UBS Investment Research
Q4 ’09 results – initial take
Running to stand still…
Q4 results look fine at the headline EBIT level, but the details show weak trends.
Top-line is very weak, particularly in Wireless, which is a surprise after recent
robust capex reporting by key operators. Total revs of €3.97bn are 11% below
us/cons, with Wireless 22% below us and down 34% y-o-y at const curr. EBIT of
€271m is broadly in-line with us (€277m) and 8% ahead of cons (€250m), driven
by Apps Software and Services, with Carrier very weak (0.8% margin vs. UBSe
6.5%). Adjusted EPS came in at €0.06 vs. UBSe €0.10 due to slightly higher tax.
…but some positives
Gross margin of 36.7% is solid vs. UBSe 35.5% and up over 300bps q-o-q on
better mix and cost reductions. FCF of €414m is significantly better than UBSe
€218 driven by NWC. Net cash position improved to €886m (UBSe €692m) and
the pension deficit also improved to €2.6bn from €2.9bn on higher discount rates.
2010 margin guidance lowered somewhat
ALU continues to expect nominal growth (0-5%) for the market in 2010 but has
lowered its margin target to low to mid single-digit (1-5%) from mid single-digit
previously. The incremental cautiousness requires some clarity given that growth
expectations haven’t changed.
Valuation – maintain Neutral and €2.75 price target
In summary, the weak top-line and Carrier margins outweigh the positives in our
view and we require more clarity on profitability in Apps Software and the weak
Wireless trends. Our price target is DCF-based (WACC 9%, g 2%).
Net Income (UBS)
EPS (UBS, €)
Net DPS (UBS, €)
Profitability & Valuation
5-yr hist av.
EBIT margin %
ROIC (EBIT) %
EV/EBITDA (core) x