FIRST QUARTER HIGHLIGHTS
-
Sales in the quarter increased by 13% reaching
SEK 53.5 (47.5) b. Significant currency movements impacted sales
positively. Sales, adjusted for comparable units and currency
decreased by -6% YoY, driven by slower mobile broadband activity in
North America.
-
With current visibility we anticipate the fast
pace of 4G deployments in Mainland China to continue and the North
American mobile broadband business to remain slow in the short
term.
-
Professional Services had a strong
quarter.
-
Gross margin decreased YoY to 35.4% (36.5%), due
to lower capacity business in North America and continued fast pace
of 4G coverage deployments in Mainland China, increased
restructuring charges and a higher share of Global Services
sales.
-
The cost and efficiency program, announced in
November 2014, is progressing according to plan. Savings of SEK 9
b. is expected, with full effect during 2017.
-
Operating income was SEK 2.1 (2.6) b. Excluding
restructuring charges of SEK -0.6 (-0.1) b., the operating income
was flat YoY.
-
The net currency effect contributed positively
to the operating income, despite a negative currency hedge effect
of SEK -1.4 (-0.1) b.
-
Cash flow from operating activities was SEK -5.9
(9.4) b. mainly due to increased working capital.
SEK b. |
Q1 2015 |
Q1 2014 |
YoY change |
Q4 2014 |
QoQ change |
Net sales |
53.5 |
47.5 |
13% |
68.0 |
-21% |
Sales growth adj. for comparable
units and currency |
- |
- |
-6% |
- |
-28% |
Gross margin |
35.4% |
36.5% |
- |
36.6% |
- |
Operating income |
2.1 |
2.6 |
-19% |
6.3 |
-66% |
Operating margin |
4.0% |
5.5% |
- |
9.3% |
- |
Net income |
1.5 |
1.7 |
-14% |
4.2 |
-65% |
EPS diluted, SEK |
0.40 |
0.65 |
-38% |
1.29 |
-69% |
EPS (Non-IFRS), SEK 1) |
0.77 |
0.90 |
-14% |
1.71 |
-55% |
Cash flow from operating activities |
-5.9 |
9.4 |
- |
8.6 |
- |
Net cash, end of period |
15.6 |
43.6 |
-64% |
27.6 |
-44% |
1) EPS, diluted, excl. amortizations and
write-downs of acquired intangible assets, and restructuring.
Comments from Hans Vestberg,
President and CEO of Ericsson (NASDAQ:ERIC)
Sales increased by 13% in the quarter. Significant
currency movements impacted sales positively and Professional
Services had a strong quarter. Profitability improved in segment
Global Services while it declined in segment Networks due to
changed business mix.
Business
In
the quarter, sales growth was strong in India and North East
Asia.
Professional Services sales increased YoY with a
continued good global demand for our services offering. We signed
27 managed services contracts in the quarter, including a major
multi-country contract in Europe.
As anticipated, segment Networks mobile broadband
business in North America continued to be slow in the quarter as
operators remained focused on cash flow optimization in order to
finance major acquisitions and spectrum auctions. The decline in
North America was partly offset by a continued fast pace of 4G
deployments in Mainland China. As a consequence, the business mix
shifted to a higher share of coverage projects in the quarter.
Consumer demand and mobile data traffic growth
continued to be strong in North America, creating further need for
quality and capacity investments. However, with current visibility,
we anticipate the fast pace of 4G deployments in Mainland China to
continue and the North American mobile broadband business to remain
slow in the short term.
Profitability
Operating income declined YoY, primarily driven by
lower profitability in segment Networks due to the above mentioned
change in business mix and increased operating expenses. This was
partly offset by significantly improved operating income in segment
Global Services, mainly driven by Network Rollout. There were no
losses related to the modems business in the quarter.
The underlying margin, excluding restructuring
charges and hedge losses, improved YoY. The net currency effect
contributed positively to the operating income, considering
transaction and translation exposure as well as the negative
currency hedge effect.
IPR revenues
As a consequence of the ongoing dispute with a major
customer, the IPR licensing revenues declined in constant
currencies. Reported IPR revenues were stable in the quarter as a
majority of these contracts are in USD.
Cost and efficiency
program
As part of improving the
profitability, we continue to proactively identify efficiency
opportunities. The cost and efficiency program is progressing
according to plan. The ambition is to achieve savings of
approximately SEK 9 b., with full effect during 2017. The program
primarily relates to five key areas: portfolio streamlining and
ways of working in R&D; structural enhancements in IS/IT;
accelerated service delivery transformation; supply chain
efficiencies; and structural efficiency gains in G&A.
In the quarter we announced, as part of the
program, that 2,200 positions in Sweden, are subject to notice. In
addition we will reduce the number of consultants in Sweden by
850.
Cash flow
We
ended the quarter with a negative cash flow from operating
activities of SEK -5.9 b. mainly due to a change in business mix
with less capacity business in North America and a higher share of
coverage business in Mainland China. This impacted working capital
negatively.
Targeted areas
In line with our strategy, we are investing in our
targeted areas; IP networks, Cloud, OSS & BSS, TV & Media
and Industry & Society. Sales in targeted areas continued to
show good growth. At the Mobile World Congress (MWC) in Barcelona,
in February, we saw an increased interest from non-operator
customers, especially within the area of Industry & Society.
Most of our key launches at MWC were related to the targeted areas,
including the new Router 6000 Series, the Hyperscale Cloud
Solution, Expert Analytics 15.0, a new Media Delivery Network
solution and Digital Telco Transformation.
In addition to the launches in the targeted areas
we announced the new Ericsson Radio System. The system has an
innovative modular architecture, delivering three times the
capacity density with 50% improvement in energy efficiency. With
the launches at the MWC, we have further strengthened our
leadership and ability to deliver on our growth ambitions.
NOTES TO EDITORS
You find the complete report with tables in the
attached PDF or by following this link
www.ericsson.com/res/investors/docs/q-reports/2015/03month15-en.pdf
or on www.ericsson.com/investors
Ericsson invites media, investors and analysts to
a briefing at the Ericsson Studio, Grönlandsgången 4, Stockholm, at
09.00 (CET), April 23, 2015.
A conference call for analysts, investors and media will begin at
14.00 (CET).
Live webcast of the briefing and conference call
details, as well as supporting slides, will be available at
www.ericsson.com/press and www.ericsson.com/investors
Video material will be published during the day on
www.ericsson.com/press
FOR FURTHER INFORMATION, PLEASE CONTACT
Helena Norrman, Senior Vice President, Marketing
and Communications
Phone: +46 10 719 34 72
E-mail: media.relations@ericsson.com
Investors
Peter Nyquist, Head of Investor
Relations
Phone: +46 10 714 64 49
E-mail: peter.nyquist@ericsson.com
Åsa Konnbjer, Director, Investor
Relations
Phone: +46 10 713 39 28
E-mail: asa.konnbjer@ericsson.com
Stefan Jelvin, Director, Investor
Relations
Phone: +46 10 714 20 39
E-mail: stefan.jelvin@ericsson.com
Rikard Tunedal, Director, Investor
Relations
Phone: +46 10 714 54 00
E-mail: rikard.tunedal@ericsson.com
Media
Ola Rembe, Vice President, Head of External
Communications
Phone: +46 10 719 97 27
E-mail: media.relations@ericsson.com
Corporate Communications
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
Ericsson discloses the information provided herein
pursuant to the Securities Markets Act. The information was
submitted for publication at 07.30 CET, on April 23, 2015.
Ericsson first quarter report
2015
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Ericsson via Globenewswire
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