FIRST QUARTER HIGHLIGHTS
- Sales as reported decreased by -2% YoY. Sales,
adjusted for comparable units and currency, decreased by -1%
YoY.
- Sales declined following weak development in
Europe and a weak macro-economic environment in some emerging
markets.
- Sales grew in North America, Mainland China and
in South East Asia.
- IPR licensing revenues grew YoY, mainly driven by
recently signed contracts which included certain one-time
items.
- Gross margin declined to 33.3% (35.4%), mainly
due to lower margins in Global Services, higher share of mobile
broadband coverage projects in parts of Asia and lower software
sales in IP and core networks.
- Operating margin increased to 6.7% (4.0%) YoY,
driven by improvements in Networks, partly offset by lower
profitability in Global Services.
- In addition to the SEK 9 b. global cost and
efficiency program, measures were started in the quarter to adapt
the operations to current mobile broadband project volumes.
Therefore, the estimate for 2016 restructuring charges increases to
SEK 4-5 b. from previous SEK 3-4 b.
- The company today announces structural changes to
further accelerate strategy execution and drive efficiency and
growth harder across the company.
- Cash flow from operating activities was SEK -2.4
(-5.9) b.
SEK b. |
Q1
2016 |
Q1
2015 |
YoY
change |
Q4
2015 |
QoQ
change |
Net sales |
52.2 |
53.5 |
-2% |
73.6 |
-29% |
Sales growth adj. for
comparable units and currency |
- |
- |
-1% |
- |
-28% |
Gross margin |
33.3% |
35.4% |
- |
36.3% |
- |
Gross margin excluding
restructuring charges |
33.9% |
36.3% |
- |
36.6% |
- |
Operating income |
3.5 |
2.1 |
63% |
11.0 |
-69% |
Operating income excluding restructuring charges |
4.1 |
2.7 |
50% |
11.7 |
-65% |
Operating margin |
6.7% |
4.0% |
- |
15.0% |
- |
Operating margin excluding restructuring charges |
7.9% |
5.1% |
- |
16.0% |
- |
Net income |
2.1 |
1.5 |
45% |
7.0 |
-70% |
EPS diluted, SEK |
0.60 |
0.40 |
50% |
2.15 |
-72% |
EPS (Non-IFRS), SEK 1) |
0.87 |
0.77 |
13% |
2.50 |
-65% |
Cash flow from operating activities |
-2.4 |
-5.9 |
-60% |
21.9 |
-111% |
Net cash, end of period 2) |
36.5 |
39.7 |
-8% |
41.2 |
-11% |
1) EPS, diluted, excl. amortizations and write-downs of
acquired intangible assets, and restructuring.
2) The definition of Net cash is changed to exclude post-employment
benefits, see accounting policies page 24. |
Comments from Hans Vestberg,
President and CEO of Ericsson (NASDAQ:ERIC)
Sales, adjusted for comparable units and currency,
were stable YoY. Growth in North America, Mainland China and South
East Asia was offset by weak development in Europe and some
emerging markets. Profitability increased YoY, driven by
improvements in Networks while Global Services had a challenging
quarter.
Business
Segment Networks sales declined slightly YoY. A
continued weak macro-economic environment impacted sales negatively
in some emerging markets in the Middle East and Latin America. In
addition, sales in Europe were down primarily driven by completion
of mobile broadband projects in 2015. Mobile broadband sales in
North America and South East Asia grew and the fast pace of 4G
deployments in Mainland China continued. IPR licensing revenues
grew YoY, mainly driven by recently signed contracts which included
certain one-time items. Software sales in IP and core networks
declined.
Sales in segment Global Services declined YoY.
This was mainly due to lower Network Rollout activities in Europe
and Latin America. Professional Services sales were stable with
growth in Consulting and Systems Integration driven by
transformation projects and stable Managed Services sales with 21
contracts signed in the quarter.
Sales in Support Solutions increased YoY due to
higher IPR licensing revenues. The underlying demand remains strong
in OSS and BSS as data growth and increased focus on customer
experience drives operators to transform their OSS and BSS
solutions.
Profitability
Gross margin declined despite higher IPR licensing
revenues. The main reasons were lower margins in Global Services, a
higher share of mobile broadband coverage projects in parts of Asia
and lower software sales in IP and core networks. Operating margin
increased YoY to 6.7% (4.0%), driven by reduced operating expenses
and a positive currency effect.
Segment Networks operating margin improved through
higher profitability in Radio supported by growth in IPR licensing
revenues. Global Services had a challenging quarter partly due to
lower mobile broadband coverage activities, leading to temporarily
larger losses in Network Rollout. In addition, Professional
Services margin declined as a large number of systems integration
transformation projects are in a start-up phase.
Cash flow
We ended the quarter with a negative cash flow
from operating activities of SEK -2.4 b. which is a significant
improvement compared with a year ago. As cash flow is volatile
between quarters it should be viewed on a full-year basis. Our
full-year cash conversion target of more than 70% remains.
Focus 2016
When announcing the year-end results 2015, we
presented three focus areas for 2016. The first focus area relates
to our Core business where we will capture business opportunities
in 4G and extend our leadership in 5G. At the Mobile World Congress
(MWC) in Barcelona in March, we demonstrated our 5G leadership both
technically and commercially through 21 customer contracts as well
as industry and academia research cooperation.
The second focus area for 2016 is to improve
profitability in the targeted growth areas. Sales in these areas
showed growth mainly driven by professional services. We will
continue to put stronger focus on software sales and recurring
business to increase profitability.
The third focus area for 2016 is to improve cost
and efficiency in order to stay competitive across the entire
business. The global cost and efficiency program is progressing
according to plan and contributed with savings of SEK 0.5 b. in
operating expenses in the quarter. We are confident in our ability
to achieve net annual savings of SEK 9 b. during 2017 compared with
2014.
In the quarter, we began to take additional
measures beyond the SEK 9 b. cost and efficiency program. Hence, we
are adapting our operations to current mobile broadband project
volumes, which primarily impacts service delivery. The additional
measures are reflected in an increased estimate for the 2016
restructuring charges.
Structural changes
We are today announcing structural changes to
further accelerate strategy execution and drive efficiency and
growth even harder across the company. We will create a leaner,
more fit for purpose, organization to cater to the needs of
different customer segments and to faster capture market
opportunities. As 5G, the Internet of Things and Cloud drive the
next phase of industry development, the time is right to make this
change.
The new structure will have five business units
and one dedicated customer group for Industry & Society, in
line with the company focus on core business, targeted growth areas
and cost and efficiency. The changes will make it easier for our
customers to do business with us, whether they are operators, media
companies or other industries.
We are not satisfied with our overall growth and
profitability development over the past years and I am convinced
this will make us more competitive and enable us to grow both our
company and our earnings.
NOTES TO EDITORS
You find the complete report with tables in the
attached PDF or by following this link
http://www.ericsson.com/res/investors/docs/q-reports/2016/03month16-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 21, 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 April 21, 2016.
Ericsson first quarter report
2016
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#2005399
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