IBM returns to growth after 6 years, warns higher tax rate to hit profits

Total revenue increased 3.6 percent to $22.54 billion, beating analysts’ average estimate of $22.06 billion. (Reuters)
Updated 19 January 2018
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IBM returns to growth after 6 years, warns higher tax rate to hit profits

BENGALURU: International Business Machines Corp’s revenue rose for the first time in 23 quarters, beating analysts’ estimates, but the company warned that a higher tax rate this year would eat into its profit.
IBM’s shares, which have rallied 10 percent so far this year on hopes of a strong turnaround in the company’s fortunes, fell more than 3 percent in extended trading on Thursday.
The company forecast stable margins and revenue growth for 2018, buoyed by growth in its newer businesses such as cloud computing and security services.
However, IBM forecast an operating profit of at least $13.80 per share for 2018, compared with $13.80 in 2017 and market expectations of $13.92, according to Thomson Reuters.
“According to Street expectations, we’re already very low for earnings, ... but still, you would have liked to have seen, with the little better revenue trajectory and some positive comments, that would have played in to a nicer number,” Pivotal Research analyst Lou Miscioscia said.
IBM forecast a 2018 operating tax rate of 16 percent, plus or minus 2 percentage points, compared with a rate of 12 percent in 2017.
“Tax will be a headwind in 2018,” IBM veteran and new Chief Financial Officer James Kavanaugh said on a conference call.
Kavanaugh said IBM would continue to “maintain a high level of investment” in 2018 as it boosts its capabilities on its high-margin “strategic imperatives” such as cloud, mobile, cybersecurity and data analytics.
That focus, started by Chief Executive Ginni Rometty, has helped IBM counter its faltering legacy hardware and software businesses and slow its revenue declines in recent quarters.
The company’s revenue finally rose in the latest fourth quarter, the first year-over-year increase since the first quarter of 2012, just after Rometty became CEO.
Revenue from IBM’s cloud business jumped 30 percent in the latest quarter. Revenue from all “strategic imperatives” rose 17 percent.
Total revenue increased 3.6 percent to $22.54 billion, beating analysts’ average estimate of $22.06 billion.
IBM swung to a loss of $1.05 billion from a year-ago profit of $4.50 billion, due to a $5.5 billion tax reform-related charge. Its adjusted profit of $5.18 per share beat estimates by a penny.
The company’s adjusted gross margins of 49.5 percent fell short of market expectations of 50.8 percent.


Emirates Airline half-year profit slides 86% on oil hike

Updated 15 November 2018
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Emirates Airline half-year profit slides 86% on oil hike

DUBAI: Emirates Airline on Thursday posted an 86 percent drop in half-year profits as the Middle East's leading carrier was hit by a hike in oil prices and currency devaluations.
The Dubai-based airline in a statement its net profit in the six months to September 30 was also impacted by other challenges and expected tough months ahead.
Emirates said it recorded a profit of just $62 million in the first half of the 2018-2019 fiscal year compared with $452 million in the same period last year.
"The high fuel cost as well as currency devaluations in markets like India, Brazil, Angola and Iran, wiped approximately 4.6 billion dirhams ($1.25 billion) from our profits," said Sheikh Ahmed bin Saeed Al-Maktoum, chairman and chief executive of Emirates Group.
Emirates, one of the world's biggest airlines, said fuel costs rose by 42 percent compared with the same period last year.
The company, which flies to more than 150 destinations, said the cost of fuel amounted to a third of its expenses.
Emirates is the world's largest operator of Airbus A380s with more than 100 of the superjumbos in its fleet.
"The next six months will be tough, but the Emirates Group's foundations remain strong," Sheikh Ahmed said in a statement.
In the six months to September 30, the airline carried 30.1 million passengers, a rise of three percent on the last fiscal year, the company said.
Emirates' revenues were 10 percent higher than the previous year at $13.3 billion.
"We are proactively managing the myriad challenges faced by the airline and travel industry, including the relentless downward pressure on yields and uncertain economic and political realities in our region and in other parts of the world," said Sheikh Ahmed.
Profit for the Emirates Group, which also includes Dnata, a leading air services provider, was also down by 53 percent to $296 million.