Sonda Benefits From Regional Spread As IT Services Market Slows

Sonda , the Chilean IT services provider and systems integrator, has reported fourth quarter and year-end 2012 results that show a strong underlying performance, despite a noticeable slowdown in new contracts secured by its IT services division. As a leading player in the Latin American IT market, the fact that Sonda has achieved strong revenue and EBITDA growth in the region's smaller markets bodes well for market growth in general and ties in with BMI 's bullish forecasts for the next five years.

The company reported consolidated revenues of CLP681.2bn (US$1.42bn) for 2012, an increase of 14.9% year-on-year (y-o-y) . Operating income grew by 24.1% to CLP85.6bn and EBITDA amounted to CLP117.4bn, up by 28.0%. Chile remained Sonda's principal market in 2012, where revenues grew by 21% to CLP306.0bn . T he Platforms division drove growth, up by 31.7% y-o-y to CLP148.5bn. Although the Chilean IT Services business grew by only 12% y-o-y, to CLP143.9bn, this is attributed to the consolidation of operations in the country and higher costs of sales.

Sonda Benefits From Robust IT Market Growth
Regional IT Market Valuation Forecasts, 2010-2017

Brazil is a much larger market for IT services, applications and solutions and BMI forecasts the value of the Brazilian IT market to rise steadily over the next few years as state agencies, multinational enterprises and local businesses alike move quickly to upgrade infrastructure and networking platforms in anticipation of higher data traffic resulting from the hosting of the FIFA World Cup in 2014 and the Olympic Games in 2016. Reflecting this, Sonda reported a 72.9% increase in revenue from its Platforms business in 2012, reaching CLP54.4bn. IT Services still accounts for the bulk of revenues in Brazil, but grew by only 0.3% y-o-y, to CLP140.0bn , owing to the adverse effects of sharp fluctuations in the exchange rate. Margins in Brazil improved markedly, aided by consolidation within the PARS business. Meanwhile, Mexican revenues were down by 11.6% in 2012, reaching CLP60.74bn, although it should be noted that 2011 results had been boosted by a large - scale project that yielded lower follow-on revenues in 2012.

Sonda's non-core markets, which include Argentina, Colombia, Costa Rica, Ecuador, Peru, Panama and Uruguay, reported consolidated revenues of CLP84.55bn in 2012, representing a 34.8% increase y-o-y. Although the Platforms business saw a 30.8% increase in revenues y-o-y, reaching CLP34.8bn, IT Services revenue increased by a very robust 43.3%, to CLP43.17bn. Improved operational efficiency, increased marketing, the consolidation of various Quintec operations and the commencement of a high-profile project in Panama for Metrobus all contributed to this increase and promise additional revenue growth opportunities over the medium term.

BMI forecasts solid growth for the IT markets in Brazil and Mexico over the 2012-2017 period, with the Brazilian market set to grow by 46.5% from US$29.8bn to US$43.7bn and that of Mexico expected to rise by 40.5% from US$15.4bn to US$21.7bn. Other markets in the region, including Argentina and Chile , will also see robust rates of growth through 2017, albeit on a much smaller scale owing to the lower penetration of advanced IT solutions. Nevertheless, Sonda's results for activities in non-core markets suggest there is still plenty of potential still to be tapped across Latin America and we will watch Sonda's progress in 2013 with a view to raising our forecasts for particular markets.

This article is tagged to:
Geography: Latin America, Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Mexico, Panama, Peru, Uruguay

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