Swisscom scares off investors with revenue target reduction
Published: Thursday, Nov 2nd 2023, 13:02
Updated At: Friday, Nov 3rd 2023, 00:54
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Swisscom achieved a solid result in the first nine months. However, headwinds came from the currency front. The "blue giant" is therefore lowering its revenue target for the full year. Investors do not like this at all: the share price plummets.
Actually, Switzerland's largest telecom provider did well. Sales grew 0.3 percent from January to the end of September to 8.2 billion Swiss francs, the Group announced in a communiqué on Thursday.
Swisscom was adversely affected by the weakness of the euro, which pushed down the earnings contribution of the Milan-based broadband subsidiary Fastweb. Adjusted for currency effects, Group revenue would have increased by 0.9 percent.
In operational terms, the usual pattern emerged: In the Swiss core business, revenue decreased slightly by 0.6 percent. However, Swisscom again recorded significant growth in Italy (+6 percent).
Significantly more profit
The picture is better in terms of profit: Operating profit before depreciation and amortization (EBITDA) grew by 4.1 percent to CHF 3.5 billion. The absence of special effects such as a fine imposed by the Swiss Federal Economic Commission (Weko), which had depressed the previous year's result, also contributed to this. Excluding the one-time effects and at constant currencies, EBITDA would have increased by 2.2 percent.
On balance, net profit even climbed by 7.9 percent to CHF 1.3 billion. Cost reductions that exceeded the original savings target also helped: In its Swiss core business, Swisscom was able to offset the decline in revenue through efficiency gains. "Overall, we are very satisfied," said company CEO Christoph Aeschlimann in an interview with the AWP news agency.
With its figures, the Group exceeded analysts' expectations, particularly in terms of profit.
Sales target lowered
However, the financial community does not like the outlook at all: Due to the euro slump and weaker cell phone sales, Swisscom is trimming its revenue target for the full 2023 financial year to 11.0 billion Swiss francs, having previously targeted revenue of 11.1 to 11.2 billion francs. The lowering of the revenue target was not on the radar of the majority of analysts.
Previously, Swisscom had expected an exchange rate of 1.00 francs for the euro, said CFO Eugen Stermetz in a conference call: "That did not prove to be the case. We are now assuming an exchange rate of 0.98 francs. That will cost us 50 million francs in sales."
In addition, certain businesses in Switzerland had developed somewhat worse than anticipated. In addition to lower cell phone sales, revenues from the telecoms business and the IT services business were also somewhat lower than expected, the CFO said. However, this had hardly any impact on profit.
The industry leader left the other targets unchanged: EBITDA is expected to reach CHF 4.6 to 4.7 billion. However, Stermetz repeated the statement that EBITDA tends towards the lower end of the range. This is because currency developments also have an impact on profit, albeit not as strong as on sales.
Share plunges to low for the year
By midday, the share price on the SIX Swiss Exchange had plummeted by a good 5 percent to 522 Swiss francs. This is the lowest level since the beginning of January. Meanwhile, the overall SMI market was half a percent higher.
The question is whether the euro dip will not become even bigger. After all, the euro has been trading below the CHF 0.98 mark since the middle of the year.
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