Telefonica 2Q Net Profit Rises 18% -- Update

By Jeannette Neumann Features Dow Jones Newswires

Telefonica SA (TEF) posted an 18% increase in net profit in the second quarter from a year earlier as the Spanish telecommunications giant also made some progress chipping away at its debt pile.

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The Madrid-based company on Thursday said second-quarter net profit was 821 million euros ($963 million) versus EUR693 million a year earlier.

Revenue in the second quarter was EUR13 billion, a 1.9% increase from the year-earlier period. Telefonica said it was upgrading its revenue guidance to increase by more than 1.5% in 2017 versus 2016. The company had previously guided for "stable" growth for the year.

"The strength and better business trends in the first half of the year, as well as being well-positioned to continue capturing sustainable growth in the coming quarters, allow us to upgrade our guidance for 2017," Executive Chairman Jose Maria Alvarez-Pallete said in a statement.

Operating income excluding depreciation and amortization was EUR4.2 billion in the quarter versus EUR3.9 billion a year earlier.

Telefonica's net debt decreased by EUR279 million in the second quarter from the first quarter to EUR48.49 billion. That reduction was thanks to free-cash-flow generation and the lower value in euros of the net debt in foreign currencies, the company said.

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Telefonica said it had to estimate an exchange rate for the currency in Venezuela, where the company has subsidiaries, "given the absence of official exchange rates representative of the economic situation" in the country. The company's new exchange rate, fixed at 3,547 Venezuelan bolivars to the U.S. dollar, lead to a negative currency effect overall on Telefonica's earnings, the company said.

Excluding Venezuela, currency fluctuations would have had a positive impact on Telefonica's earnings year-on-year due to the appreciation of other Latin American currencies, such as the Brazilian real, versus the euro.

On Wednesday, Telefonica's board approved the appointment of Angel Vila as chief operating officer. The company hadn't had anyone in that role since Mr. Alvarez-Pallete was promoted from that post to become chairman and chief executive when longtime head Cesar Alierta stepped down last year.

To replace Mr. Vila in his previous role as chief finance officer, the board named Laura Abasolo, who had served as director of planning, accounting and control and had been on the executive committee since March 2014.

"Ms. Abasolo is unknown to the equity markets, but looks to have a strong track record within Telefonica," Fidentiis Equities analyst James McKenzie wrote in a research report. She had been overseeing a "simplification of operations," he noted, which "is likely to be the big driver of cash flow in upcoming years."

Write to Jeannette Neumann at jeannette.neumann@wsj.com

(END) Dow Jones Newswires

July 27, 2017 02:36 ET (06:36 GMT)