Magyar Telekom reported on Thursday consolidated Q1 net income of HUF 21.54 billion ($100.7 million) that beat expectations and reaffirmed its full-year guidance despite a weak economy.
A year earlier Magyar Telekom, a unit of Deutsche Telekom, earned a net profit of HUF 22.17 billion. Analysts in a Reuters poll this week projected that net income would fall by 7.6% to 20.49 billion.
The company said its bottom line shrank as revenues dropped in its core business segments and as financial costs increased due to weakness in the Hungarian forint and higher financing costs on its outstanding debt.
The forint hit record lows past 317 versus the euro in March, having lost about a third of its value from all-time highs hit last summer. On Wednesday the currency finished trade around five-month highs at 283 per euro in the domestic market.
First-quarter revenues dropped by an annual 2% to HUF 159.41 billion, largely in line with market forecasts. The company said both fixed-line and mobile voice segment revenues declined, while internet revenues also dropped.
However, the weak forint helped cushion some of the decline on the top line through revenues denominated in euros from the company’s foreign subsidiaries in Macedonia and Montenegro, it said.
Despite the poor economic outlook, Magyar Telekom confirmed its full-year guidance issued in February for a 1% drop in total revenues and a 1-2% decline in earnings before interest, taxes, depreciation and amortization (Ebitda).
“Although the external environment has deteriorated quite significantly since we published our public targets for this year, we still believe that the announced targets can be met if the economic situation does not worsen further,” Magyar Telekom Chairman and CEO Christopher Mattheisen said.
Hungary, which escaped financial meltdown by a $25.1 billion IMF-led rescue loan in October, faces its biggest downturn in two decades. The government expects the economy to contract by up to 6% this year, much worse than its earlier forecast.
Ebitda fell by 6.3% in the quarter to HUF 64.6 billion, below market expectations, partly due to a one-off gain from the sale of real estate a year ago and a faster shift in the revenue mix toward lower margin products, the company said.
The company’s gearing dropped to 24.8% at the end of March, well below the 30-40% range targeted in its dividend policy.
Magyar Telekom stock finished trade up 3.5% at HUF 559 on the Budapest Stock Exchange on Wednesday, outperforming a 0.5% gain in the wider market. (Reuters)