Bouygues Stock Rises as Spending Reductions Boost ProfitFrancois de Beaupuy
Bouygues SA, the French building and telecommunications company, rose the most in 2 1/2 months after spending reductions at the mobile-phone and broadcasting divisions helped profit beat analyst estimates.
Bouygues jumped as much as 8.1 percent to 30.025 euros, the steepest intraday gain since Aug. 28, and was trading up 6.8 percent at 10:45 a.m. in Paris. The stock has gained 32 percent this year, valuing the company at 9.47 billion euros ($12.7 billion).
“This set of third-quarter figures is supportive of a gradual recovery in Bouygues’s credit profile,” Nicolas Hue de la Colombe, an analyst at Credit Agricole in Paris, said in a research report. He recommends buying Bouygues’s bonds, in particular debt maturing in 2022 and 2023.
Bouygues, which controls France’s third-largest mobile-phone operator and TF1, the country’s biggest television network, has reduced its workforce while cutting prices to respond to Iliad SA, which started a discount wireless service in January 2012. Bouygues Telecom also started talks in July with SFR, France’s second-largest phone operator, to share part of their mobile networks.
Third-quarter current operating profit, which excludes some one-time gains or costs, rose 13 percent from a year earlier to 542 million euros, the Paris-based company said in a statement yesterday. Earnings exceeded the 465 million-euro average of four analyst estimates compiled by Bloomberg. Net income jumped 26 percent to 360 million euros.
“The construction businesses demonstrated a good commercial performance, while TF1 and Bouygues Telecom strengthened their offerings in a highly competitive environment,” the company said. “The adaptation plans delivered the expected results and the group’s profitability continued to improve.”
Last year “should mark the low point” in profitability, the company reiterated, adding that margins should continue to improve in the fourth quarter.
Spending reductions at the telecommunications unit totaled 455 million euros from the end of 2011 through the third quarter of this year, including 116 million euros in the three months ended Sept. 30, thanks to lower marketing and operating costs, Bouygues said. “Good execution” of construction projects also contributed to earnings growth.
The company stuck to a goal to stabilize Bouygues Telecom’s earnings before interest, taxes, depreciation and amortization at about 900 million euros in 2013.
Third-quarter sales were unchanged as falling revenue at Bouygues Telecom and Television Francaise 1 offset rising construction and real estate billings. The company reiterated that full-year revenue may remain unchanged or fall as much as 1 percent.