SINGAPORE (REUTERS, THE BUSINESS TIMES) – Singtel on Wednesday (Aug 24) warned of a challenging operating environment due to rising inflation and interest rates, after posting a 41.3 per cent jump in first-quarter profit.
Companies around the world are facing pressure from rising labour and fuel costs, prompting them to take a number of belt-tightening steps to avoid a hit to their profit margins.
“We will need to stay nimble and contend with these realities should they put further pressure on our costs and bottom lines,” chief executive Yuen Kuan Moon said in an exchange filing.
South-east Asia’s largest telco, which is in the midst of a strategic reset of its infrastructure, said net profit for the first quarter ended June 30 surged 41.3 per cent to $628 million from $445 million last year.
The net profit included an additional gain from the divestment of a 70 per cent stake in its Australian tower network to superannuation fund AustralianSuper for A$1.9 billion (S$1.8 billion). The proceeds of which, it had said, would be used to fund the 5G roll-out and data centres.
The jump in profit was also fuelled by partly owned Bharti Airtel’s resilient turnaround. Earlier this month, it reported a 22 per cent jump in quarterly revenue, boosted by high-speed 4G subscriber additions and higher data consumption.
Singtel’s first-quarter earnings before interest, taxes, depreciation and amortisation (Ebitda) fell 2 per cent to $977 million from $997 million, while operating revenue slipped 5.6 per cent from $3.8 billion to $3.6 billion.
This was largely due to the absence of Optus’ national broadband network migration revenue and contributions from Amobee. Amobee was classified as a “subsidiary held for sale” in March. The telco also took a hit from a 4 per cent depreciation of the Australian dollar.
On an underlying basis, operating revenue and Ebitda would have grown 1.8 per cent and 2.9 per cent respectively, mainly driven by Optus and its Singapore consumer business arms on the back of a roaming rebound from the broader relaxation of Covid-19 restrictions.
“This set of positive results reflects the progress made on our strategic reset designed to strengthen our core, unlock the value of our assets and grow new digital businesses,” said Mr Yuen.
But he expects the operating environment for the group to remain challenging amid rising inflation and interest rates, as continuing geopolitical tensions further impact global supply chains.
Singtel had in May forecast a stronger fiscal 2023 led by a strong uptake for its 5G networks.
Its shares were trading two cents, or 0.76 per cent, lower at $2.61 as at 2.19pm, after its results announcement.