"I'm outraged by the news that a Canadian citizen, John Ridsdel, held hostage in the Philippines since September 21, 2015, has been killed at the hands of his captors," Trudeau said.
"This was an act of cold blooded murder and responsibility rests with the terrorist group who took him hostage."
Ridsdel, fellow Canadian tourist Robert Hall, Norwegian resort manager Kjartan Sekkingstad and Filipina Marites Flor were kidnapped seven months ago from yachts at a marina near the major city of Davao, more than 500 kilometers from Jolo.
The men were forced to beg on camera for their lives, and similar videos were posted over several months in which the hostages looked increasingly frail.
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In the most recent video, Ridsdel, a retiree aged in his late 60s, said he would be killed on April 25 if a ransom of 300 million pesos was not paid.
Hours after the ransom deadline passed, police in the Philippines said two people on a motorbike dropped the head near city hall on Jolo, a mostly lawless island about 1,000 kilometers south of Manila that is one of the main strongholds of the Abu Sayyaf militant group.
He said the head belonged to a caucasian man, but emphasized it was impossible to immediately identify. The local police chief issued a report to journalists with similar details.
Trudeau said Canada was working with the government of the Philippines to pursue and prosecute Ridsdel's killers, and that efforts were underway to obtain the release of the other hostages.
The Abu Sayyaf is also believed to be holding a Dutch bird watcher kidnapped in 2012, and has been blamed for abducting 18 Indonesian and Malaysian sailors from tugboats near the southern Philippines over the past month.