SAP Lowers 2022 Forecast After Ukraine War Hit 2Q Operating Profit -- Update
By Mauro Orru
SAP SE on Thursday posted higher revenue for the second quarter
as its cloud business continued to grow, but the war in Ukraine
harmed operating profit, prompting the German business-software
giant to lower its forecast for the year.
Reporting on a non-IFRS basis, SAP said operating profit slipped
to 1.68 billion euros ($1.71 billion) from EUR1.92 billion, with
its operating margin down to 22.4% from 28.8%. Analysts polled by
FactSet had forecast operating profit of EUR1.74 billion.
SAP blamed lower software-licenses revenue and bad debt expenses
linked to the war in Ukraine for the decline, saying it expects a
hit of roughly EUR350 million to operating profit at constant
currencies for the year. The war left a hole of roughly EUR160
million in its second-quarter operating profit, and EUR230 million
in the first half, the company said.
As a result, SAP lowered its forecast for the year and now
expects non-IFRS operating profit at constant currencies between
EUR7.6 billion and EUR7.9 billion, rather than between EUR7.8
billion and EUR8.25 billion.
Many Western firms have said they would seek to leave Russia
since Moscow launched a full-scale invasion of Ukraine on Feb. 24,
and have started doing so in widely different ways. SAP opted to
wind down its business operations in Russia and Belarus, handing
out severance payments to employees there and recognizing
impairments on some assets.
"This quarter, we have recognized the main impact of the war in
Ukraine," SAP Chief Financial Officer Luka Mucic said. "We believe
that we are now able to capitalize on our substantial growth
investments of the last 18 months, by delivering sustained growth
and profitability expansion."
SAP is pivoting away from software-licenses sales, once its
biggest revenue stream, to subscription-based cloud services,
banking on a more profitable and predictable model based on
Total revenue for the second quarter climbed to EUR7.52 billion
from EUR6.67 billion, with cloud revenue up to EUR3.06 billion from
EUR2.28 billion. Software-licenses revenue fell to EUR426 million
from EUR650 million.
For the year, SAP continues to expect cloud revenue at constant
currencies between EUR11.55 billion and EUR11.85 billion.
Analysts polled by FactSet had forecast total revenue of EUR7.43
billion, and cloud revenue of EUR3 billion.
"Our transition to the cloud is ahead of schedule and we have
exceeded topline expectations, with cloud revenue becoming SAP's
largest revenue stream," Chief Executive Christian Klein said.
Write to Mauro Orru at email@example.com; @MauroOrru94
(END) Dow Jones Newswires
July 21, 2022 02:10 ET (06:10 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
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