Aug 19, 2015
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Portugal Sonae's profitability drops, one-offs boost net profit

Aug 19, 2015

Portugal's largest retailer, Sonae, posted on Wednesday a steeper-than-expected 14 percent drop in first-half recurring earnings as tough competition and weak consumer prices dented profitability while sales edged up 1 percent.

Net profit almost doubled to 97 million euros ($107 million)from 52 million a year earlier on one-off gains from asset sales and a hefty appreciation of Sonae's stake in telecoms firm NOS, but still came in slightly below expectations.

Vasco da Gama shopping center in Lisbon, owned by Sonae Sierra - Foto: DR

Analysts in a Reuters poll had expected, on average, a net profit of 105 million euros at the conglomerate that operates Continente hypermarkets, consumer electronics stores Worten and SportZone outlets of sporting goods, among other brands.

Underlying earnings before interest, taxes, depreciation and amortization (EBITDA) that many analysts focus on, fell 14 percent to 132 million euros, well below 146 million euros expected by analysts.

Underlying EBITDA margin, which measures operating profitability, fell by one percentage point to 5.7 percent.

Sonae's sales rose 1 percent from a year earlier to 2.33 billion euros, and the company said sales increased in all of its business segments.

Mark-to-market valuation of Sonae's indirect 2.1 percent stake in NOS helped boost net profit and total EBITDA, which rose 11 percent. The value of shares in the country's second-largest telecom operator increased 44 percent so far this year, by far outperforming the country's stock index, up 16 percent.

Sonae shares, which have risen nearly 20 percent so far this year, closed 1.87 percent lower before the results were announced, in line with the broader market in Lisbon.


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