Now that's funny. I could have sworn that when last we heard from Russia's national long-distance telephone service provider, Rostelecom (NYSE:ROS), it was to learn of the company's financial performance in fiscal 2004. What's more, I could have sworn that the date when we last heard from the company was June 30. And it's what, August now? About six weeks later? Yet on Aug. 2, Rostelecom phoned in with -- get this -- its earnings report for the first half of fiscal 2005.
In other words, either Rostelecom was extremely slow in getting its 2004 report printed and distributed, or time simply works differently over in Russia. Six weeks to generate six months' worth of business, collate the numbers from same, and report all of them. I mean, I've heard Russia was stuck in a time warp, but this is a bit ridiculous.
But enough with the telecom bear-baiting. Oddly timed or not, the latest results are in, and we should give them a read -- because the picture has changed an awful lot since the year 2004 ended six weeks ago (sorry, I'll stop now).
When last we left Rostelecom, the company was reporting a 19% increase in revenues against fiscal 2003 and a 980% increase in net profits, a consequence of the company's jettisoning the deadweight of its money-losing RTC-Leasing subsidiary. Six months into the new year, profits have jumped higher once more, if not quite as much as last year. With a little help from "revaluation of the Company's financial investments and a sharp increase in gains from the sale of investments," Rostelecom posted a 28% improvement in net profits on just an 8% increase in revenues, in comparison with the first half of FY 2004.
Actually, it was more than just "a little help." Roughly 15% of the company's total net profits came in the form of one-time gains this year. In addition to the company's revaluation of its investments, which accounted for more than half of that 15% gain, Rostelecom also made a killing on some bond sales, and on the sale of its 20% interest in fixed-line operator Telmos (a Lucent (NYSE:LU) client). However, as outlined in its H1 2005 filing, Rostelecom increased its operating profits by just 3% over the year-ago period. Its operating margin dropped nearly 200 basis points, falling from 35% one year ago to 33% year to date.
What a difference six weeks can make.
Want to read some happier telecom news? Try "Go Long for Long Distance."
Fool contributor Rich Smith does not own shares in any company mentioned above.
