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The rally in Mexico’s peso currency since January helped América Móvil, the telecoms giant controlled by Mexican mogul Carlos Slim, swing to a 35.9bn peso ($1.9bn) net profit in the first quarter from a 4.8bn peso net profit in the same period last year, beating market forecasts.
“We registered a comprehensive financing income of 30.4bn pesos in the quarter on the back of foreign exchange gains, mostly as a result of the Mexican peso appreciating vs. the dollar and the euro,” the company said in an earnings report on Tuesday. The forex gains totalled 37.1bn pesos.
“With our operating profits rising 8.3 per cent to 30.4bn pesos, this comprehensive financing income helped us attain a net profit of 35.9bn pesos in the period, up from 4.8bn pesos a year before,” it added.
The weaker peso helped push AMX, Latin America’s biggest telecoms company, to a nearly 6bn peso loss in the fourth quarter. After touching a historic low in January, however, the peso has since rallied on the back of hopes that US President Donald Trump’s policies towards Mexico and the upcoming renegotiation of the North American Free Trade Agreement will not be as dramatic as feared.
AMX had been expected to report a net profit of around $1.45bn, according to Dow Jones Newswires. The company’s ADRs in New York, which have been climbing since mid-March, were flat on the earnings news. In Mexico, its shares rose 1.21 per cent to 14.17 pesos, after climbing for the past six week.
But pressure remained on the company’s margins. Earnings before interest, tax, depreciation and amortisation as a percentage of total revenues were 27.1 per cent, down from 27.7 per cent in the first quarter of 2016. EBIT as a percentage of revenues slid to 11.5 per cent from 12.6 per cent in the same period last year.
Revenues, at 264bn pesos, were 18.5 per cent higher than those of the year-agoquarter. EBITDA reached 72bn pesos, up 15.8 per cent compared with the first quarter last year. At constant exchange rates, EBITDA rose 1.5 per cent year-on-year, the first in eight quarters, compared with a fall of 8.1 per cent in the previous quarter. Accelerating service revenue growth and cost control drove EBITDA higher, the company said.
Mexico – which AMX said was “recovering rapidly” — Brazil, Colombia and Peru all contributed strongly.
In peso terms, the company’s consolidated net debt fell to 584bn pesos from 630bn in December, again because of the appreciation of the currency.
The upbeat results were welcome news for a company that has seen disappointing results in recent quarters. It was ordered last month to separate some of its infrastructure into separate units after the telecoms regulator evaluated the impact of so-called asymmetric regulations imposed on América Móvil in 2014 to curb its dominant market position in its home market, Mexico.
In Mexico, AMX noted that mobile ARPUs – average revenue per user – recovered to -2.3 per cent in the first quarter from -17.7 per cent in the second quarter of 2016, partly because of an increasing shift to postpaid. IT also attributed the figure to new commercial offerings that have “enabled us to extract more revenues from data services”.
In Brazil, the number of postpaid clients rose 9.8 per cent, while the pre-paid base was down 13.8 per cent at the end of March.
Local bank Ve Por Más noted that the forex gain negated a higher tax rate and that the EBITDA margin in Mexico fell 3.8 percentage points to 31.9 per cent — only partly offset by improving margins in Brazil.
“In terms of income, there were no real surprises. In Mexico, income is continuing to decelerate (down 2.1 per cent year-on-year) but less than in previous quarters … Brazil operations also contracted,” the bank said. “It is worth noting that the number of pre-paid subscribers fell 13.8 per cent in that country.”
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