Zain posts 27pc drop in Q1 profit
Kuwait, May 8, 2013
Zain, Kuwait's No.1 telecom operator, reported a 27 per cent fall in first-quarter net profit, missing analysts' estimates, due to a steep devaluation in the Sudanese pound and loss-making unit Zain Saudi.
The former monopoly, whose domestic rivals include Wataniya , a unit of Ooredoo and Viva, an affiliate of Saudi Telecom Company, made a net profit of KD52 million($182.6 million) in the three months to March 31, down from KD70.9 million a year ago.
Analysts polled by Reuters had on average forecast a net profit of KD55.9 million.
Sudan accounted for nearly a third of Zain's customer base and a fifth of group revenue last year, but the country has been mired in economic turmoil following South Sudan's succession in 2011.
In July, Sudan devalued its currency to 4.4 pounds to the dollar from 2.6, while the black market rate hit a record low of 7.1 in December. The slump cost Zain the equivalent of $179 million in revenue and $44 million in profit in the first quarter, the company said on Wednesday.
"Operationally our group companies are performing well in local currency terms," chief executive Scott Gegenheimer said in a statement. "The adverse effect (from) ... the devaluation of the Sudanese pound ... is unavoidable as there is no effective hedge on the currency."
In local currency, Zain's Sudan operations increased first-quarter revenue by 25 percent and net profit by 57 percent.
Zain, whose group revenue fell to KD299 million from KD325.7 million a year ago, increased its stake in affiliate Zain Saudi to 37 per cent from 25 per cent in July as part of the latter's capital restructuring.
The company said this had pressured group operating results, but did not give further details.
Zain has undergone a major managerial reshuffle, in December appointing ex-Wataniya chief Gegenheimer as CEO, while his deputy Hisham Akbar quit in March.-Reuters