Sweden (Business Emerge), August 17: Swedish gaming giant Embracer Group reported a sharp 50% decline in its first-quarter operating profit, driven by a reduced number of game releases. The company, known for owning the popular Tomb Raider franchise, has faced several challenges that have impacted its financial performance. As Embracer continues to navigate through these hurdles, the company remains committed to releasing games valued at 3.9 billion Swedish crowns ($372.70 million) for the fiscal year. Despite this commitment, Embracer’s shares dropped by 10% by 0700 GMT, further exacerbated by a larger-than-anticipated decline in first-quarter sales within its Entertainment & Services segment.
The company’s Entertainment & Services division experienced a steep 54% year-on-year decline in sales for April through June, totaling 848 million crowns. This drop surpassed the company’s forecast, which had anticipated a 37% decrease, reflecting the severe impact of these financial challenges. After years of aggressive acquisitions to position itself as a leading global and European gaming publisher, Embracer is now grappling with the burden of a $1.5 billion debt load.
In the wake of a major setback last year, where a $2 billion partnership deal with an unnamed company fell through, Embracer announced a comprehensive restructuring plan. As part of this strategy, the company has divested several studios to meet its debt reduction targets. Additionally, Embracer is embarking on a new direction by planning to split into three publicly traded entities by 2025, signaling a significant shift in its approach to the gaming industry.
Looking ahead, Embracer’s planned three-way split includes the listing of Asmodee, which recently secured a $976 million loan to assist in repaying the company’s debt. Middle-earth Enterprises & Friends and Coffee Stain & Friends are also set to be listed, forming part of Embracer’s redefined future. Despite the company’s efforts to stabilize, the first quarter saw its adjusted operating profit fall to 828 million Swedish crowns, slightly below analysts’ expectations of 839 million crowns, based on company consensus.