Ericsson reports fourth quarter
and full year results 2015
FOURTH QUARTER HIGHLIGHTS
-
Reported sales increased by 8% YoY. Sales,
adjusted for comparable units and currency, decreased by -1%.
-
In North America, mobile broadband investments
remained stable, with additional hardware sales in the
quarter.
-
4G deployments in Mainland China recovered after
a weak third quarter.
-
A global patent license agreement was signed
with Apple, contributing to growth in IPR revenues both YoY and
QoQ.
-
A larger share of hardware sales with lower
margin impacted gross margin negatively QoQ. In addition, a
one-time inventory write-down of SEK -0.4 b, was made.
-
The global cost and efficiency program is
progressing according to plan, contributing to lower operating
expenses YoY.
-
Operating margin increased to 15% (9%) YoY with
improvements in all segments.
-
Cash flow from operating activities was SEK 21.9
(8.6) b.
FULL YEAR HIGHLIGHTS
-
Reported sales increased by 8%. Sales growth in
India, North America and China as well as higher IPR licensing
revenues were partly offset by lower sales in Japan, Russia and
Brazil. Sales, adjusted for comparable units and currency,
decreased by -5%.
-
The IPR licensing revenues were SEK 14.4 (9.9)
b. They were previously estimated at SEK 13-14 b.
-
Operating income, excluding restructuring
charges, increased to SEK 26.8 (18.3) b. with improvements in all
segments.
-
Cash flow from operating activities was SEK 20.6
(18.7) b. Cash conversion was 85%, above target of more than
70%.
-
The Board of Directors will propose a dividend
for 2015 of SEK 3.70 (3.40) per share, an increase of 9% compared
to last year.
SEK b. |
Q4
2015 |
Q4
2014 |
YoY
change |
Q3
2015 |
QoQ
change |
Full year
2015 |
Full year
2014 |
Net sales |
73.6 |
68.0 |
8% |
59.2 |
24% |
246.9 |
228.0 |
Sales growth adj. for comparable
units and currency |
- |
- |
-1% |
- |
26% |
- |
- |
Gross margin |
36.3% |
36.6% |
- |
33.9% |
- |
34.8% |
36.2% |
Gross margin excluding
restructuring charges |
36.6% |
37.6% |
- |
34.5% |
- |
35.7% |
36.6% |
Operating income |
11.0 |
6.3 |
75% |
5.1 |
117% |
21.8 |
16.8 |
Operating income excluding
restructuring charges |
11.7 |
7.1 |
65% |
6.1 |
94% |
26.8 |
18.3 |
Operating margin |
15.0% |
9.3% |
- |
8.6% |
- |
8.8% |
7.4% |
Operating margin excluding
restructuring charges |
16.0% |
10.5% |
- |
10.2% |
- |
10.9% |
8.0% |
Net income |
7.0 |
4.2 |
68% |
3.1 |
124% |
13.7 |
11.1 |
EPS diluted, SEK |
2.15 |
1.29 |
67% |
0.94 |
129% |
4.13 |
3.54 |
EPS (Non-IFRS), SEK 1) |
2.50 |
1.71 |
46% |
1.34 |
87% |
6.06 |
4.80 |
Cash flow from operating activities |
21.9 |
8.6 |
154% |
1.6 |
- |
20.6 |
18.7 |
Net cash, end of period |
18.5 |
27.6 |
-33% |
-0.2 |
- |
18.5 |
27.6 |
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)
Reported sales in the quarter increased by 8% YoY.
Sales, adjusted for comparable units and currency, decreased by
-1%. Sales in North America grew YoY as well as QoQ. Profitability
improved YoY, with higher IPR licensing revenues and lower
operating expenses as main contributors. Network Rollout continued
on its path to sustainable profitability.
Business
We saw a recovery in segment Networks in the
quarter. In North America, the mobile broadband investments
remained stable, with additional hardware sales in the quarter. 4G
deployments in Mainland China recovered after a weak third quarter.
Emerging markets such as India, Indonesia and Mexico remained
strong while markets such as Russia, Brazil and parts of the Middle
East continued to be weak, mainly due to macro-economic
developments. Investments in Europe were driven by the transition
from 3G to 4G and capacity enhancements. Operators increased their
investments in telecom core networks, driven by deployment of new
service offerings such as VoLTE (Voice over LTE).
In the quarter, sales growth in segment Global
Services was mainly driven by growth in Systems Integration and
Managed Services while Network Rollout sales declined.
We ended the year with good YoY sales development
in TV and Media which contributed to growth in Segment Support
Solutions.
IPR licensing
Our IPR strategy, to generate value from our
investments in R&D, has been successful and over the last five
years we have more than tripled our IPR licensing revenues. After
the recent announcements of two important patent license
agreements, we now have agreements with the majority of handset
suppliers.
Targeted growth areas
In 2015, we had good progress in all our targeted
growth areas and we continued to invest in order to establish
leadership. Sales grew by more than 20% YoY, reaching SEK 45 b.,
corresponding to 18% of group sales.
The strategic partnership with Cisco, announced in
the quarter, will give us strong end-to-end network solutions with
a complete IP portfolio. As a result of the partnership, we will
extend our addressable market and expect to generate USD 1 b. or
more of additional sales by 2018. Additional sales are expected to
be accretive to operating income in 2016.
Profitability
Operating margin increased to 15% (9%) YoY with
improvements in all segments. The major contributors to the profit
improvement were higher IPR licensing revenues and lower operating
expenses, mainly in segment Networks. The effort to restore Network
Rollout to a sustainable profitable business is progressing well,
with a break-even operating income, excluding restructuring
charges, for the second half of 2015.
Cost and efficiency
program
The global cost and efficiency program is
progressing according to plan, with the target to achieve net
annual savings of SEK 9 b. during 2017 compared with 2014.
Operating expenses, excluding restructuring charges, for the second
half of 2015, declined by almost 10% compared with same period last
year. We will continue to address operating expenses and increase
efforts to further reduce cost of sales in order to improve the
gross margin.
Cash flow
After a strong cash flow from operating activities
in the fourth quarter, we delivered a full-year cash flow of SEK
20.6 b., exceeding the cash conversion target of more than 70%.
Focus 2016
Although company performance improved in the
quarter, there is still a need for further improvements. Our focus
in 2016 will be:
1. Core business - While market conditions are
challenging in certain parts of the world, we continue our work to
capture business opportunities as more markets shift to 4G. At the
same time we will work to extend our technology leadership also in
the emerging 5G market.
2. Targeted growth areas - After a period of
investing, in order to create growth, we also need to improve
earnings. This will involve stronger focus on software sales and
recurring business as a complement to the already strong
Professional Services business.
3. Cost and efficiency - We are confident in our
ability to achieve our SEK 9 b. cost and efficiency program by
2017. We are closely monitoring market and business development and
will take all necessary actions to remain competitive across the
entire business.
As we deliver in these areas, in combination with
our other ongoing strategic initiatives, we are well positioned to
create future shareholder value. Consequently, the Board of
Directors will propose a dividend of SEK 3.70 (3.40) per share for
2015, an increase of 9% compared with last year.
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/2015/12month15-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), January 27, 2016.
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
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 January 27, 2016.
Ericsson fourth quarter and full
year 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
HUG#1981476
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