One of Europe’s largest gaming companies has slashed its profit forecast for the year after a planned partnership fell through worth more than $2 billion in revenue.
(Bloomberg) — One of Europe’s largest gaming companies has slashed its profit forecast for the year after a planned partnership fell through worth more than $2 billion in revenue.
Sweden’s Embracer Group AB said the “groundbreaking strategic partnership” over a period of six years would not materialize after receiving “a negative outcome” from the unnamed counterparty late on Tuesday night, prior to the publication of fourth quarter results.
Embracer’s shares tumbled 37%, the most on record, when trading started in the Swedish capital on Wednesday.
“This decision was unexpected to the management and the Board of Directors of Embracer,” Chief Executive Officer Lars Wingefors said in a statement.
As a result of the canceled contract and delays to other gaming projects, Embracer slashed its forecast for adjusted earnings before interest and taxes for the year ending in 2024 to a range of 7 billion kronor to 9 billion kronor ($660 million to $848 million), materially down from its earlier forecast of 10.3 billion kronor to 13.6 billion kronor.
“Investors may take some time to rebuild confidence with management,” said analysts at Svenska Handelsbanken in a client note. They described the news as “a major reset of expectations.”
The developments round off an already difficult month for the Kalrstad-based developer of “Tomb Raider.” On May 15, the company issued a profit warning due to delays in closing some licensing deals. The update overshadowed news of an agreement with Amazon Games to develop an open-world online version of “Lord of the Rings.”
Read More: Embracer Slips as Profit Warning Eclipses Lord of the Rings Deal
Embracer on Wednesday said adjusted earnings before interest and tax came in at 915 million kronor for the fourth quarter while organic sales dropped 4%. Cash flow from operating activities totaled 1.6 billion kronor in the period.
“FY 2023/24 is not the year when we maximize the value in Embracer – but we will continue to take important steps and set the foundation for the years to come,” CEO Wingefors said.
–With assistance from Jonas Cho Walsgard.
(Adds shares, analyst comment.)
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