February 28, 2013 / 7:21 AM / 5 years ago

UPDATE 1-Telefonica 2012 profit disappoints after writedowns

(Adds debt target, detail on writedowns, CEO quote, dividend)

By Clare Kane

MADRID, Feb 28 (Reuters) - Telefonica reported lower than expected net profit for 2012 after making writedowns worth 2.5 billion euros ($3.3 billion) in areas including its Irish business and its stake in Telecom Italia.

The Spanish telecoms giant, which made a series of asset disposals last year to pare debt, said it aimed to reduce net debt to below 47 billion euros in 2013, after narrowly missing its net debt to operating income target ratio of 2.35 for 2012.

“In 2013, we will further execute this transformation process, and we expect to recover our growth profile and further improve margin trends, while we continue to reduce our leverage,” Chief Executive Cesar Alierta said in a statement on Thursday.

Analysts had expected impairment charges for Telecom Italia and the Venezuela devaluation to knock over 800 million euros off net profit, predicting a final figure of 4.4 billion euros.

However, Telefonica also wrote down Telefonica Ireland by 513 million euros. The company said the impairment charge on its Telecom Italia stake was worth 949 million euros and put the impact of Venezuela’s bolivar devaluation at 417 million euros.

The company’s net debt was 51.3 billion euros at end-2012, compared with 56 billion euros at end-September. Telefonica just missed its target leverage ratio of 2.35 times operating income before depreciation and amortisation (OIBDA), reporting a ratio of 2.36.

Telefonica reiterated that it would pay a dividend of 0.75 euros per share for 2013, after scrapping its dividend last year for the first time since the Spanish Civil War in the 1930s as part of its cash-raising drive.

The company said it raised 15 billion euros on the market in 2012, meaning its debt redemptions are covered beyond 2014. ($1 = 0.7628 euros) (Reporting by Clare Kane; Editing by Sarah White and Hans-Juergen Peters)

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