By Scott Kanowsky
Investing.com -- SAP SE (ETR:SAPG) shares fell by more than 4% on Thursday after the German business software firm lowered its annual profit guidance, citing the impact from costs linked to the war in Ukraine.
The group said it now expects adjusted operating income to come in at between €7.6B – €7.9B at constant currencies in 2022, down from the prior range of €7.8B – €8.25B.
The downgrade reflected a first-half charge worth about €350M caused by the group's decision to wind down operations in Russia and Belarus in the wake of the Kremlin's invasion of Ukraine. Also factoring into that expense was an accelerated move by customers to subscription-based cloud computing services and away from upfront software licensing, SAP said.
"Other impacts due to this rapidly evolving situation are currently unknown and could potentially subject our business to materially adverse consequences should the situation escalate beyond its current scope," SAP warned.
Quarterly adjusted operating income at SAP tumbled by 32% to €673B, also due to expenses related to the conflict in Ukraine. Profit margin for the period declined to 5.8% from 8.9%.
Meanwhile, total second quarter revenue rose by 13% to €7.52B, beating estimates of €7.32B, driven chiefly by a 34% uptick in revenue at the group's key cloud computing unit. SAP chief executive officer Christian Klein added in a statement that SAP's planned transition to the cloud was "ahead of schedule."
SAP also reiterated its full-year guidance for revenue and free cash flow.