The Ticker: Bezeq Cuts 2017 Profit Forecast Due to Lower Yes Valuation

Tamar gas field partners earned record $1.1 billion last year ■ Orbotech will pay $125 million fee if KLA-Tencor takeover is cancelled ■ High fuel and wage costs leave El Al with bigger loss Tel Aviv shares end lower ahead of expected Fed rate hike

File photo: The logo of Bezeq, Israel's largest telecom group, as seen outside their headquarters in Tel Aviv.
\ AMIR COHEN/ REUTERS

Bezeq cuts 2017 profit forecast due to lower Yes valuation

Bezeq on Wednesday warned that its 2017 profit would be lower than previously forecast due to a lower valuation for its Yes satellite television business. “It appears, mainly due to continuing worsening competition in the multi-channel television sector, that there has been a decrease in the value of the business of [YES] as compared with the book value in the company’s accounts to a value of 1.35 billion shekels,” Bezeq said in a Tel Aviv Stock Exchange statement. As a result, Bezeq said it now expected 2017 net of about 1.2 billion shekels ($345 million), down from a previous estimate of 1.4 billion and around 2016’s level. It also reduced its earnings before interest, tax, depreciation and amortization to 3.8 billion shekels from 4 billion and raised its estimate for free cash flow to 2.1 billion shekels from 2 billion. Shares of Bezeq, which is set to issue fourth-quarter results on March 29, ended down 3.65% at 4.89 shekels. (Reuters)

Tamar gas field partners earned record $1.1 billion last year

The Tamar gas field generated a record $1.1 billion in profits last year, figures from its partner companies released over the last few days show. That brought earnings from the field, Israel’s largest now in operation, to $3 billion for the 2015-17 period, revenues climbed 5% last year to $1.875 billion, with 53% of the revenues coming from state-owned Israel Electric Corporation. With the windfall profit tax not kicking in during 2017, the figures suggest that Tamar is one of the world’s most profitable gas fields. However, the partner did pay about $225 million on royalties to the Israeli government. In addition, partner Delek Drilling paid 765 million shekels ($223 million) in income and capital gains taxes after selling part of its stake to Tamar Petroleum. The reports reveal that a nonbinding agreement with Union Fenosa Gas to sell gas to its Egyptian liquefied natural gas plant is “no longer relevant” but that the partners continue to explore options. (Eran Azran)

Orbotech will pay $125 million fee if KLA-Tencor takeover is cancelled

Orbotech will have to pay a $125 million cancellation fee if it backs out of the agreement announced earlier this week to be acquired KLA-Tencor in a $3.4 billion deal. The fee was revealed as part of a presentation Orbotech CEO Asher levy gave investors on Tuesday after the deal, where he explains that Orobtech had concluded that only through a merger with a bigger company like California-based KLA-Tencor could it preserve or even accelerate the high rate of growth it’s enjoyed over the last few years. Levy and other Orbotech executives also cited the American company’s reputation, complementary product line and corporate culture as reasons why they are comfortable with the merger. In addition, KLA-Tencor has a demonstrated commitment to Israel by virtue of the manufacturing operations it already has in the country, they said. Orbotech shares were trading down 0.3% at $64.69 midday local time in New York on Wednesday. (Yoram Gabison)

High fuel and wage costs leave El Al with bigger loss

Higher fuel costs and a sharp rise in its wage bill left El Al Airlines with a more than a tenfold increase in its fourth-quarter loss compared with the same time in 2016. Israel’s flag carrier said on Wednesday it lost $29.7 million in the final three months of last year, widening from $2.4 million a year earlier. Revenue grew 11% to $512 million, but this was more than offset by a 17% rise in expenses, mainly from salaries and jet fuel. El Al remained the market leader at Ben-Gurion International Airport, but its market share fell to 28.5% for all of 2017 from 32.6% the previous year. Passenger numbers rose 2.4% last year while the total number of travelers at Ben-Gurion was up 16%. El Al has met with stiff competition from rivals including Turkish Airlines, Aeroflot, EasyJet and WizzAir, which offer lower fares even though some flights require a layover. El Al shares finished down 3.1% at 166.20 shekels ($47.60). (Yoram Gabison)

Tel Aviv shares end lower ahead of expected Fed rate hike

Tel Aviv shares ended lower on Wednesday as world markets braced for an expected hike in the Federal Reserve interest rate. The benchmark TA-35 index ended down 0.3% at 1,483.42 points, while the TA-125 slid 0.2% to 1,349.10, on turnover of 1.33 billion shekels ($380 million). Bank shares were down, paced by declines of 1.9% to 24.54 shekels for Hapoalim and 1.8% to 10.18 for Israel Discount. A spate of earnings releases also left many shares lower. Avgol dropped 6.3% to 3.50 after reporting that higher raw materials prices slashed pretax profit 80%. Azrieli Group lost 2.5% to end at 166.20 even though it reported that net operating income rose 6.5% in 2017. Among gainers, Frutarom extended its rally into a ninth day, adding 2.7% to 347, and Ormat Technologies capped a three-session run higher with a 2.6% gain to 199.40. Hadera Paper Mills rose just 0.1% to 250. Roasrio Capital set a target price of 285. (Guy Erez)