sale of 51% of the CEZinc processing facility.

Revenue between the two periods slipped by $90 million to $1.58 billion thanks to a stronger Canadian dollar and lower copper sales a result of strike at the Horne smelter in Rouyn-Noranda, Que. Cash flow (after working capital changes) from operations fell to $156 million from $191 million.

For the first half of the year, Noranda’s loss piled up to $74 million (38 a share) on revenue of $3.16 billion, compared with year-ago net earnings of $55 million (19 a share) on 3.3 billion.

At quarter’s end, Noranda had $554 million in cash (down from $824 million a year earlier) and about 244.4 million shares outstanding.

Noranda will begin reporting in U.S. dollars as of July 1.