AMSTERDAM (Reuters) - Dutch digital mapping company TomTom (TOM2.AS) on Tuesday raised its full-year outlook as upbeat sales of software and services to carmakers in the second quarter helped offset the falling popularity of GPS devices.
Its shares, which had suffered from a report that customer Apple (AAPL.O) may be lessening its reliance on TomTom’s maps, rose 5 percent to 7.69 euros.
Chief Executive Harold Goddijn said robust demand from automaker customers, rather than new customer wins, were behind the outlook upgrade. He said he did not expect U.S. tariffs on China, where TomTom outsources the manufacture of its hardware, to impact earnings.
Navigation devices are “apparently on the list of products that incur a tariff when going to the U.S.,” Goddijn said.
However, the bulk of TomTom’s sales are outside the United States and Goddijn said he did not expect a “material effect”.
“It is a very low number and very low potential increase in our cost,” he said.
The company’s second-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) rose 26 percent to 63 million euros ($74 million).
That beat a company-published poll of analysts who forecast a profit of 47 million euros.
ING analyst Marc Zwartsenburg, who says consensus estimates for the company remain too low, repeated his “Buy” recommendation.
“Cash is also piling up ... but no shareholder friendly measures yet announced,” he said.
He said the company may prefer to hold its war chest of 155 million euros in case it needs to invest in highly automated driving technology complementary to its digital maps, which compete with Google Maps and German carmaker-owned mapmaker HERE.
TomTom, listed in Amsterdam, raised its full-year sales forecast to 825 million euros from 800 million and its adjusted earnings per share outlook to 0.30 euros from 0.25 euros.
Group sales fell 9 percent to 231 million euros, dented by a 24 percent decline in its consumer division, which includes personal navigation devices (PND) and other hardware.
While the company’s consumer division has been shrinking for years, it still generated 35 million euros in EBITDA over the first half of 2018, the company said.
Reuters reported in March that TomTom had engaged Deutsche Bank (DBKGn.DE) to help seek a buyer for some or all of the company, which TomTom denied.
The company has “no plans” to sell the consumer division, Goddijn said on Tuesday.
“It’s a declining business, but it’s cash generative,” he said.
Reporting by Toby Sterling; editing by Sherry Jacob-Phillips and Jason Neely