SAP sees margins flattening out in fourth quarter: CFO

BARCELONA (Reuters) - Business software company SAP sees the potential for profit margins to hit bottom during the fourth quarter after three years of declines, with improving profits to begin to show up in 2018, Chief Financial Officer Luka Mucic said on Friday.

“We see now the advent a period when the margin inflection point should be reached soon,” Mucic told investors at the annual Morgan Stanley European Technology, Media and Telecoms conference here.

“In Q4 (fourth-quarter) I see at least the chance to reach flat margins in non-IFRS terms,” he said.

SAP has invested heavily in recent years in transitioning its business to the cloud, but sees that paying off in the years ahead. Mucic said margins would “start to climb back up” next year and expand further in 2019 and 2020.

Analysts, on average, forecast margins to hit bottom this year at around 29 percent before starting to rebound in 2018.