What happened
Shares of once-Russian-and-still-kind-of-Russian telecom giant Veon (VEON 0.02%) -- owner of the VimpelCom brand in Russia -- jumped as much as 32% in early trading on Friday after the company reported better-than-expected results for fiscal Q3 2022. The gains didn't hold, but Veon stock is still up a modest 1.8% as of 12:05 p.m. ET.
Analysts polled by Yahoo! Finance expected Veon to grow revenue 2.7% in Q3 to just over $2 billion. The telecom's results, which came out this morning, showed that revenue actually increased 3.5% to $2.07 billion.
NASDAQ: VEON
Key Data Points
So what
So there's some good news to justify today's pop. Not all of Veon's news was good, however. While the company posted a $267 million profit from continuing operations, losses from discontinued operations (apparently, operations in Algeria and Georgia) ate up all that profit and more, leaving Veon with a $435 million loss for the quarter. Year to date, Veon's net loss is $242 million, despite revenue growing 2.8% for the year's first nine months.
On the plus side, the company does remain cash-profitable, with free cash flow of $265 million year to date -- or $412 million counting cash flow from discontinued operations.
Now what
Management noted in its report that "the conflict between Russia and Ukraine and developments since February 2022 with respect to sanctions laws and regulations have resulted in unprecedented challenges for VEON." No huge surprise there. Indeed, strong as it is, this statement is probably actually an understatement.
To extricate itself from this situation, the company is proceeding with plans to sell its VimpelCom subsidiary -- its entire Russian business -- to local management in Russia. Veon expects the "total consideration" for this sale to take the form of VimpelCom taking on some, but not all of Veon's debt obligations. So on the one hand, Veon will not receive any cash from this transaction. On the other hand, it does expect to "significantly" deleverage its balance sheet, which is a plus.
How this will all leave Veon stock looking after the transaction closes remains somewhat unclear, and this may explain why investors' initial enthusiasm over the company's results has waned today, despite confirmation that Veon ex-Russia looks likely to remain a strong cash generator.
For more clarity on the company's financial picture, check back in "early June" 2023, when the transaction is expected to close.
