As a result, the operating margin was above analyst estimates. SAP confirmed its goal of achieving double-digit growth in operating profit in the coming year. Although the annual forecast for 2022 remained unchanged for operating profit, cloud and cloud/software sales, free cash flow was reduced slightly to “around” instead of “more than” 4.5 billion euros.
The much-publicized operating margin came in at 26.7 percent in the third quarter, down from the high prior-year figure of 30.7 percent but above the consensus estimate of 26.5 percent. Growth in the cloud business has accelerated to almost 38 percent from a good 34 percent in the second quarter. At the same time, the expected slowdown in the high-margin licensing business intensified.
The cloud order backlog on a one-year view (current cloud backlog) increased by 38 percent or currency-adjusted to 11.3 billion euros compared to the same period of the previous year, at the end of 2021 it was 9.45 billion euros. Adjusted for currency effects, it was 26 percent more. With the SAP core software S/4 Hana, the CCB has more than doubled to 2.662 billion euros.
Operating profit for the quarter continued to decline, but fell only 1 percent to 2.094 billion euros. Analysts had only expected 2.008 billion. CFO Luka Mucic confirmed the assessment that there would be an increase again from the fourth quarter, followed by double-digit growth rates in 2023. SAP has not yet delivered the increase in the medium-term targets for 2025 “in the coming quarters” announced in July, but is sticking to the statement. CEO Christian Klein sees the group right on course to achieve the current goals. He draws his optimism primarily from the cloud momentum, which is above his own plans. The increased rate of predictable sales, which has now reached 80 percent, gives confidence.
Total sales in the third quarter improved by almost 15 percent to EUR 7.841 billion, and analysts had also expected less here. The cloud business accounted for EUR 3.288 billion, licenses for EUR 406 million (previous year: EUR 657 million) and the service area for EUR 3.016 billion (up 3.3 percent). SAP now estimates the restructuring expenses, mainly due to the withdrawal from Russia and Belarus as a result of the Russian invasion of Ukraine, at 110 to 130 instead of 120 million euros. The negative impact on the operating result in 2022 should only be 300 instead of 350 million euros and on sales 250 instead of 300 million euros.
SAP CFO: Complete exit from Russia business will take longer
Europe’s largest software manufacturer SAP (SAP SE) will not completely withdraw from its Russian business by the end of the year as planned. CFO Luka Mucic made responsible for this in a conference call on Tuesday, legal requirements that exist for customers and employees. The company does not currently have its sights set on a new point in time when activities in Russia should be completely ended.
According to the manager, Walldorfer currently employs around 600 people in Russia, compared to 1,250 originally. By the end of the year there should still be around 100 employees. “Giving the (business) to third parties is difficult and currently not feasible,” said Mucic. In April, after allegations of hesitation, SAP announced that it would withdraw completely from Russia and Belarus because of the war of aggression against Ukraine, thereby also terminating the contracts of existing customers. In July, Mucic promised that this should happen by the end of the year.
Meanwhile, SAP is expecting slightly fewer additional costs for the business closure this year than last estimated, as the outgoing CFO explained when presenting the figures for the third quarter. While the company had assumed a cost burden of around 350 million euros in the half-year report, Mucic now calculates an impact of around 300 million euros on the operating result.
FRANKFURT (Dow Jones) / WALLDORF (dpa-AFX)
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