Third-quarter net sales declined by 10% and amounted to EUR 382.9 (425.3) million.
In local currencies, net sales declined by 6%. Outsourcing activity remained at a high level, but the market for new projects has not picked up. Telecom and manufacturing industries were the most challenging sectors whereas the development in the service sectors, i.e. healthcare and welfare, public and retail sectors was more stable.
Third-quarter operating profit amounted to EUR 26.3 (33.8) million. Operating profit excluding one-off items amounted to EUR 30.1 (36.7) million, representing a margin of 7.9% (8.6). Financial Services started to recover, whereas Telecom continues to suffer from weak demand.
Profitability recovered compared with the first half of 2009. Thanks to the savings programmes and currency effects, the cost base was down by EUR 62 million in the nine-month period. However, close to half of the decline was attributable to currency effects. All country segments delivered a positive operating margin. The number of employees declined during the quarter, resulting in a decrease in personnel costs. Profit before taxes totalled EUR 27.2 (30.3) million and earnings per share amounted to EUR 0.25 (0.33) in the third quarter.
As there are signs of stabilization in IT market, Tieto anticipates the market to bottom out during 2009. However, the potential pick-up in demand would affect the company's net sales with delay. Therefore Tieto's net sales and profitability outlook for the full year remains unchanged. The company expects its full-year net sales and operating profit to decline from last year.
President and CEO Hannu Syrjälä: "General market conditions remained unchanged. Tieto's net sales were down by 10%, but even with lower sales we were able to deliver a margin of close to 7%. All country segments - Finland, Sweden and International - were profitable.
The current year has been characterized by restructuring activities in Tieto. These actions were started last spring and are now paying off. During the past nine months, we have lowered our cost base in line with our plans. Most of the planned streamlining actions have been completed; work to increase the offshoring ratio continues.
Our outsourcing pipeline is strong, but it will take some time before these prospects turn into signed deals. Customers continue to be very cautious with their IT investments, focusing primarily on cost savings. Tieto is well positioned in its main markets, and with our new operating structure, innovative offerings and customer-centric services that aim to boost productivity and efficiency, we can support our clients through the downturn to growth."
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