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SAP Q2 Profit Rises, While Software Revenues Fall On Slow Asia

SAP Q2 Profit Rises, While Software Revenues Fall On Slow Asia
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7/18/2013 2:33 AM ET

German business software maker SAP AG (SAP: Quote) Thursday reported higher profit and revenue for the second quarter, but software revenues were hurt, amid growth challenges in Asia.

SAP also cut its outlook for non-IFRS software and software-related service revenue, while asserting that it is committed to be a double-digit growth company with at least 10 percent growth in the business in 2013.

Bill McDermott and Jim Hagemann Snabe, Co-CEOs of SAP, said, ''The industry transformation we predicted back in 2010 is now happening at full speed and our strategy of innovation for growth is paying off. We continued our double-digit growth momentum, we are leading the transformation of the industry, and our market opportunity is bigger than ever.''

Profit attributable to owners of parent increased 10 percent to 725 million euros from 661 million euros reported last year. The results are on the basis of IFRS. Total revenue grew 4 percent to 4.062 billion euros from 3.898 billion euros in the prior year. Software and software-related service revenue was 6 percent higher at 3.318 billion euros. Within the business, revenue from Support increased 8 percent. Software and cloud subscriptions revenue rose 3 percent, with software revenues falling 7 percent to 982 million euros and Cloud subscriptions and support revenues more than tripling to 159 million euros.

SAP's non-IFRS software and software-related service revenue increased 10 percent at constant currencies and was up 7 percent at actual currencies to 3.35 billion euros. SAP saw excellent software revenue performance in Latin America, especially in Brazil. Strong cloud subscription and support revenue growth was witnessed in North America.

Non-IFRS software and cloud subscription revenue in the Asia Pacific Japan region declined 7 percent, amid continued macroeconomic challenges. However, some markets in the region, such as Southeast Asia and India, saw strong growth in software revenue.

The company's operating profit rose 7 percent to 988 million euros and increased 4 percent on a non-IFRS basis to 1.22 billion euros. SAP reaffirmed its non-IFRS operating profit outlook of 5.85 billion euros - 5.95 billion euros at constant currencies, compared with 5.21 billion euros in 2012.

SAP noted that the difficult macroeconomic environment, especially in Asia Pacific Japan, and the transition to the cloud have led to lower software revenue expectations. However, the company remains committed to be a double-digit growth company with at least 10 percent growth in non-IFRS software and software-related service revenue at constant currencies in full year 2013 compared with 13.25 billion euros reported in the prior year.

This replaces the previous growth outlook for non-IFRS software and software-related service revenue of 11 to 13 percent at constant currencies and the underlying guidance for software and cloud subscription revenue.

The stock closed up 0.3 percent on Wednesday at 57.67 euros.

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by RTT Staff Writer

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