VimpleCom’s (VIP, Financial) earnings took a battering in the first quarter after reporting a sharp decline in its first quarter results. Thanks to the stronger dollar, the Dutch telecommunications company reported a drop in revenue of 30% to hit $3.5 billion. The company’s EBITDA fell 33% to hit $1.396 billion the last quarter. Organically speaking, Vimpelcom’s service revenue dropped a total of 2% with markets such as Russia being stable, Italy, Algeria and Pakistan dropping and Ukraine and Bangladesh growing handsomely.
Number mix
Vimpelcom’s telecom investments plummeted 38% to reach $460 million in the first quarter of 2015. However, Vimpelcom will not be swaying from these setbacks and instead will continue in the course of its original strategy of investing in fast-growing networks in order to capture mobile data growth that includes the rollout of 4G and LTE networks in its Russian and Italian markets as well as 3G networks in Pakistan and Ukraine. The company expects about 20% of its annual revenue to be invested towards Capex this year.
Vimpelcom reported a drop of 30% in sales to hit $3.52 billion, falling short of analysts’ estimates of $3.55 billion for this concluded quarter. Besides the rising dollar, the company’s fortunes were determined by a 44% decline in the Russian services market owing to a weakened ruble.
Management outlook
Accoridng to VimpelCom CEO JeanYves Charlier, “On an organic basis, service revenue declined 2% and EBITDA by 6%, mainly due to the delayed launch of 3G services in Algeria and continuing market weakness in Italy. This was partly offset by service revenue growth in Bangladesh and Ukraine. We would also like to confirm today that we are in discussions with Hutchison (HUWHY, Financial) regarding a possible equal joint venture between 3 Italia and our subsidiary WIND. There can be no assurances that an agreement will be reached and any transaction would be subject to, among other things, achieving satisfactory debt levels and obtaining all required corporate and regulatory approvals.’
Company profile
The Dutch company VimplelCom Ltd was founded in 1992 and is responsible for telecommunication services being provided to countries such as Italy, Russia, and Pakistan. The telecommunications company offers voice and data services via a multitude of traditional as well as broadband mobile and fixed line systems. Its subsidiaries are Beeline, Kyvistar, banglalink, Mobilink, Djezzy, Wind and Infostrada. As of December 2014 VimpelCom’s customer base was 222 million customers in 14 countries.
Investor take
Analysts are giving VimpelCom a sell rating. Being driven by plenty of negative factors, this decision shows the weaknesses to greatly outnumber the company’s strengths enabling investors to find it difficult to obtain positive results with this stock. The company’s weaknesses can be seen across many areas such as very high debt management risk, weak operating cash flow, and a very weak stock market performance for the stock itself.
VimpelCom Ltd’s has an unchanged gross profit margin for this quarter compared to the same time period year over year. The company has seen its sales numbers dropping but has seen a rise in its net income. VimpelCom Ltd’s liquidity is weak and the company has a quick ratio of 0.81 that represents a clear lack of ability to cover short term cash requirements. However, the company’s liquidity has risen on a Y-o-Y basis.
During this quarter, stockholder equity has plummeted by 48.56% when compared to the same quarter last year. The company’s key liquidity measurements show it to be in a position where major financial difficulties could occur in the next quarter.
