UPDATE: TomTom Shares Rise As 2Q Tops Views, Upgrades Cost Cuts
22 Julio 2009 - 6:09AM
Noticias Dow Jones
Shares In Dutch navigation equipment maker TomTom NV (TOM2.AE)
surged Wednesday after second quarter earnings beat analysts'
expectations and it raised its cost savings target, but the company
said it remains hard to forecast how markets will develop in the
second half of the year.
Margins were ahead of expectations, due to cost savings and a
favorable product mix as a result of new products introduced during
the quarter, while lower sales of personal navigation devices, or
PNDs, was partly offset by higher sales from other products. In
addition to PNDs, TomTom supplies services such as traffic
information, fleet management tools and in-car navigation.
At 1034 GMT, TomTom shares were up 11.5%, strongly ahead of a
0.4% fall in the AEX index.
Net profit fell to EUR19.8 million in the quarter ending June 30
from a net result of EUR52 million a year earlier, however beating
analysts' expectations for net profit of EUR18.9 million.
Sales fell 19% to EUR368 million in the second quarter, compared
with EUR453 million a year ago, again beating the EUR353 million
forecast by analysts.
TomTom, along with rival Cayman Islands-based Garmin Ltd (GRMN),
has had to contend with the sharp drop in consumer spending on
consumer electronic goods caused by the economic slump, which has
hit sales and margins, and the increasing prevelance of
location-based services available on mobile phones.
As a result of these pressures, TomTom previously announced a
EUR60 million cost cutting program, which it increased Wednesday to
EUR90 million in operating cost savings from last year. "In the
first six months of 2009 we've realized EUR64 million in cost
savings," Chief Financial Officer Marina Wyatt told reporters,
nearly half of those from marketing, research and development
costs.
Wyatt said that so far trading has been in line with
expectations given at the beginning of the year, but she refrained
from reiterating the guidance as she said the company needs to see
how markets develop in the second half.
Overall the results were better than expected, said SNS
Securities analyst Martijn den Drijver, but "the lack of guidance
and the fact that the market share in the U.S. did not increase
will dampen the enthusiasm somewhat." SNS rates TomTom at buy.
TomTom in February said it expects PND volumes for the full-year
in in Europe to be around 15 million units, and in North America 17
million units. TomTom said it expects to sell between 11 million
and 12 million units, for full-year revenue of between EUR1.4
billion and EUR1.6 billion.
In the second quarter, TomTom sold 2.5 million PNDs at an
average price of EUR112 per unit, a 20% volume decline and a 14%
price drop compared with the same time last year.
In Europe, the company had 45% market share, up one percentage
point from last year, while it lost one percentage point in market
share in the U.S. market, where Garmin is dominant.
Goddijn told reporters he is confident the company will be able
to gain market share in the U.S. in the second half of 2009 as the
price difference between TomTom's products and those of Garmin
narrows.
While overall revenue from PND sales declined by over 30% on the
year, revenue from other products rose over 30%, mainly driven by a
strong increase in automotive sales. Revenue at TeleAtlas was
flat.
Earnings before interest and taxes, or EBIT, was EUR57 million
compared with EUR92 million in the same period last year, topping
forecasts for EUR41 million. EBIT margin came in at 16%, down from
18% in the second quarter of 2008.
TomTom recently raised EUR430 million by offering new shares to
investors to ease the debt it took on when it acquired TeleAtlas
for EUR2.9 billion in 2007. Pro forma net debt stood at EUR672
million after the rights issue.
-By Robin van Daalen; Dow Jones Newswires; +31 20 571 5201;
robin.vandaalen@dowjones.com