Alcatel announces results, including strength in US market:
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February 03, 1999 14:28
-ALCATEL: 1998 preliminary results in line with forecasts
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M2 PRESSWIRE-3 February 1999-ALCATEL: 1998 preliminary results in line with forecasts (C)1994-99 M2 COMMUNICATIONS LTD
* Telecom Income from Operations increases by 30%
* Consolidated Net Income exceeds FF 15 billion
Paris -- Alcatel's 1998 Telecom sector Sales increased by 13.5% to EURO 15.2 billion (FF 99.8 billion) compared with 1997 and Income from Operations increased by 30% to EURO 0.61 billion (FF 4.0 billion) compared with EURO 0.47 billion (FF 3.1 billion) as published in the 1997 accounts. Sales in the Cables and Components sector declined by 7.1% to EURO 6.8 billion (FF 44.5 billion), due entirely to the decrease in copper prices, while Income from Operations remained stable at EURO 0.4 billion (FF 2.8 billion).
1998 preliminary Net Income for the group amounted to EURO 2.3 billion (FF 15.3 billion), compared with EURO 0.7 billion (FF 4.7 billion) in 1997. This record figure includes a EURO 2.0 billion (FF 13.2 billion) after tax capital gain from the disposal of non-core assets and a EURO 0.4 billion (FF 2.5 billion) for new restructuring provisions. Income from Operations increased to EURO 1.0 billion (FF 6.5 billion) due to the improvement in Telecom operating income. Consolidated Net Sales amounted to EURO 21.3 billion (FF 139.5 billion). Net Debt amounted to EURO 0.3 (FF 2.2 billion), representing a gearing of 3%, compared to 26% in 1997. Fully Diluted EPS amounted to EURO 13.1 (FF86.2).
Commenting on these preliminary results, CEO Serge Tchuruk said, "We have met the sales and operating income targets announced in September for the Telecom sector: sales increased by around 10% and income from operations grew by 40% on a year-to-year comparable basis, even though it was slowed down in 1998 by the economic crises in parts of the world and the weakness in certain European markets. In the Cables and Components sector, we've been able to maintain our results together with an improvement in our competitive position, despite difficult market conditions. Our strong net earnings for the Group reflect the excellent valuation of our asset sales and considerably enhance the financial strength of Alcatel."
"Alcatel made major advances during the past year in its extensive transformation process. We are now largely focused on the Telecom market, where our customer base has significantly diversified after winning strong positions with a number of new operators worldwide. In the U.S., where DSC's integration was successfully achieved in the last quarter, our $2.5 billion telecom sales were up 55% (33% excluding the four months of DSC sales), confirming Alcatel's strong penetration in what is now our largest market."
"In parallel, Alcatel is pursuing its transformation to establish itself as a key player in end-to-end communication networking. A first step has been achieved with our transmission and access systems sales growing over 40 %, to become the company's growth driver both in sales and profits. In this area, Alcatel has gained a market leadership position ranging from terrestrial wireline and wireless systems, to undersea and satellite networks. The latter has doubled its size by the formation in 1998 of Alcatel Space".
"1999 will be the year for Alcatel to focus on the second step, in the field of Internet access and routing. In addition to technology acquisitions, Alcatel will continue its high R&D investment in WDM optical networking and ADSL systems. Alcatel should see the first pay back of its worldwide leadership in ADSL technology, as many operators start to roll out large quantities of equipment in 1999."
"1999 will also be another year of growth in sales and operating income for Alcatel, even if it is affected by the continuing economic uncertainties in certain parts of the world, particularly in Asia and South America. The fast expanding segments in the Telecom sector will more than make up for the relative stability of traditional voice systems. All in all, the Telecom sector should maintain a double-digit growth momentum in sales and the current trends in the improvement of its operating income".
Alcatel's 1998 results reflect the company's new structure following the sale of Cegelec to Alstom and Alstom's subsequent stock market listing in June 1998. As of January 1, 1998, these two businesses are consolidated under the equity method, therefore the sales and income from operations are not included. 1997 figures have been restated to reflect these changes. These preliminary results are non-audited.
Business Highlights
Telecom 1998 sales increased by 13.5% to EURO 15.2 billion (FF 99.8 billion) and included the integration of DSC (last 4 months of 1998) and Alcatel's newly formed Space company (full year1998). Orders increased by 12.3% to EURO 15.4 billion (FF 101.2 billion). Income from operations increased by 30% to EURO 0.6 billion (FF 4.0 billion) compared with 1997.
DSC was successfully merged into Alcatel's U.S. business during the 4th quarter 1998. The integration is going very well: significant synergies have already been realized, and Alcatel continues to increase its U.S. presence.
Sales in the Networking segment remained stable over 1997. The decline in switching system revenues was partially offset by the good performance in the Intelligent Networking activities with software sales increasing. Mobile Communications recorded double digit growth due, in particular, to its continued success in China.
Income from operations in the Networking segment was down over 1997 due to a slowdown in switching systems, as forecasted in September, and an unsatisfactory performance in Mobile Communications, in part attributable to the Southeast Asian crisis.
Sales in the Transport and Access segment increased by over 40% in 1998, due mainly to the explosion in Internet traffic. Terrestrial systems, both SDH and SONET, grew by close to 20%. Submarine network systems recorded a strong performance, which should continue in 1999. The access business registered a stable year with the slowdown continuing in the European wireline access markets, partially offset by the continued growth in the wireless access business. The satellite activities had a satisfactory performance with good sales growth.
Income from operations in the Transport and Access segment registered record growth in 1998 coming from a strong performance in terrestrial and submarine systems. This achievement confirms Alcatel's technological and commercial strengths and its ability to position itself for dynamic expansion.
Sales in the Enterprise and Consumer segment grew by 19% due, in particular, to the good performance of GSM handsets. Handset sales more than doubled to 7.2 million and Alcatel has achieved a number one position in some of the continental European countries. Alcatel's PBX 4400 continued to be successful in Europe.
Income from operations in the Enterprise and Consumer segment was unsatisfactory, however, a strong recovery program is underway.
Cables & Components Sales in the Cables & Components sector remained stable at constant copper prices. At current copper prices, sales decreased by 7.1% to EURO 6.8 billion (FF 44.5 billion). Income from operations remained stable at EURO 0.4 billion (FF 2.8 billion).
Sales in the Telecom components segment were down slightly over 1997, however market share was maintained, despite a continuing difficult environment. The strong growth in volume in telecom cable networks was offset by declining prices especially in the fiber optics cable activity.
Income from operations in the Telecom components segment increased at a satisfactory level due to continuing productivity gains.
Sales in the Energy cables segment remained stable at constant copper prices. At current copper prices, sales decreased by 12%. The continuing scarceness of high voltage contracts, resulting from a worldwide market slowdown, was not offset by the satisfactory performance in the enameled wire business.
Income from operations in the Energy cables segment slightly decreased attributable to the significant decline in high voltage contracts.
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