March 4, 2016 / 9:10 AM / 4 years ago

SIM card maker Gemalto's margin forecast lifts shares

PARIS, March 4 (Reuters) - French SIM card maker Gemalto on Friday said it expected its gross margin to improve significantly this year after posting forecast-beating results, driving its shares more than 10 percent higher.

Gemalto said it expected gross margin to rise by 1.5 percentage points this year after it remained flat in 2015 at 39 percent, as solid demand in the payment market helped compensate for worsening conditions in the mobile services sector.

Gemalto Chief Executive Olivier Piou said the company had invested a lot in the past two years in the adoption of new card payment norms in the United States.

“We now need to invest less to capture growth so this will help increase our gross margin significantly,” Piou said in a conference call about the company’s results. Piou said the company had also benefited from solid demand for machine-to- machine payments, e-government services and cyber-security.

Gemalto shares rose as much as 11.27 percent to a six-month high. By 0830 GMT, the stock was up 9.75 percent at 64.79 euros.

Piou said the company’s operating profit target of 660 million euros ($722 million) for 2017 was less dependant on operating expenses than on the expected rise in gross margin.

“This guidance for next year is not unreachable but has never been so tight. It suggests a strong acceleration in the following two years with cumulative average growth rate of at least 25 percent,” Bryan, Garnier & Co said in a note.

Gemalto reported an operating profit of 422.6 million euros, up 10.4 percent against last year and beating the market consensus of 389.6 million euros. ($1 = 0.9144 euros) (Reporting by Cyril Altmeyer; Writing by Astrid Wendlandt; Editing by Alexander Smith)

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