Takeover Expenses and Low Trading Activity Dampen NYSE Euronext Earnings

Andrew Klips  |

Exchange operator NYSE Euronext (NYX) reported early Tuesday morning that its fourth-quarter 2012 profit plunged 75 percent as the company was hit with a lower number of transactions and costs associated with being acquired.

Net income for the quarter tallied $28 million, or 12 cents per share, compared to $110 million, or 43 cents per share, in the fourth quarter of 2011.

Excluding necessary write-offs and $24 million in debt refinancing to complete its $8.2 billion acquisition by IntercontinentalExchange Inc. (ICE) that was announced in December, NYSE Euronext said that income was $105 million, or 43 cents per share, compared to an adjusted $130 million, or 50 cents per share, in Q4 2011.

The merger with ICE is expected to close in the second half of this year.

After a third quarter in 2011 that brought record trading volumes, market volatility has caved to multi-year lows, resulting in less trading activity, the company said in a statement today.  Trading on the company’s Liffe futures platform decreased by 15 percent in the fourth quarter compare to the year earlier quarter.  The number of transactions in equities on its U.S. and European exchanges (which encompass New York, Paris, Amsterdam, Brussels and Lisbon) contracted by 25 percent.

“Our fourth quarter results reflect both the beneficial actions we took to refinance our debt and rationalize our clearing plans for Liffe in connection with the announced move to ICE Clear,” said Duncan L. Niederauer, CEO, NYSE Euronext.

“Our fourth quarter results were in line with the third quarter, but trailed prior year. The impact of lackluster trading volumes was somewhat mitigated by lower costs and lower share count,” added Michael S. Geltzeiler, Group Executive Vice President and CFO, NYSE Euronext.

Excluding items, net income was $462 million, or $1.84 per diluted share, for the full 2012 year, compared to net income of $653 million, or $2.48 per diluted share for full-year 2011.

For the full-year 2012, net revenue was $2.32 billion, a decrease of $348 million, or 13 percent, compared to $2.67 billion for full-year 2011, including a $55 million negative impact from foreign currency fluctuations.  Lower average daily volumes, mostly in the derivatives business, were largely attributed for the decline.

The company did manage to exceed it guidance of cutting $63 million from core operating expenses in 2012 by shaving $115 million in costs compared to the year earlier.

Looking forward at the full year 2013, NYSE Euronext said that it expects total operating expenses to decline to approximately $1.53 billion.  Compared to its expense-cutting Project 14 goals and the 2011 expense base of $1.67 billion, the company expects core operating expenses to be about  $200,000 lower at $1.47 billion.

Shares of NYX have been steadily climbing since the ICE merger was reported and 2013 began.  After dipping to nearly seven-month lows of $122.72, shares have risen to their highest levels since early in 2008.  Shares closed Monday at $141.33.

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