Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Orange Polska SA (FRA:TPA1, Financial) reported a healthy growth in EBITDA, with an increase of almost 4% year over year, driven by strong performance in core telecom services.
- The company achieved a solid net profit of PLN230 million in the second quarter, maintaining a similar level to the previous year.
- Orange Polska SA's mobile customer base exceeded 9 million, with a continuous growth of around 3% year on year.
- The company is making significant investments in mobile and fixed infrastructure, including the rollout of a 5G network and expansion of fiber footprint.
- Digital sales channels are nearing the strategic target, with 24% of sales conducted digitally in the first half of 2024, driven by the performance of their mobile app.
Negative Points
- Orange Polska SA experienced a decrease in total revenues by 3.1% year over year, primarily due to a decline in energy sales and IT/IS revenues.
- The company faced headwinds from inflationary pressures and energy resale, impacting costs and margins.
- There was a cyclical slowdown in demand for ICT services, affecting revenue growth in this segment.
- The financial results were impacted by a high comparable base from the previous year, particularly in IT and energy trade.
- Employment costs accelerated in the second quarter, partly due to salary increases and provisions, which may affect future profitability.
Q & A Highlights
Q: Can you explain the impact of JV settlements on your EBITDA and whether these are recurring?
A: Jacek Kunicki, CFO, explained that the JV settlements contributed over PLN80 million to EBITDA, but this should not be seen as a recurring item. The first half of the year was influenced by non-recurring impacts such as profits from energy trade and inflationary pressures. These headwinds are expected to ease, and the catch-up from the FiberCo contract will continue to provide benefits until 2025.
Q: What is the expected trajectory for financial gains from the FiberCo JV in the coming quarters?
A: Jacek Kunicki, CFO, stated that the FiberCo contract is a five-year agreement, and the margin is recognized over time. The recent upward revision of expected margin resulted in a catch-up of almost PLN90 million. Future margins will be recognized more gradually until the end of 2025, reflecting ongoing cost efficiencies.
Q: What is the outlook for IT projects and equipment sales in the second half of the year?
A: Liudmila Climoc, CEO, mentioned that IT projects are expected to pick up as public sector orders resume post-elections, supported by EU digitalization funds. For equipment sales, Jacek Kunicki, CFO, noted that while volumes are growing, average prices are lower. Sales are expected to be higher in H2 due to seasonal demand, but overall growth may be modest.
Q: Have you considered taking control over FiberCo in the future?
A: Jacek Kunicki, CFO, stated that no decision has been made yet. Orange Polska has options to regain control of FiberCo between 2027 and 2029, but this will be evaluated closer to those dates.
Q: What are the key challenges to your midterm growth strategy, particularly regarding EBITDA and dividends?
A: Jacek Kunicki, CFO, emphasized that the company will present its midterm strategy in early 2025, which will address both opportunities and challenges. The focus will be on maintaining growth despite past headwinds like inflation and energy costs, leveraging the company's strong fundamentals and strategic assets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
