Ingenico Falls After Cutting 2016 Sales, Margin Forecasts

  • Stock drops the most since February on Brazil, U.S. woes
  • Ingenico rival Verifone warned last week of U.S. slowdown

Ingenico Group SA fell the most in almost seven months in Paris trading after the French payments processor cut its sales and profitability forecasts for the year, citing Brazil’s economic woes and a shift to a new type of credit and debit card in the U.S.

The shares dropped 12 percent to 80.66 euros at 10:43 a.m. after falling as much as 14 percent, the biggest intraday decline since Feb. 19. Organic revenue growth this year will be at least 7 percent and the profit margin will be at least 20 percent of sales, the Paris-based company said in a statement on Tuesday, compared with previous forecasts for at least 10 percent growth and a margin of around 21 percent.

Ingenico’s announcement adds to evidence that the shift in the U.S. to payment cards with chips is problematic for the industry. Verifone Systems Inc. on Thursday cut its sales and profit forecasts, citing weakening demand in the U.S. Large merchants there have already shifted to payment terminals that accept credit and debit cards with chips, while smaller merchants are delaying adoption. In Brazil, the economy has shrunk for six straight quarters, damping retail activity and thus hurting payments companies.

“Management said at the end of July that it was very confident of meeting its targets, so the magnitude of this profit warning is surprising,” Geoffroy Perreira, an analyst at Gilbert Dupont in Paris, wrote in a report. He cut his rating on the stock to accumulate from buy.

Ingenico and Verifone make payment terminals used in stores, bars and restaurants. To reduce card fraud, U.S. retailers last year began accepting the cards, already common in Europe, that feature a chip rather than just a magnetic stripe. Stores had to accept the cards beginning Oct. 1, 2015, or face some liability if fraud occurred.

Small businesses have resisted the shift because of the expense, Ingenico Chief Executive Officer Philippe Lazare said on a conference call with reporters. While they’re being allowed to temporarily stick with old-style terminals, adoption of the new standard, known as EMV, will accelerate next year, he said.

Ingenico experienced a “sudden and significant decline” in recent weeks in the U.S., which accounts for about 10 percent of sales, the company said. It expects a strong revenue fall in the U.S. in the second half. Brazil accounts for 5 percent to 10 percent of sales, and that country’s economy will probably resume growth next year, Chief Financial Officer Nathalie Lomon said.

“It’s very frustrating because the rest of the company continues to show an excellent performance,” Lomon said on the call.

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