What’s Behind The Sharp Drop In Indra’s Price?

Indra slumpIndra

The big companies which make up the Ibex 35 index don’t normally fall more than 10% when they present their results (fortunately). But all the market’s attention was on technology firm Indra on Tuesday when it’s share price plummeted 12%, although it is still up 9% in the year so far. So what’s behind this slump?

The first reason can be found in the company’s nine months to September results, which were a huge disappointment to analysts and investors, even though its Brazil business has been a source of problems for some time.

Indra reported net profit of 48.1 million euros in January-September period, compared with the 560.8 million losses registered a year earlier. That said, the previous year’s results were distorted by high provisions.

Analysts have expressed doubts about some aspects of the results like margins and sales. Recurring Ebit rose to 34 million euros, 10% below market consensus. The other black spots are negative cash generation (5 million euros) and weak sales, which dropped 6.2%. By geographical areas, sales fell 2% in Spain; 20% in America and 1% in Europe. On the other hand, sales rose 12% in Asia, the Middle East and Africa.

Brazil’s economic difficulties are taking their toll on Indra, as well as other Spanish companies with business in that country. It also hasn’t helped that the company’s CEO, Fernando Abril Martorell, announced that Telefonica will sell its remaining stake sooner rather than later. (The telecommunications giant owned 6.1% of Indra but has already cut this to 3%).

Indra’s net debt stands at 666 million euros, 5% less than in December. But the general impression amongst the experts is that its results do not really provide much support for it to return to sustainable organic growth.

About the Author

Francisco López
Working for more than 25 years in the world of journalism and communications, Francisco has gained valuable experience at several well-known newspapers such as El Mundo and La Vanguardia. He specialized in economic and financial news before making the leap to the corporate communication sector where he has held several positions: Adviser to the Ministry of Economy, Director of the Bank of Spain’s Communication Department, in addition to his consultancy role at Analistas Financieros Internacionales, where he currently works.