Vimpelcom Q1 profit down by 90 per cent

Amsterdam-headquartered operator Vimpelcom, which has operations in Russia, the CIS as well as Algeria, Bangladesh, Italy and Pakistan, has reported a 90 per cent year-on-year dive in net profit for the first quarter of 2014. Revenue was down ten per cent to $5.02bn, while profit for the quarter sat at $39m, down from $408m for the first quarter of 2013.

The firm said that its revenue decline stemmed from a drop in operational performance in Russia, a price war in Italy that was particularly intense during summer 2013, regulatory and government activity in African and Asian markets and unstable macroeconomic situations in Pakistan and Ukraine.

That operational performance fed through to the bottom line, Vimpelcom said, and the firm also recorded foreign exchange losses of $92m.

“We previously indicated our expectation that 2014 would be a challenging year and the Q1 results reflect the more difficult trading environment,” said CEO Jo Lunder.  “Group organic revenues declined by 5 per cent, however due to our continuing focus on cost control the Group’s EBITDA margin remains strong at 41.6 per cent. All of our Business Units have reported double-digit data revenue increases and we continue to invest in high-speed networks to drive future growth.”

Indeed Vimpelcom increased its Capex outlay by 24 per cent over 1Q13, to $736m, driven by LTE deployment in Russia and Italy, its Algerian and Bangladeshi 3G networks.

“Our CIS markets again delivered a solid set of results,” Lunder said. “Recently we also agreed a favorable resolution of our discussions in Algeria and we completed the refinancing of our most expensive debt, related to Italy. Together, we estimate that these achievements will deliver approximately $600m in annual interest savings. Despite these successes, due to the challenging environment in many of our operations, we have revised our targets for 2014.”

The firm now expects revenue and EBITDA decline of low to mid single digit year-on-year for 2014, it said. Net debt is expected to be 2.4x EBITDA.