Telefonica S A : Shares in Spain's Telefonica dive after 2019 net profit disappoints

Shares in Spain's Telefonica dived in opening trade on Thursday, leading losers on Madrid's blue-chip index after the company posted a sharp fall in net profit mainly due to an expensive layoff programme in its home country.

By Isla Binnie and Jose Elías Rodríguez

Along with its peers, Europe's fourth-largest telecoms group is battling to boost profit growth in an increasingly crowded market, and promised to reinvent itself in November.

As part of the turnaround plan, Telefonica offered early retirement to employees aged 53 or over in Spain, contributing to 2.2 billion euros in restructuring provisions that led to a 66% fall in reported full-year net income.

Losses in Mexico and an impairment charge in Argentina also weighed on profit towards the end of the year.

The results were "negative for the stock as net profit came clearly below consensus estimates", Madrid-based broker C.M. Capital Markets said in a note to clients.

Shares fell more than 5% by 0833 GMT.

The company predicted sales and core profit would remain stable over the coming year, saying underlying growth in its key markets had helped meet growth targets for 2019.

Sales hit 48.42 billion euros ($52.27 billion) for the full year, rising faster than a targeted annual increase of 2% once currency fluctuations and hyperinflation in Latin America were stripped out.

This beat an analyst consensus forecast provided by the company of 47.8 billion euros, and underpinned an annual rise of 1.9% in operating income before depreciation and amortisation (OIBDA).

"We are expecting stable growth in the main metrics, a stable and attractive dividend, with a long-term commitment to a sustainable and responsible growth," Chief Executive Jose Maria Alvarez-Pallete said in a statement.

Alvarez-Pallete said all the group's main markets - which it has identified as Spain, Brazil, Germany and Britain - showed organic growth in 2019.

In reported terms, OIBDA came out negative, down 2.9% on the year at 15.1 billion euros due to restructuring costs, a goodwill impairment in Argentina, capital gains and other factors.

The company also introduced a new measure to its guidance, forecasting a 2 percentage point rise between 2019 and 2022 in the ratio of OIBDA minus capital expenditure to revenue.

(Reporting by Isla Binnie and Jose Elias Rodriguez)

By Isla Binnie and Jose Elías Rodríguez