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Investing.com -- Shares of Sinch AB (STO:SINCH) leaped 15% following the release of its fourth-quarter earnings, which surpassed both Morgan Stanley (NYSE:MS) estimates (MSe) and consensus expectations. The company reported a gross profit that was 1% higher than MSe and 3% above consensus, alongside an adjusted EBITDA that outperformed MSe by 2% and consensus by 7%.
The company’s organic growth stood at 1%, exceeding Morgan Stanley’s estimate of -0.4% and the consensus of -1%. This positive performance comes after the company’s previous guidance indicated expectations of "flat to negative organic GP growth in 4Q."
A significant contributor to the uptick was the Network Connectivity segment, which delivered a strong gross profit. CEO Laurinda Pang attributed the success to "successful supplier negotiations and the passing on a remaining price increases."
Sinch also showcased a robust fourth-quarter free cash flow to equity (FCFE) at SEK 706 million, with its net debt decreasing to SEK 6,012 million, resulting in a net leverage of 1.5 times, an improvement from 2 times the previous year. The company benefited from a substantial inflow from changes in working capital, which amounted to SEK 292 million in the fourth quarter.
While the company did not provide financial guidance for 2025, CEO Pang emphasized the focus on achieving mid-term financial targets, which include reaching 7-9% organic growth in net sales and gross profit, along with an adjusted EBITDA margin of 12-14% by the end of 2027. These targets are notably higher than the current forecasts, which predict approximately 2% organic growth in gross profit for 2025.
In management updates, Sinch has appointed Jonas Dahlberg as the new CFO, effective no later than April 1, 2025. Dahlberg brings experience from roles at Transcom, Sweco, and McKinsey. Additionally, Thomas Heath will step down as Chief Strategy Officer starting April 1.
The company also announced a one-time provision of SEK 700 million due to a reassessment of its historical tax exposure.
Despite this provision, market sentiment remains positive, with Morgan Stanley commenting, "We expect the shares to outperform the market today." This analyst outlook reflects confidence in Sinch’s financial performance and potential for continued growth.
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