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British Airways owner IAG SA reported a 3.6 percent decline in third-quarter profit as the weaker pound hurt the value of U.K. sales when translated into euros, and said earnings will gain less than expected for the full year as sterling continues to slide.
Operating profit fell to 1.21 billion euros ($1.32 billion) from 1.25 billion euros a year earlier, according to IAG, which is based in London but reports in the single European currency. The figure matched the average forecast of analysts.
At current exchange rates and fuel prices, IAG now anticipates 12-month earnings of about 2.5 billion euros, Chief Executive Officer Willie Walsh said in a statement Friday. That would represent a gain of less than 7 percent compared with 2015’s 2.34 billion euros, versus the “low double-digit percentage” advance forecast on July 29.
Sterling has declined a further 6.2 percent compared with the euro since the July statement, taking its slide since Britain’s June 23 vote to quit the European Union to 14.4 percent. The company has reined in capacity growth and placed spending under review as the decision threatens to compound a decline in demand prompted by weakening economies and a spate of terrorist attacks.
“These results were affected by a tough operating environment with a very significant negative currency impact,” Walsh said in the release, adding that sterling’s weakness cost IAG 162 million euros in the quarter. Before the Brexit poll the CEO had forecast that 2016 earnings would match the 2015 advance of 950 million euros.
Shares of IAG rose as much as 1.1 percent as the revised outlook approximately matched the expectations of analysts, who had forecast an 8.4 percent full-year profit gain prior to the statement, according to Bloomberg data. They traded 0.5 percent higher at 415.50 pence as of 8:07 a.m.in London.
The guidance also parallels that from Ryanair Holdings Plc, which said on Oct. 18 that net income would increase by about 7 percent in the year ending March 31 rather than the 12 percent previously estimated.
While based in Ireland, the discount carrier, which held back from a profit warning following the Brexit vote, counts Britain as its biggest market.
©2016 Bloomberg L.P.
This article was written by Benjamin Katz from Bloomberg and was legally licensed through the NewsCred publisher network.