Operator News
Argentina – Plummeting peso means plummeting profits for Codere
By Phil - 15 November 2018
Argentina’s economic crisis continues to take a toll on Codere’s operating profits.
According to the financial results for the third quarter hyperinflation and the devaluation of the peso meant that the company obtained accumulated operating revenues during the nine months of 2018 of €1,115.6m, 8.2 per cent less than in the same period of 2017.
However, the company achieved a gross operating profit (adjusted EBITDA) of €203.6m in the nine months of 2018, 1.8 per cent above the same period in 2017. This result reflects the impact of operational improvements that have been implemented by the company and its resistance to an adverse macroeconomic and regulatory environment, marked by tax increases (especially in Italy and Argentina) and the devaluation of Latin American currencies.
Consequently, the company increased its adjusted EBITDA despite the strong year-on-year appreciation of the euro against the Argentine peso, the dollar and other Latin American currencies. However, the adverse effect of exchange rates caused a fall in turnover during the first nine months of the year of 8.2 per cent. At a constant exchange rate, the Group’s revenues grew by 10.4 per cent compared to the same period in 2017, according to the report.
CEO of the company Vicente Di Loreto stated that the company remained in a good position both due to its positioning in each market and its long-term business strategy. “Although the macroeconomic situation in Argentina has continued to have an impact on our results, our position is solid to face it and we maintain the strategic guidelines of our business plan. In this period, we have achieved a growing adjusted EBITDA and expanding margins that will allow us to continue consolidating our competitive positioning in each market and our ability to generate positive results, “he said.
Codere’s performance in its European market saw an increase in its turnover of 8.8 per cent to €408.4m, mainly due to the company’s growth in sports betting both online and via sports betting shops. The European market recorded a growth in operating income close to nine per cent, compared to the same period last year growing by 19.8 per cent in Spain and 2.6 per cent in Italy.
However, Argentina’s economic crisis continues to worsen and it has already had an effect on profits. The financial results for the quarter and six month period ended June 30, 2018, which were published by Codere in September, reflected a grim picture in Argentina where the peso fell to a record low at the end of August. This was after President Mauricio Macri said that he has asked the International Monetary Fund to speed up delivery of a $50bn bailout package. The value of Argentina’s peso continued to fall on August 30th, plunging by more than 13 per cent after a 7 per cent drop a day earlier. The decline came despite the central bank’s effort to stabilise the currency by raising a key interest rate to 60 per cent. In addition, there is little sign that Argentina’s economy will begin to improve in the short term at least. Inflation stands at around 40.5 percent so far in 2018 and is expected to top 44 percent by the end of the year.
