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 Business News | April 2005 
Big Companies Report Earnings
 Wire services
| | Carlos Slim |
Telefonos de Mexico SA, the nation's largest fixed-line telephone company, said firstquarter earnings increased 10 percent after the company turned its first profit in its Brazilian unit.
Mexico City-based Telmex, controlled by billionaire Carlos Slim, said it had net income of 6.3 billion pesos (US568 million), or 96 cents per American depositary receipt, compared with 5.7 billion pesos, or 83 cents, a year earlier. Sales rose 28 percent to 39 billion pesos.
The profit gain may help Chief Executive Jaime Chico Pardo ease concern that his strategy of using Mexican earnings to expand into South America will fail to yield returns, said investors such as Henry Cobbe of Thames River Capital. Telmex shares have risen 1.6 percent since Chico Pardo agreed to buy Embratel Participacoes SA of Brazil on March 15, 2004, compared with a 28 percent gain in Mexico's benchmark stock index.
"Judging by Embratel's firstquarter results, execution is going to be the benchmark for Telmex going forward," said Cobbe, a telecommunications analyst with London-based Thames River Capital, which manages US1.1 billion in emerging market equities. "If they're executing, the strategy holds. If not, investors may demand a higher return of cash." Chico Pardo, 55, ordered that all Embratel's contracts be reviewed and renegotiated after taking over the company in August 2004. The move helped cut Embratel's general and administrative costs in the first quarter by 19 percent to 192 million reais (US76 million), allowing the Rio de Janeiro-based long-distance carrier to increase net income more than ninefold for its first profit in a year. The cost reduction also made up for a lack of growth in sales, which were little changed in the quarter.
The median estimate of nine analysts surveyed by Bloomberg was for Telmex profit of 6 billion pesos, or 92 cents per ADR.
Grupo Televisa SA, the world's largest Spanish-language broadcaster, said firstquarter net income rose 21 percent as revenue increased at its satellite-television unit.
Net income rose to 594 million pesos (US53 million) from 493 million pesos a year earlier, the company said in a statement. Profit fell short of a forecast of 810 million pesos, according to the median estimate of five analysts in a Bloomberg survey. The company didn't provide earnings per share.
Net income included profit and sales from the satellite-television unit Innova, which was consolidated into Televisa's earnings for the first time in the second quarter of last year. The company didn't disclose proforma net income, adjusted to include Innova results from the year-earlier period.
"Televisa needs to show how well Innova is doing," Xavier Escala, an analyst with Banif Securities in Mexico City, said in a telephone interview before the earnings were announced. "That's going to be the driver for this year. The elections are also going to help local ad spots sales by the end of the third quarter." Investors expect Chief Executive Emilio Azcarraga to spur growth by adding former DirecTV subscribers to his Sky satellite TV service after DirecTV quit the Mexican market, Escala said. Azcarraga, 37, last year paid shareholders a dividend for the first time in a decade and boosted the payment by 10 percent this year as profit grew. After taking over from his father in 1997, he has cut 8,000 jobs, sold unprofitable businesses and reduced debt.
Televisa's first-quarter sales rose 17 percent to 6.37 billion pesos from 5.46 billion a year earlier. On a pro-forma basis, which includes year-earlier Innova sales and 84 million pesos of sales from companies Televisa sold, sales rose 4.6 percent from 6.09 billion pesos, the company said. |
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