By Inti Landauro
MADRID (Reuters) -Spanish telecom company Telefonica said on Thursday it booked a non-cash 314 million-euro ($337.4 million) writedown on the value of its Peruvian unit in the third quarter though it is still on track to meet its financial targets for the year.
The deteriorating outlook for the Peruvian economy, tougher competition and political and judiciary instability pushed Telefonica to review the present and future value of its whole business in Peru, Chief Financial Officer Laura Abasolo told Reuters.
Peru accounted for 3.5% of overall revenue in the first nine months of the year, Telefonica said.
As a result of the writedown, the company’s overall net profit fell to 10 million euros in the third quarter, down from 502 million euros in the same period a year ago, the company said. Analysts expected a net profit of 329 million euros, according to a consensus provided by the company.
Despite the impairment in Peru, Telefonica said its performance in the January-September period put it on track to meet all its targets for the full year. It confirmed the dividend payment.
Shares fell 3.4% in morning trading, while the blue-chip index was up 0.5%.
Telefonica’s core earnings were 2.95 billion euros out of overall revenues of 10.02 billion euros, whereas analysts expected 3.22 billion euros out of 9.98 billion euros in revenues, according to the consensus.
The company expects core profits to grow between 1% and 2% and revenue to grow 1% in 2024. Over the first nine months, core profits rose only 0.4%, while revenues fell 0.3%.
The company said all its main markets, Spain, Germany and Brazil, which grew in euro terms, despite a significant depreciation of the real currency, performed well.
“All core markets maintain the same direction of travel with improved commercial momentum and growth in local currency,” Chief Executive Jose Maria Alvarez-Pallete said in a statement.
Though revenues from its business in Britain dipped, Chief Operating Officer Angel Vila said.
The company’s free cash flow over the first nine months of the year rose 28% from the same period a year earlier, which already represents the 10% it expects for the full year, Vila said in a conference call with analysts.
($1 = 0.9307 euros)
(Reporting by Inti Landauro; Editing by Jacqueline Wong, Jane Merriman and Sharon Singleton)
