SAP raises 2003 earnings targets after better-than-expected third quarter

WALLDORF, Germany (AFP) Oct 16, 2003
SAP, the world's leading maker of business software, said Thursday it was raising its targets for full-year earnings after positive sales and continued cost-cutting efforts helped boost third-quarter profits more than expected.

In figures that appear to confirm the tentative recovery being seen in the sector, SAP said in a statement that its net profit rose by 25 percent to 252 million euros (292 million dollars) in the period from July to September.

Operating profit was up 23 percent at 413 million euros and excluding charges related to acqusitions and SAP's stock-based employee bonus scheme, it rose by as much as 33 percent to 423 million euros.

Total revenues slipped by three percent to 1.652 billion euros in the July-September period, but the decline was largely attributable to exchange rate fluctuations. At constant exchange rates, revenues would have actually increased by three percent, SAP said.

The third-quarter operating margin, a yardstick of profitability, gauging the proportion of profits to sales, increased by five percentage points to 25 percent.

"We delivered strong results despite a continued tough market environment," said chairman Henning Kagermann.

"Our success was the result of excellent sales execution, particularly in the US, combined with a continued focus on improving operating efficiencies."

Operating expenses were cut by nine percent to 1.239 billion euros in the third quarter.

In view of the favourable third-quarter figures, SAP said it was raising its target for full-year operating margin and was now pencilling in a operating margin before exceptional items of 24.7 percent for the whole of 2003, two points higher than in 2002 and better than the earlier projected increase of 1.0-1.5 percentage points.

Furthermore, SAP, which employs a worldwide workforce of 29,000, said earnings per share would come out "at the top end" of the projected range of 3.45-3.60 euros.

In the first nine months of the current year, EPS amounted to 2.11 euros, or total net profit of 657 million euros for the period from January to September.

The better-than-expected figures did not really help SAP shares, which were still showing a loss of 0.7 percent at 126.94 euros in mid-morning trade on the Frankfurt stock exchange, even if they were outperforming the market as a whole.

SPACE.WIRE