Alcatel takes EUR 1.1bn charge as sales fall
FT - By Maija Pesola Published: October 30 2002 8:27 | Last Updated: October 30 2002 9:51
Alcatel, the struggling French telecommunications equipment group, on Wednesday unveiled a sharply widened net loss for the third quarter as continuing deterioration in demand forced the company to book bigger asset write-downs and provisions than expected.
> But shares in the company rose more than 18 per cent to > EUR> 4.38 in early trade on optimictic comments from Serge Tchuruk, chairman and chief executive, who said he expected double-digit sequential sales growth in the fourth quarter.
> Alcatel reported a net loss of > EUR> 1.35bn ($1.33bn) in the three months to the end of September, widened from > EUR> 558m in the same period last year, and the company's sixth consecutive quarterly loss.
> The decline at net level came as Alcatel took an exceptional charge of about > EUR> 1.1bn, to reflect a further deterioration in demand from its struggling telecommunications sector customers. The charge includes > EUR> 550m in bad debt provisions, some > EUR> 220m in write-downs at the company's fibre-optics division and > EUR> 331m for restructuring.
> The restructuring charges do not include the 10,000 redundancies, expected to cost about > EUR> 500m, that Alcatel announced last month. The charge for these is to be taken over the next two quarters.
> "It is a big charge for the company and represents a big cash call on the balance sheet," said Per Lindberg, analyst at Dresdner Kleinwort Wasserstein. "That said, Alcatel can probably handle it with an accelerated disposal programme."
> Last month, Alcatel announced plans to sell part of its shareholding in Thales, the defence electronics group, in order to raise more than > EUR> 300m to strengthen its balance sheet and finance restructuring. Analysts believe the company could generate a further > EUR> 1bn through the sale of shares in its Nexans cable business, as well as a further sales of Thales shares.
> "Alcatel could also carve into its Space and Components division, which is one of its strongest performing units," said Mr Lindberg.
> Sales in the third quarter fell to > EUR> 3.51bn, down 17.2 per cent from the previous quarter and 37.5 per cent down from last year.
> The company said it was confident of returning to profitability in 2003. The bulk of losses in 2002, it said, were related to the Optics unit, which was under intensive restructuring, with other units operating at around break-even.
> The Optics unit saw sales decline 30.4 per cent sequentially to > EUR> 704m, as European and US telecommunications companies continued to face a glut of fibre-optic cable capacity on the market.
> Alcatel said it aimed to cut costs by 25 per cent from current levels, to reach a break-even target of > EUR> 3bn per quarter by the end of 2003.
> The company gave no guidance on 2003, although Mr Tchuruk indicated that the > EUR> 3bn per quarter break-even level was "way below" his estimate for next year's business. |
